Five Forces
“The Five Forces helped me”
Some readers complained that in criticizing the Five Forces analysis I was trashing something that they had found useful. I am glad to hear that some people have found help from Porter’s five-forces model.
It is however a bit like saying that we had success for over a thousand years in predicting the movements of the planets with the geocentric model of the universe, so why should we accept that the earth revolves around the sun?
There are ways to reinterpret Porter’s theories, so that they can appear to make sense, as Joan Magretta does in her interesting book, Understanding Michael Porterr. However redefining the true meaning of “competition” as “adding value to customers” is to flout the standard definition of “competition” in any dictionary. It is also not exactly what Porter actually wrote or what is taught in his name in business schools around the world and apparently practiced by leading consulting firms.
There are much simpler and more direct and more fruitful ways of understanding what is going on, without such intellectual contortions, particularly because the world has changed so much since Porter started putting forward this theories. In astronomy, we decided to move on. I believe that it is time to do so in business strategy.
Balance of power shift isn’t universal
Brad Focht wondered whether “the balance has shifted to seller or buyer specifically – this is more industry specific and cannot be generalized.”
The following phenomena affecting the shift in power from seller to buyer are universally applicable: (1) globalization (2) the internet, giving all customers immediate access to generally reliable information as to what is available and its quality and (2) social media that enables customers to communicate with each other.
The impact of these phenomena is happening at different speeds in different industries. But all industries will receive the impact in due course.
At the same time, the internet
Some readers complained that in criticizing the Five Forces analysis I was trashing something that they had found useful. I am glad to hear that some people have found help from Porter’s five-forces model.
It is however a bit like saying that we had success for over a thousand years in predicting the movements of the planets with the geocentric model of the universe, so why should we accept that the earth revolves around the sun?
There are ways to reinterpret Porter’s theories, so that they can appear to make sense, as Joan Magretta does in her interesting book, Understanding Michael Porterr. However redefining the true meaning of “competition” as “adding value to customers” is to flout the standard definition of “competition” in any dictionary. It is also not exactly what Porter actually wrote or what is taught in his name in business schools around the world and apparently practiced by leading consulting firms.
There are much simpler and more direct and more fruitful ways of understanding what is going on, without such intellectual contortions, particularly because the world has changed so much since Porter started putting forward this theories. In astronomy, we decided to move on. I believe that it is time to do so in business strategy.
Balance of power shift isn’t universal
Brad Focht wondered whether “the balance has shifted to seller or buyer specifically – this is more industry specific and cannot be generalized.”
The following phenomena affecting the shift in power from seller to buyer are universally applicable: (1) globalization (2) the internet, giving all customers immediate access to generally reliable information as to what is available and its quality and (2) social media that enables customers to communicate with each other.
The impact of these phenomena is happening at different speeds in different industries. But all industries will receive the impact in due course.
At the same time, the internet