[HN Gopher] The Irrelevance of Porter's Five Forces for the B2B ...
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The Irrelevance of Porter's Five Forces for the B2B Software
Industry
Author : djhope
Score : 22 points
Date : 2022-04-14 18:50 UTC (4 hours ago)
(HTM) web link (jhcblog.juliehuntconsulting.com)
(TXT) w3m dump (jhcblog.juliehuntconsulting.com)
| mvkel wrote:
| A competitor can be your customers' apathy, or resistance to
| change. That doesn't throw out Porter's theories, (which still
| hold very true imo).
| __jf__ wrote:
| Near the end of "Understanding Michael Porter", there is a Q&A
| with him that touches on this subject:
|
| Q: "How do you do a five forces analysis if you're an
| entrepreneur starting a new business in a completely new market
| space? Is strategy even relevant when there's no existing
| industry or when conditions are still so fluid that there is no
| discernible industry structure and no direct competitors?"
|
| Porter: "Strategy is relevant for any organization at any point
| in its trajectory. How to develop and sustain a competitive
| advantage is the core question that every organization has to
| answer if it's to be successful and to prosper. In emerging
| industries there's a lot of experimentation. What will the
| product ultimately look like? What will the distribution system
| look like? Will the product or service scope produce a stand-
| alone industry, or will this new idea become part of a larger or
| existing industry? There's more uncertainty about the shape of
| things, but the five forces exercise is fundamentally the same
| with one big exception: instead of analyzing what already exists,
| you're forecasting. And you probably know quite a lot about all
| of the five forces but one. You know the customers you're
| targeting. Are they likely to be price sensitive? You know who
| your suppliers are or who they are likely to be. How powerful
| will they become? You know the substitutes and can identify the
| likely entry barriers. What you don't have yet are actual rivals.
| That's where you need to think through who those might be. Will
| the rivals most likely come from adjacent industries? Or from
| companies that already exist in other countries? Or will the
| likely rivals be new start-ups? How would each of these rivals be
| likely to compete? So even when you're inventing new market
| market space, you probably already know more about the five
| forces than you realize. Doing such analysis is important because
| if you're creating something that's truly valuable, don't kid
| yourself that no one will follow you. There is no such thing as a
| market where competition is irrelevant, as nice as that might
| sound. The idea that innovation allows you to ignore competition
| is a fairy tale. So you have to have a hypothesis for how the
| industry might take shape once there is an industry. Early on,
| there are many paths the evolution can take, many choices you can
| make that will have an important impact on how attractive the
| industry will become. Decisions you and others make over time
| will begin to lock in the basic economics, making industry
| structure less fluid. So it's crucial to see different paths for
| how the industry might evolve, and to ask the basic questions
| about the five forces, so that you can make choices that will put
| the industry on the best possible path."
| sunir wrote:
| I loved the insight of the mistake of viewing the customer as
| something to be conquered rather than a partner.
| malshe wrote:
| Yes but Porter never said that customers need to be conquered.
| His framework says that if you have a choice, select the
| customer who don't have a lot of bargaining power.
| ghaff wrote:
| All models are wrong. Some are useful.
|
| That said, I agree with at least some of the points. _Competitive
| Strategy_ would seem like a very incomplete work today that (as
| far as I know, it 's been years) probably doesn't pay a lot of
| attention to coopetition--which may not even have been coined at
| the time--and things like ecosystems.
|
| That said, we do still talk about competitive moats for
| businesses and VCs are certainly willing to pay a lot of money to
| help build those moats.
| diegof79 wrote:
| I compare the article with what I learned from the book
| "Understanding Michael Porter", and I wonder if the article talks
| about the same thing:
|
| > "Porter's aggressive modeling around "competition" has
| misguided organizations into becoming obsessed with destroying
| the competition."
|
| My understanding from Porter's model is that competitiveness is
| defined by Product Value - Cost... a very simple concept that
| doesn't involve "destroying the competition".
|
| A cheap computer manufacturer doesn't compete with Apple, because
| the definition of product value depends on the audience.
|
| Now I wonder who got it wrong, me, the book, or the article.
| xyzzy21 wrote:
| Ah, NO...
|
| I'm in B2B and Porter is central to our product design and
| marketing strategy.
|
| I'll just put it out there: the author has NEVER started a
| company!
| malshe wrote:
| Michael Porter's article: https://hbr.org/1979/03/how-
| competitive-forces-shape-strateg...
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