What Killed Michael Porter's Monitor Group? The Force That Really Matters (2012)

This is a rant against Michael Porter, his theories, and the practice of business strategy generally, but has nothing to do with why Monitor actually failed. Most of the rest of the industry is doing fairly well, especially since the end of the recession, and Monitor moved away from the five forces model decades ago to tackle the same types of business strategy projects other top-tier consulting firms help with.

Monitor failed for A LOT of reasons. It had a strange debt/equity structure that paid large sums to former partners who were no longer involved in the business, an issue that has caused other notable firms to struggle as well. They were a mid-sized player in a market increasingly split between boutiques and large global firms. They were a pure play strategy firm in a market where clients were looking for help with implementation. They did brand-damaging work with former dictators.

The list could go on, but executives wising up that they didn't want to buy strategy consulting wasn't why Monitor failed. Executives are going to buy the same projects, probably from the same consultants, they're just going to buy them from Deloitte now.

This article has more than a little shadenfruede, methinks. But there's an interesting thesis lurking in there, that Porter's theories have lead directly to the enshrinement of C-level executives as a kind of upper-class:

   first, that strategy is a decision-making sport involving
   the selection of markets and products; second, that the
   decisions are responsible for all of the value creation
   of a firm (or at least the “excess profits,” in Porter’s
   model); and, third, that the decider is the CEO. Strategy,
   says Porter, speaking for all the strategists, is thus 
   ‘the ultimate act of choice.’

The article doesn't go on to talk about what a C-level exec actually is but makes an emphatic case that, since Porter is responsible for the crowning of these kings, and now Porter is proven wrong, then perhaps it's time to take the crowns away.

I'm terribly biased, but I like this line of argument very much.

I don't have an MBA. At one point I felt sorry for myself for not having taken that route. This was during a time that I was building a business that was gaining traction. As an engineer I felt my management skills and understanding of business had serious holes all over the place. I didn't have time to go back to school. I had to run a business. So, I resorted to reading business books. At one point My wife made the comment that things had changed because there were stacks of business books everywhere now instead of engineering books. It was a really frustrating phase for me. I learned a lot but, at the same time, a lot of it sounded like highly refined bullshit to me. I was far more comfortable looking at business from the perspective of mathematical equations and a series of hypothesis to be tested via a scientific process.

Eventually I got tired of the bullshit. Read three authors and get ten different opinions. Not one of them ever built anything or risked anything at all. These people were not my people.

I started to devote more time to getting together with other entrepreneurs and swapping notes. It was amazing to me how solutions to problems presented themselves almost without effort in this context. Sure, talk to people who are really holding a cat by the tail and they might just know a thing or two that the escapes the consultant's artificial construct. I had some of the most amazing and revealing conversations with successful entrepreneurs who had barely finished high-school and hated to read books --any books. Who would have known?

Look at the history of innovation. Look at some of the most important and influential companies and products of the last hundred years. How many of these came out of the minds and work of consultants and MBA's? How many came out of the efforts of entrepreneurs of all walks of life and levels of education hell-bent to make it happen?

So, again please, why do we follow these false prophets?

The author is silly to conclude that strategy is useless because Monitor failed. Sustainable advantages are absolutely real (think any network effects business: Dropbox, Airbnb, Craigslist, eBay). But they're also rare, and baked-in from the beginning.

Monitor's actual flaws:

(a) a consulting business can't capture the value of a successful strategy, they collect only fees, and

(b) the sorts of customers who are willing to pay for big ticket consulting projects are big sprawling businesses for whom it's far too late to identify an effective strategy.

As someone who sat through Bschool strategy class (which, for those who have not, is typically a near religious semester-long praise-fest of Porter and his 5 forces), I find strange pleasure in reading this. Can't put my finger on why.

What utter crap. The version of Michael Porter that this "article" argues against is a straw man that bears little resemblance to the actual man or his ideas.

Between Forbe's hosted blogger section (where this article came from) and the Atlantic's paid content, the quality of mainstream business reporting is dropping like a stone.

What a terrible article. It starts out OK, but quickly goes wrong.

Yes, the 5 Forces model is the most overused piece of analysis since the 'pro and con' list. But to wholesale throw it out because the company went bankrupt, well, this just looks like dancing on the grave of another.

I don't see anything wrong at all with finding a business that has natural protections from competition. Any decent startup strategy should have conversations about switching costs, customer lock-in and looking for niches where competition is less fierce, or at least favourable to early-movers. If you read Warren Buffets strategies he appears to spend a lot of time concentrating on companies with natural resistance to competition, which gives them pricing power and longevity.

The whole article reeks of academic paybacks and profit is evil thinking, and I didn't bother finishing it.

I'm amused that the author chooses Amazon and Apple, of all companies, as one that doesn't rely on structural barriers.

Lots of services firms failed in the recession...