Porter’s analysis revisited.

Michael Porter transformed strategy development 30 years ago by  asking two simple questions:

1. 1. What are the drivers of industry profitability?
   2. What are the drivers of profitability of an individual firm in an industry?

He then  provided a framework to analyse both, his “five forces“.

The possibility, and ease of entry of substitutes is one of the 5 forces that dictate strategy, and this remains the case, it is just that the possibility of finding an acceptable substitute is infinitely greater now than it was 30 years ago when the original thinking took place.

 Almost every industry you can think of has been transformed in the last 10 years by the power of the web to offer substitutes. Access to substitutes of both the product of, and supplier to any business, immediately and transparently, is infinitely easier that just a decade ago.

Oh, and new industries have been spawned that have decimated, and changed forever those legacy industries, and most did not see it coming.

Porter’s framework got it right, it remains right, it is just that the time frames he worked with are now way shorter, and the entry/exit barriers lower. The net has completely altered the tactical dynamics, but the strategic thinking behind the model remains sound.

Related posts:

Porters strategy do and don’t list. Analysis or strategy Disruptive view of the future How to identify where your potential competitors will come from