In this weeks blog post I will review Steve Denning’s ambiguous pursuit to expose the inherent issues within Michael Porter’s Five Forces Model. Denning presents a persuasive and reputable argument against Porter’s belief that a successful company’s main objective must focus on curtailing the power of their competitors. Denning incorporates the writings of Peter F. Drucker and Matthew Stewart to argue the importance of a customer-centric approach to strategy, and understands that past performance does not constitute future success due to customer’s newly realized power in the market.

Michael Porter’s Five Forces is one of the most recognized business models taught in business schools throughout the U.S. The model focuses on the bargaining power of the supplier, the bargaining power of the customers, threat of new entrants, threat of substitute products, and the rivalry within the industry. Most business schools forget to mention the inherent failures in Porter’s Five Forces, which is why Denning’s oppositional stance is intriguing.

Denning explorers Porter’s Five Forces further by understanding the importance of managing competitor’s power, and degrading it’s believed dominance in business strategy. He states, that a market cannot be viewed as a finite pie where companies must compete for a portion of the profits. Rather, he argues that companies must use a customer-centric strategy, that focuses on the needs of the end user to better satisfy the most integral part of dominant business strategy, the customer.

Denning successfully argues against the model by exposing the dynamic nature of the modern business environment by understanding the revolutionary shift in power, from the company to the customer. In an age where information is widely available, customers are becoming more powerful due to their ability to understand and select amongst a landscape of varying options. Denning recognizes this power shift requires customer management and engagement, rather than taking actions against competition.

Throughout the article, Steve Denning draws from several prominent figures in the business community and compiles their writings into a reputable and persuasive argument. Denning refers to Peter F. Drucker’s emphasizes toward creating value for the customer. Drucker states that business is  “unlike warfare or sports in that one company’s success does not require its rivals to fail.” Instead, both companies can compete for similar customers by offering variably different products once they understand how and why their customers are different. Rather than avoiding competition and developing coping type behavior, they can further segment a market into smaller subgroups by recognizing and enacting differing strategic plans to benefit their customers.

Denning also uses Matthew Stewart to further understand Porter’s Five Forces stating that, “It merely helps to explain excessive profits in retrospect, but is useless in predicting them in prospect.” Meaning, Porter’s forces help to understand past performance, but are insufficient in predicting future behavior. Overall, the article offers a dynamically different view of successful business strategy, given that it challenges one of the most prominent figures in the business community. I would not change any portion of the article, for the writers opinions mirror many of my own. The business environment has changed dramatically, due to the influx of technology and computer-generated commercialism. Company’s strategy today must recognize this shift and view their potential profits as a value creation process rather than a competitive game against rivals.

Contributor: Steven Denning

Article: What Killed Michael Porter’s Monitor Group? The One Force That Really Matters.

http://www.forbes.com/sites/stevedenning/2012/11/20/what-killed-michael-porters-monitor-group-the-one-force-that-really-matters/