Tuesday, April 25, 2017

Michael Porter Not Worth Reading?

Very interesting Forbes piece:

Hype, spin, impenetrable prose and abstruse mathematics, along with talk of “rigorous analysis”, “tough-minded decisions” and “hard choices” all combined to hide the fact that there was no evidence that sustainable competitive advantage could be created in advance by studying the structure of an industry.

Although Porter’s conceptual framework could "help explain excess profits in retrospect, it was almost useless in predicting them in prospect." As Stewart points out, “The strategists’ theories are 100 percent accurate in hindsight. Yet, when casting their theories into the future, the strategists as a group perform abysmally. Although Porter himself wisely avoids forecasting, those who wish to avail themselves of his framework do not have the luxury of doing so. The point is not that the strategists lack clairvoyance; it’s that their theories aren’t really theories— they are ‘just-so’ stories whose only real contribution is to make sense of the past, not to predict the future.”
Everybody raves about his book Competitive Strategy (90% 4 and 5 star reviews) but is it actually useful for an entrepreneur or an investor??

1 comment:

Anonymous said...

I think Porter's framework can be useful for understanding strategies and making corporate decisions. But his book, Competitive Strategy, is very generic and a bit outdated. If this subject is of interest to you, then I would recommend reading a short article by Ghemewat (who is one of Porter's academic protégés) -- it is much better than his books on strategy: https://hbr.org/2007/03/managing-differences-the-central-challenge-of-global-strategy