Question 1

Q: What did this one leave behind?

Accepted Answer

American scholar, born in 1947, trained as an economist and long a professor at Harvard Business School, widely regarded as the founder of the modern study of competitive strategy. In 1979 he put the five forces in the Harvard Business Review, in 1980 he published Competitive Strategy, and in 1996 he wrote "What Is Strategy?". He kept asking one question: in the same industry, some firms always earn well and others never do, so where is the difference? His answer was not effort or good management but choosing a different set of things to do.

Question 2

Q: What actually happened?

Accepted Answer

In 1979 Harvard Business School professor Michael Porter published an article in the Harvard Business Review titled "How Competitive Forces Shape Strategy". Whether an industry makes money, he said, does not depend on how fashionable it looks. It depends on five forces: rivalry among existing competitors, the threat of new entrants, the threat of substitutes, the bargaining power of buyers and the bargaining power of suppliers. He had moved the question from how well a company is run to whether the industry can pay anyone at all.

Question 3

The parts · Look at the industry before the firm

Accepted Answer

The same effort can earn very different returns in different industries. The five forces work as a check-up: how fierce the rivals are, how easy it is to enter, whether substitutes exist, and how much bargaining power buyers and suppliers hold. e.g. The same coffee shop at the foot of an office block and in a residential street faces two different sets of rivals, customers and landlords.

Question 4

The parts · Better is not the same as different

Accepted Answer

In 1996 he pointed out that quality programmes, benchmarking and outsourcing are learned and used by everyone. Firms converge on the same best practice, grow alike, and the profit thins out together. Efficiency is the price of entry, not the way to win. e.g. Five hotpot places on one street all offer a sauce bar and a birthday cake; diners pick whoever has a discount today.

Question 5

The parts · A strategy is a set of activities that fit together

Accepted Answer

His example was Southwest Airlines: short point-to-point routes, no meals, no assigned seats, one aircraft type. Each thing it left out lets another work, so a rival copying a single piece gets nothing like the same result. e.g. A barber who only visits homes, with no shop and no loyalty card, spends all the saved time on the road and on the haircut.

Question 6

The parts · What you refuse is what draws your outline

Accepted Answer

His line: the essence of strategy is choosing what not to do. Continental wanted Southwest's low fares and its own full service in one airline, and the same planes and staff were pulled two ways. Wanting everything leaves you standing out in nothing. e.g. A restaurant that wants a cheap quick lunch and a pricey banquet menu tears its kitchen in half.

Question 7

Q: How do I use it today?

Accepted Answer

Pick a place where you are competing hard with rivals. On a sheet, write on the left the things you do that rivals do not, or do not do in the same way. On the right, write what you added in the last six months only because rivals had it. If the left stays empty, you are competing on efficiency. If the right is full, rivals are leading you around. Then write a "what I won't do" list of at least three. His test is one question: do not ask how to do it better than the others, ask how to do it differently from them.

Question 8

Lines to keep

Accepted Answer

Operational effectiveness is not strategy. The essence of strategy is choosing what not to do. Competitive strategy is about being different. Each extra yes makes you harder to remember.

Question 9

Q: What should I read alongside?

Accepted Answer

Peter Thiel — Both are about not being ground down by competition. Thiel says build something ten times better and aim for a monopoly, because competition is for losers. Porter says that inside one industry you can choose a different set of activities and hold a different position. One tells you to leave the fight; the other tells you how to live differently inside it. Duan Yongping — Both are about whether to learn from others. Duan says dare to be last: let others test the road, then do it well. Porter says that if everyone studies the same best practice they end up alike and the profit thins together. One is about turning what you learn into your own; the other is about why learning is…

Question 10

Further

Accepted Answer

Peter Thiel Peter Drucker Duan Yongping The Wealth of Nations

Michael Porter

What actually happened?

Look at the industry before the firm

Better is not the same as different

A strategy is a set of activities that fit together

What you refuse is what draws your outline

How do I use it today?

Deep read

Read alongside

Further

Lines to keep