May The (Five) Force (s) Be With You...
Ritson recently went on another of his superb rants last week about the trend for either adapting or, even worse, ignoring McCarthy’s classic 4P’s framework. When, by pure coincidence, the word Porter popped up on screen in Ritson’s “4P regeneration engine”, it instantly had me reflecting on another much-maligned framework, Porter’s 5 Forces Model.
As with the 4P’s, there has been no shortage of contenders looking to either enhance or criticise the framework but, in keeping with McCarthy’s model, is the tried and tested original really that bad? Could it be that, particularly as we try to understand how category dynamics could shift as the world begins to open up again, that the questions it poses are more useful now than ever?
Michael Porter first published his theory of competitive advantage (the ‘5 Forces model’) in the Harvard Business Review in 1979. His intention was to create a simple framework to assess the factors within an industry that impact a company’s strategic positioning. Porter summarised these five forces as the threat of entrants, the power of suppliers, the power of customers, the threat of substitutes and, finally, the competitive intensity of the industry itself.
Like McCarthy’s 4P’s, much of the subsequent critique of Porter’s model has been that ‘there’s a force missing’ and many management theorists since have lobbied to create a sixth force, either to cover ‘complementors’ (e.g. technical leaps) or the regulatory environment (e.g. government policy or pressure groups).
In our today's digital world, Porter’s model is often seen as being too ‘olde worlde’ and the business model canvas is usually touted as a more modern or ‘agile’ alternative. However, whilst undoubtedly a high level, qualitative view of a particular industry, Porter’s original model does, I believe, still provide a useful lens through which to understand the dynamics of a category and even, through the assessment of substitutes, to answer the critical question ‘what category are we in’.
This may seem like an obvious statement but it’s still surprising how many brands, when developing a research brief for example, struggle to get to an aligned articulation of what business they’re in or who their key competitors are. I still have a vivid recollection of the first time this question reared its head for me. As an eager but naive final year Management Studies student I trotted down the Headrow in Leeds to interview the manager of the Odeon about the impact of the opening of the out of town multiplex on his business.
In true Yorkshire-style, he pointed out that my questions were frankly all a bit crap and that the Odeon wasn’t competing in the cinema business but in the entertainment category; yes, a new multiplex added more competition but this had to be judged against a much broader backdrop of bowling alleys, new bar openings, entertainment venues etc. It was a great early lesson in thinking about the category from a consumer perspective rather than imposing your own internal view on the outside world.
So, why hark back to a model that is now over 40 years old? From my perspective, there has never been a better time to ponder some of those fundamental questions that Porter’s model poses. What are the substitutes people see to my product/ brand? How easy is it for another brand to enter our space? Has the competitive landscape / intensity changed given the shifts in consumer behaviour?
For all of the predictions and pontifications about a new normal, it’s still too early to say how many of the changes we’ve seen in the past year become permanent shifts vs. how quickly we’ll simply revert back to our old behaviours. I point anyone in any doubt about how quickly society can revert to type to the recent debacle at ITV; just over a year from Caroline Flack “ Be Kind” to Piers Morgan “ she’s making it up”. Anyway, I digress…
I think it’s unrealistic to expect a crystal-clear picture on future behaviour at the moment. If you think this is a cop out on behalf of the research industry, think about how you would answer those sorts of questions. From my own perspective as I sit looking at my well-stocked Nespresso cupboard, I would find it almost impossible to tell you how much of this incremental lockdown coffee volume will switch back to coffee shops. Likewise, will that Disney+ subscription still feel like good value or can I justify re-starting my Everyman membership again once cinemas re-open? The honest, but perhaps not that helpful answer is, I'll wait and see.
There are countless other categories where new alternatives have seen exponential growth over the past year – from digital fitness subscriptions to fine dining delivery boxes, it remains to be seen how many of these still feel like good value once the ‘IRL’ alternatives are available once more.
However, this doesn’t mean you should bury your head in the sand and hope for the best; there are undoubtedly simple steps we can take to ensure we are on the front foot and anticipating the changes which are on the horizon.
1. Run scenarios rather than look for a definitive view – in an environment like this where the only certainty is uncertainty, asking those big ‘what if?’ questions is as good a starting place as any.
2. Think indirect as well as direct impacts – whilst the 5 Forces model was conceived with micro rather than macro influences in mind, it’s still important to think how those macro shifts exert an indirect influence on your category. For example, what does the significant rise in dog ownership during 2020 mean for family holiday choices in 2021/2 and beyond?
3. Think outside-in – I write this with the words of my friendly Odeon manager ringing clearly in my ears but it’s critical to think about concepts such as alternatives / substitutes from a consumer perspective, particularly in discretionary categories. The temptation with Porter is to become very industry-centric so make sure there is some solid research underpinning your assumptions on brand or channel consideration set, for example.
So whilst it’s tempting to over intellectualise the debate on both frameworks, the important thing is to think about how the questions they pose can help you structure your marketing strategy. If the first logical step in any planning process is getting to a clear answer to the question ‘where are we now?’, it feels to me as though the questions which Porter’s model poses are as relevant today as they were 40 odd years ago...