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An organization’s raison d’être, mission, or higher purpose is certainly not transitory. Indeed, its ultimate goal is the perhaps intangible yet fundamental reasons for its very existence.
Still, to carry out a mission, a business organization must have strategy. Does this have to involve a five-year plan and solid components that translate as competitive advantage, as Porter claims? Well, that is a reassuring idea, but it is unrealistic to assume any competitive advantage will last indefinitely. Things change so very quickly that any competitive advantage is, at best, transient. And dealing with sources of competitive advantage that change as often as the tide calls for two skills that cannot be found among Porter’s five forces. First, the ability to execute a project-based strategy (rather than a traditional long-term plan), and second, the ability to build strategy around innovation, because innovation is not a mere luxury!
Agility is not just important for organizational matters. It is a key component of effective strategic thinking.
Competitive markets have been described according to a single model for over 30 years.
1. Bargaining power of customers
2. Bargaining power of suppliers
3. Threat of alternate products or services
4. Threat of new entrants
5. Rivalry from competitors
The arrangement, ranking, and dynamics of these forces make it possible to identify key success factors, meaning the strategic factors you should focus on to prevent the five forces from taking profits for your organization. If your company can control these key success factors, it can gain competitive advantage. By definition, Porter’s five forces framework refers to a competitive market and not a specific firm.
* Harvard Business Review, March/April 1979.
Source: Competitive Advantage (Simon & Schuster, 1998) and Competitive Strategy (Simon & Schuster, 2004).
1. Bargaining power of customers
2. Bargaining power of suppliers
3. Threat of alternate products or services
4. Threat of new entrants
5. Rivalry from competitors
The arrangement, ranking, and dynamics of these forces make it possible to identify key success factors, meaning the strategic factors you should focus on to prevent the five forces from taking profits for your organization. If your company can control these key success factors, it can gain competitive advantage. By definition, Porter’s five forces framework refers to a competitive market and not a specific firm.
* Harvard Business Review, March/April 1979.
Source: Competitive Advantage (Simon & Schuster, 1998) and Competitive Strategy (Simon & Schuster, 2004).
Porter’s framework is the most effective tool available for competitive analysis.
Porter’s model is largely inspired by Sun Tzu’s The Art of War.
Porter’s framework is no longer effective for determining sustainable competitive advantage.
The idea of lasting competitive advantage is unrealistic.
Competitive advantage no longer exists.
A skillfully, carefully developed offer is a means to protect yourself from the competition.
1. The inventor prerogative. This is when you consider that successfully pioneering in a domain should forever ensure market leadership.
2. One-upmanship mentality. Do you feel you must constantly improve product or service quality (and price) even though customers would actually prefer simpler, cheaper options?
3. Visions of an empire. This is when you direct all resources toward a single project or goal, thus sacrificing other promising initiatives.
4. Spinelessness. This refers to the temptation to give up when an opportunity seems too tough to seize.
1. The inventor prerogative. This is when you consider that successfully pioneering in a domain should forever ensure market leadership.
2. One-upmanship mentality. Do you feel you must constantly improve product or service quality (and price) even though customers would actually prefer simpler, cheaper options?
3. Visions of an empire. This is when you direct all resources toward a single project or goal, thus sacrificing other promising initiatives.
4. Spinelessness. This refers to the temptation to give up when an opportunity seems too tough to seize.
Lasting growth depends on transient competitive advantage.
Building strategy around innovation and making project mode the standard for business operations creates agility…and discomfort. Especially for people who never expected to be a part of ceaselessly changing processes. You must therefore beware of potentially destructive stress and burnout — developing agility also requires keeping an eye out for dangers like organizational chaos and personal overload.
Building strategy around innovation and making project mode the standard for business operations creates agility…and discomfort. Especially for people who never expected to be a part of ceaselessly changing processes. You must therefore beware of potentially destructive stress and burnout — developing agility also requires keeping an eye out for dangers like organizational chaos and personal overload.