Michael Porter offers some interesting lessons on how companies must deal with economic downturns.
How Porter's recommendation apply to your PII project?
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THINK ABOUT IT
2 comments:
Michael Porter at the 2008 World Knowledge - Pii Blog
To survive, we have to have de capacity to integrate the short term and the long term.
Companies that overreact to the crisis, commonly get stuck with problems. During crisis times, the customer is under pressure, and because there are fewer clients with less money to spend, they know they have the bargaining power. In any case, the worst thing a company can do is lower the quality of their products and/or services.
Areas where we can add depth and rigor:
Whatever the business framework you utilize, the business strategy tools that are meant to model the real deep fundamentals and provide a set of tools by which we can look at any set of trends, and be used at any time are:
The Value Chain
The 5 Forces of an industry
The diamond theory
The Clusters tool
These tools will help make sense about their significance in the ability of any company to compete.
Even though competition and technology changes, these tools are independent of the circumstances or moment of time. The frameworks themselves don´t find any modifications. They can be used at any industry, anywhere in time. When applying these same fundamentals to new circumstances we can find new insights and answers to actual challenges.
Days after listening to this very interesting intervention of Michael Porter at the 2008 World Knowledge, and refreshing and clarifying as well the depth and relevance of these strategy set of tools, I was found at a pork producers meeting, stuck with the same old problems and paradigms, with a regional industry with so many combined circumstances that have made this industry a dog one, according to the Boston Consulting industry attractiveness matrix classification. And the conclusion that I shared with the colleagues was this:
We are living the actual circumstances because of what we have made and what we have made not. We have not invested time, nor resources in designing and executing a well thought strategy that would lead us to a desired future of a competitive and profitable cluster around pork. We do not know how competitive we are at any of the 5 forces, and others have made their task, so there the reason of why we cannot compete. We neither know how to maximize the throughput along the value chain. So, after reviving these elemental business tools, I now conclude that not using them properly and regularly will be at our own peril and will compromise, as in the above case, a business sustainability.
This is just an example of the relevance of these B-tools applied to a real life (and in this particular case a sad) context. But as Porter says, they can be used in any industry, in any context, anywhere in time, and each time, new relevant issues will be revealed.
1- Barriers of entry
1980´s where primarily in the supply side, and had to do with economies of scale in production, R&D, bargaining power, competitive financing, technology access, mass marketing, etc. What was found since those times is a new barrier of entry: the network effects. When many consumers use the same product (as Microsoft solutions) a barrier of entry takes place for other competitors.
We can think of rivalry in a more sophisticated way than the 1980´s.
Complimentary products, the 6th force
Carlos has got it right. The Pork industry, it seems, is stuck in a reactive mode and waits for crisis to hit before thinking of change. What the Peral group is considering is not change but 'transformation' where all is on the table. By using Mega, transformation is possible.
I am just finishing up an article that hs been accepted by Educational Technology on crisis-driven reaction as compared with proactive transformation in higher education. My examples are Arizona State University and Florida State University as compared to ITSON.
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