Why Porter's Monitor Consulting Company Failed
In 1983, Michael Porter co-founded his consulting company, the Monitor Group. In November 2012, Monitor was unable to pay its bills and filed for bankruptcy. One would think a strategy consulting firm would be able to avoid going into bankruptcy. Astonishly, the Monitor Group itself didn’t believe in the Five Forces Analysis and hadn’t used it for years.
Steve Denning in a
Forbes.com article wrote: "Porter began his publishing career in his March-April 1979 Harvard Business Review article, 'How Competitive Forces Shape Strategy', with a very strange sentence: 'The essence of strategy is coping with competition.' Ignoring Peter Drucker’s foundational insight of 1973 that the only valid purpose of a business is to create a customer, Porter focused strategy on how to protect businesses from other business rivals: "The goal of strategy, business and business education was to find a safe haven for businesses from the destructive forces of competition."
In a
following article he concluded: "Firms will only survive if they respond to customers’ wants and needs in a world in which customers have choices and accurate information as to what those choices are.
It was Monitor’s failure to do this that led to their bankruptcy. Monitor appears to have been successful, but overall, it didn’t generate enough customer delight to fund its various activities".
What might be some the lessons learned? One is to tread carefully before jumping onto a perceived guru's new idea. Is it valid? A possible myth? Fallacy?
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Comments
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Warren D. Miller, CPA, CFA
Strategy Consultant, United States
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Michael Porter & the Monitor Group 'Perceived guru'? What the heck is that?
IMHO, the takeaway from Monitor not succeeding over the longer term--it was acquired by Deloitte in 2013--is that monumental success as a strategy academic is no guarantee of success in business. Michael Porter is a very smart guy. Unfortunately, before he got his PhD from Harvard in 1973, he never spent a day in the 'real world'. Yes, he's an active consultant to major companies. But he's still--first, last, and always--an academic.
It's worth noting that Porter's Five Forces Framework is an industry-level notion. That is because Porter got his PhD in a field of economics called 'industrial organization' (IO). The unit of analysis in IO is not the individual firm. It is the industry (or a subset called a 'strategic group'). That is why IO does not address questions of what individual firms should do.
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