A big shock in the world of consulting a couple of weeks ago was when Monitor Group filed for bankruptcy in the USA. Monitor was the multi-million dollar strategy consultancy started by Michael Porter in the 1980’s based on his famous 5 Forces model. The premise of Porter’s model is excess profits can be found by focusing in industries and companies whose barrier to entry or barrier to competition is high. Monitor’s consulting revenues streamed in from doing the data and financial analysis for companies to show them how and where to maintain this competitive advantage. Safe and highly profitable havens of industry were identified for those companies who could afford Monitor’s fees. This was a way of analysing markets to keep structural barriers high and make more money than, potentially, the merits of a company’s products or services deserved.
This competitive, defensive view of the world is surely not good for customers or society as a whole. With globalisation and the internet, it’s the customer today who is in charge of the marketplace (except in those heavily government regulated industries) and not the old paradigm of the seller in charge, blocking out the competition.
As Clay Christiansen showed, disruptive innovation destroyed company after company that believed in its own competitive advantage. The only safe haven today is to engage with customers and continuously add more customer value through redefining and redesigning what you offer and how you engage. Continuous innovation in many areas, including product and service design and customer experience design, is how to win.
For new companies this new model is easier. Established companies have a harder job to move themselves towards being willing and able to make this shift from the anxiety of fending off competitors towards the open and collaborative culture that continuous innovation needs. Letting go of the corporate anxiety around this shift is key to making it happen.
What doesn’t deliver bottom line results in the long term is a strategy of focusing on only defeating rivals or only pursuing shareholder value. What does deliver results (from many studies) is managing people well and continuously adding customer value. To do this well requires deep customer understanding and the creativity to know what to do with this new understanding and customer insight.
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This was piece was born out of an article on Forbes.com “What Killed Michael Porter’s Monitor Group?” by Steve Denning