No Schadenfreude (celebrating somebody else’s misfortunes): Michael Porter and his theories were at the center of what I learned at IMD. And his five forces model was and still is a useful checklist that any entrepreneurial leader should be well advised to study before they make a decision. But Michael Porter and his Monitor consultancy went bankrupt in November 2012. I am surprised of how little noise this has done into our microcosm. Is it because they were considered to be so outdated already?
An interesting article in Forbes Magazine by Steve Denning, dated from June 2013 and called “It’s official! The end of the Competitive advantage” sounds familiar and seeks to explain the demise of the father of modern strategy in the light of a new book, “The end of the competitive advantage” by Professor Rita G. McGrath of Columbia Business School. Professor McGrath simply explains the end of the Porter’s myth by claiming that his focus on advising clients to create a long term competitive advantage had become obsolete and… unsustainable in what she calls the Creative Economy. For her, this concept is illusionary and lethal. I found her main points, as reported by Denning (as I confess to have just ordered the book) very much aligned with some of the concepts my partners and I see emerging in the Disruption Economy:
- “Strategy prevents them from thinking!”: This provocative quote was expressed by our Elp Network strategy partner, Nick van Heck, when talking with a client who was complaining about the lack of creativity of his teams. “Think about it: the presumption of stability creates all the wrong reflexes. It allows for inertia and power to build up along the lines of an existing model” writes Professor McGrath.
- Challenging unconscious and self-limiting orthodoxies: Is one of our favorite although most difficult piece of work with clients determined to prepare for the new economy. McGrath continues: “The presumption of stability allows people to fall into routines and habits of mind. It creates the conditions for turf wars and organizational rigidity. It inhibits innovation. It tends to foster the denial reaction rather than a proactive design of a strategic next step…”
- “Disruption only happens to the unprepared”: Another strong provocation of Nick van Heck being supported here by the Columbia Professor: “A preference for equilibrium and stability means that many shifts in the marketplace are met by business leaders denying that these shifts mean anything negative for them”.
- The emergence of strategic ecosystems: Gerd Leonhard, the famous Business Futurist, has identified for quite some time now, that creating and driving powerful strategic ecosystems was the reasons for success of operating systems such as Apple IOS and Android and could explain the failure of Microsoft, for the moment, on the mobile battlefield. Denning quotes McGrath as saying that one of the biggest changes will be “to stop thinking of within-industry competition. “In more and more markets, we are seeing industries competing with other industries, business models competing with business models even in the same industry, and entirely new categories emerging out of whole cloth”.
- Big bang disruption: Denning refers to the article we quoted here: “Today, competition can come from anywhere. It’s not just cheap substitutes to their products, capturing low-end customers, and then gradually move upmarket to pick-off higher-end customers. Now entire product lines, whole markets could be destroyed almost overnight, as customers defect in droves by big bang disruption.
- From strategy to strategize: “Building an innovation proficiency suggests that in a world of temporary advantage, innovation needs to be a continuous, core, well managed process rather than the episodic and tentative process it is in many companies” says Denning. “Companies are learning to leverage more ephemeral things such as deep customers relationships and the ability to design irreplaceable experiences […]They will be focused on creating capabilities and skills that will be relevant to whatever arenas they happen to find themselves operating in.” says McGrath
I haven’t yet read “The end of competitive advantage” yet but the article written by Denning, explaining the fate of Porter’s Monitor group at its light interested me and I thought useful of presenting it here. I hope this was relevant to you. Have a good week.