Almost 30 years ago, Michael Porter identified the five competitive forces that shape business strategy. This ground-breaking work was a holistic way of looking at industry/business. Porter focuses on the need to step back from the details of running your business so that you can identify the strategic objectives that will deliver value across your organization.
This is a particularly important skill for leaders — after all, it is easy to be caught up in the detail of running a business. Some even find it enjoyable. But leading a business also means being able to operate, like Richard Branson, at 30,000 feet.
To recap, Porter’s five forces are:
- Rivalry among existing competitors
- Bargaining power of buyers
- Bargaining power of suppliers
- Threat of new entrants
- Threat of substitute products or services
The Harvard Business Review have published a reaffirmation and extension of Porter’s five forces. In this 12 minute video from HBR you can hear Porter speak about the five forces, or, you can see an edited, 5 minute version, on YouTube.
Nina Nets It Out: Despite being written 30 years ago, Porter’s five forces still provides a solid framework for thinking through business strategy. No matter where you are in your career, understanding this framework can provide you with a way of understanding the trends, opportunities and challenges faced by your company and your industry.