What Killed Michael Porter's Monitor - 企管

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


What Killed Michael Porter's Monitor Group? The One Force That Really Matters


What killed the Monitor Group, the consulting firm co-founded by the
legendary business guru, Michael Porter? In November 2012, Monitor was unable
to pay its bills and was forced to file for bankruptcy protection. Why didn’
t the highly paid consultants of Monitor use Porter’s famous five-force
analysis to save themselves?


What went wrong?

Was Monitor’s demise something that happened unexpectedly like a bolt from
the blue? Well, not exactly. The death spiral has been going on for some
time. In 2008, Monitor’s consulting work slowed dramatically during the
financial crisis. In 2009, the firm’s partners had to advance $4.5 million
to the company and pass on $20 million in bonuses. Then Monitor borrowed a
further $51 million from private equity firm, Caltius Capital Management.
Beginning in September 2012, the company was unable to pay monthly rent on
its Cambridge, Mass., headquarters. In November 2012, Monitor also missed an
interest payment to Caltius, putting the notes in default and driving the
firm into bankruptcy.

Was it negligence, like the cobbler who forgot to repair his own children’s
shoes? Had Monitor tried to implement Porter’s strategy and executed it
poorly? Or had Monitor implemented Porter’s strategy well but the strategy
didn’t work? If not, why not?

Was it missteps, such as chasing consulting revenue from the likes of the
Gaddafi regime in Libya? Or had the world changed and Monitor didn’t adjust?
Or was it, as others suggested, that Monitor had priced itself out of the
market? Or was Monitor’s bankruptcy, as some apologists claimed, merely a
clever way of selling its assets to Deloitte?

Or was it, as Peter Gorski wrote, that “even a blindfolded chimpanzee
throwing darts at the Five Porter Forces framework can select a business
strategy that performs as well as that prescribed by Dr. Porter and other
high-paid strategy consultants?” If so, are other strategy consulting firms
also doomed?


A very strange tale

The answers to these intriguing questions are strange and troubling. We can
find some of them in the work of consulting insider, Matthew Stewart, and his
enlightening, but misleadingly-titled, book, The Management Myth (Norton,
2009).

In his book, Stewart tells how in 1969, when Michael Porter graduated from
Harvard Business School and went across the river to get a PhD in Harvard’s
Department of Economics, he learned that excess profits were real and
persistent in some companies and industries, because of barriers to
competition. To the public-spirited economists, the excess profits of these
comfortable low-competition situations were a problem to be solved.

Porter saw that what was a problem for the economists was, from a certain
business perspective, a solution to be enthusiastically pursued. It was even
a silver bullet. An El Dorado of unending above-average profits? That was
exactly what executives were looking for—a veritable shortcut to fat city!

Why go through the hassle of actually designing and making better products
and services, and offering steadily more value to customers and society, when
the firm could simply position its business so that structural barriers
ensured endless above-average profits?

Why not call this trick “the discipline of strategy”? Why not announce that
a company occupying a position within a sector that is well protected by
structural barriers would have a “sustainable competitive advantage”?

Why not proclaim that finding these El Dorados of unending excess profits
would follow, as day follows night, by having highly paid strategy analysts
doing large amounts of rigorous analysis? Which CEO would not want to know
how to reliably generate endless excess profits? Why not set up consulting a
firm that could satisfy that want?


The Aristotle of business metaphysics

Thus it was that in March/April 1979, Michael Porter published his findings
in Harvard Business Review in an article entitled “How Competitive Forces
Shape Strategy” and followed it up the next year with a long and unreadable
book. The writings started a revolution in the strategy field. Michael Porter
became to the new discipline of strategy “what Aristotle was to metaphysics”
.

Better still, the new-born discipline of strategy was able to present itself
as “the discipline that synthesizes all of the other functional
sub-disciplines of management into a meaningful whole. It defines the purpose
of management and of management education.”

In 1983, Porter co-founded his consulting company, the Monitor Group, that
over the years generated hundreds of millions of dollars in fees from
corporate clients (as well as from clients in the nonprofit sector), and also
providing rich livelihoods for other large consulting firms, like McKinsey,
Bain and BCG.

“Among academics,” writes Joan Magretta in Understanding Michael Porter, “
he is the most cited scholar in economics and business. At the same time, his
ideas are the most widely used in practice by business and government leaders
around the world. His frameworks have become the foundation of the strategy
field.”


No basis in fact or logic

There was just one snag. What was the intellectual basis of this now vast
enterprise of locating sustainable competitive advantage? As Stewart notes,
it was “lacking any foundation in fact or logic.” Except where generated by
government regulation, sustainable competitive advantage simply doesn’t
exist.

Porter might have pursued sustainable business models. Or he might have
pursued ways to achieve above-average profits. But sustainable above-average
profits that can be deduced from the structure of the sector? Here we are in
the realm of unicorns and phlogiston. Ironically, like the search for the
Holy Grail, the fact that the goal is so mysterious and elusive ironically
drove executives onward to continue the quest.

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.”


The goal of strategy is to avoid competition?

How did all this happen? 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.

By defining strategy as a matter of defeating the competition, Porter
envisaged business as a zero-sum game. As he says in his 1979 HBR article, “
The state of competition in an industry depends on five basic forces… The
collective strength of these forces determines the ultimate profit potential
of an industry.” For Porter, the ultimate profit potential of an industry is
a finite fixed amount: the only question is who is going to get which share
of it.

Sound business is however unlike warfare or sports in that one company’s
success does not require its rivals to fail. Unlike competition in sports,
every company can choose to invent its own game. As Joan Magretta points out,
a better analogy than war or sports is the performing arts. There can be many
good singers or actors—each outstanding and successful in a distinctive way.
Each finds and creates an audience. The more good performers there are, the
more audiences grow and the arts flourish.

What’s gone wrong here was Porter’s initial thought. The purpose of strategy
—or business or business education—is not about coping with competition–
i.e. a contest in which a winner is selected from among rivals. The purpose
is business is to add value for customers and ultimately society. There is a
straight line from this conceptual error at the outset of Porter’s writing
to the debacle of Monitor’s bankruptcy. Monitor failed to add value to
customers. Eventually customers realized this and stopped paying Monitor for
its services. Ergo Monitor went bankrupt.


Making profits without deserving them

In the theoretical landscape that Porter invented, all strategy worthy of the
name involves avoiding competition and seeking out above-average profits
protected by structural barriers. Strategy is all about figuring out how to
secure excess profits without having to make a better product or deliver a
better service.

It is a way of making more money than the merits of the product or service
would suggest, or what those plain folks uncharitable to the ways of 20th
Century business might see as something akin to cheating. However for several
decades, many companies were ready to set aside ethical or social concerns
and pay large consulting fees trying to find the safe and highly profitable
havens that Porter’s theory promised.

Although Michael Porter, the human being, appears to be a well-meaning man of
high personal integrity, his framework for the discipline of strategy isn’t
just an epistemological black hole; in its essence, it’s antisocial, because
it preserves excess profits, and it’s bad for business, because it doesn’t
work. It accomplishes the unlikely feat of goading business leaders to do
wrong both to their shareholders and to their fellow human beings.

It is only recently that Porter’s writing has begun to include any awareness
that creating safe havens for businesses with unending above average profits
protected by structural barriers is not good for customers and society, with
his advocacy of shared value. This recognition has come, however, without yet
jettisoning any of the toxic baggage of sustainable competitive advantage.


No competitive advantage is sustainable

The disastrous consequences of thinking that the purpose of strategy,
business and business education is to defeat one’s business rivals rather
than add value to customers has of course been aggravated by the epic shift
in the power of marketplace from the seller to the buyer. In the studies of
the oligopolistic firms of the 1950s on which Porter founded his theory, it
appeared that structural barriers to competition were widespread, impermeable
and more or less permanent.

Over the following half century, the winds of globalization and the Internet
blew away most of these barriers, leaving the customers in charge of the
marketplace. Except for a few areas, like health and defense where government
regulation offers some protection, there are no longer any safe havens for
business. National barriers collapsed. Knowledge became a commodity. New
technology fueled spectacular innovation. Entry into existing markets was
alarmingly easy. New products and new entrants abruptly redefined industries.

The “profit potential of an industry” turned out to be, not a fixed
quantity with the only question of determining who would get which share, but
rather a highly elastic concept, expanding dramatically at one moment or
collapsing abruptly at another, with competitors and innovations coming out
of nowhere. As Clayton Christensen demonstrated in industry after industry,
disruptive innovation destroyed company after company that believed in its
own sustainable competitive advantage.


The only safe place

The business reality of today is that the only safe place against the raging
innovation is to join it. Instead of seeing business—and strategy and
business education—as a matter of figuring out how to defeat one’s known
rivals and protect oneself against competition through structural barriers,
if a business is to survive, it must aim to add value to customers through
continuous innovation and finding new ways of delighting its customers.
Experimentation and innovation become an integral part of everything the
organization does.

Firms like Apple [AAPL], Amazon [AMZN], Salesforce [CRM], Costco [COST],
Whole Foods [WFM] and Zara [BMAD:ITX] are examples of prominent firms
pursuing this approach. They have shifted the concept of the bottom line and
the very purpose of the firm so that the whole organization focuses on
delivering steadily more value to customers through innovation. Thus
experimentation and innovation become an integral part of everything the
company does. Companies with this mental model have shown a consistent
ability to innovate and to disrupt their own businesses with innovation.

Thus what is striking about continuous innovation is that the approach is not
only more innovative: it tends to make more money. The latter point is
important to keep in mind. For all the hype about innovation, unless it ends
up making more money for the firm, ultimately it isn’t likely to flourish.
Making money isn’t the goal, but the result has to be there for
sustainability.

Is continuous innovation sustainable? Firms like those I mentioned have been
at it for one or more decades with extraordinary results. What’s interesting
is that they are consistently disrupting others, rather than being disrupted
themselves. Will they survive for 50 or 100 years? Time will tell. What we do
see is that they are doing a lot better than firms pursuing shareholder value
or focusing merely on defeating rivals.


Monitor had no place in the emerging world

In this world, Monitor’s value proposition of a supposed sustainable
competitive advantage achieved by studying the numbers and the existing
structure of the industry became increasingly implausible and irrelevant. Its
consultants were not people with deep experience in understanding what
customers might want or what is involved in actually making things or
delivering services in particular industries or how to innovate and create
new value.

They were part-time academics who promised to find business solutions just
from studying the numbers. They had no idea how to build cars or make mobile
phones or generate great software. They were numbers men looking for
financial solutions to problems that required real-world answers.

The important question is not: why did Monitor go bankrupt? Rather, it is:
how were they able to keep going with such an illusory product for so long?
The answer is that Porter’s claim of sustainable competitive advantage,
based on industry structure and the numbers, had massive psychological
attractions for top management.


The strategist CEO as a kind of warrior god

Porter’s theory thus played to the image of the CEO as a kind of superior
being. As Stewart notes, “For all the strategy pioneers, strategy achieves
its most perfect embodiment in the person at the top of management: the CEO.
Embedded in strategic planning are the assumptions, 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 chief strategist
of an organization has to be the leader— the CEO.”

Strategy leads to “the division of the world of management into two classes:
“top management” and “middle management.” Top management takes
responsibility for deciding on the mix of businesses a corporation ought to
pursue and for judging the performance of business unit managers. Middle
management is merely responsible for the execution of activities within
specific lines of business.

The concept of strategy as it emerges defines the function of top management
and distinguishes it from that of its social inferiors. That which is done at
the top of an organizational structure is strategic management. Everything
else is the menial task of operational management.


Two classes of management

Practitioners of strategy insist on this distinction between strategic
management and lower-order operational management. Strategic (i.e. top)
management is a complex, reflective, and cerebral activity that involves
interpreting multidimensional matrices. Operational management, by contrast,
requires merely the mechanical replication of market practices in order to
match market returns. It is a form of action, suitable for capable but
perhaps less intelligent types.

This picture of CEO-superdeciders helps justify their huge compensation and
the congratulatory press coverage, and yet again, it also has little
foundation in fact or logic. The strategy business thus lasted so long in
part because it supports and advances the pretensions of the C-suite.

Porter’s strategy theory is to CEOs what ancient religions were to tribal
chieftains. The ceremonies are ultimately about the divine right of the
rulers to rule—a kind of covert form of political theory. Stewart cites
Brian Quinn that it is “like a ritual rain dance. It has no effect on the
weather that follows, but those who engage in it think that it does.”


The future of strategy consulting

Does strategy consulting have a future? When rightly conceived as the art of
thinking through how companies can add value to customers–and ultimately
society–through continuous innovation, strategy consulting has a bright
future. The market is vast because most large firms are still 20th Century
hierarchical bureaucracies that are focused on “the dumbest idea in the world
”: shareholder value. They are very weak at innovation.

Consultancies that can guide large firms to move into the world of continuous
innovation in the 21st Century have a bright future. To succeed in this
field, however, consultants need to know something both about innovation and
about the sectors in which they operate and the customers who populate them.
Merely rejiggering the financials or flattering the CEO as the master
strategist is not going to get the job done. Managers and consultants are
going to have to get their hands dirty understanding what happens on the
front lines where work gets done and where customers experience the firm’s
products and services. To prosper, everyone has to become both more creative
and more down-to-earth.

What has no future is strategy conceived as defeating rivals by finding a
sustainable comparative advantage simply through studying the structure of
the industry and juggling the numbers.

Since Monitor had no other arrow in its strategy quiver, it was doomed from
the outset. Its embarrassing debacle marked the beginning of the end of the
era of business metaphysics and the exposure of the most over-valued idea on
the planet: sustainable competitive advantage.


Monitor was killed by the dominant force: the customer

Eventually even attractive illusions come to an end: people see through them.
Ceremonial rain dances come to be viewed for what they are. The financial
crisis of 2008 was a wake-up call that reminded even entrenched firms how
vulnerable they were. Today, large firms have little interest in paying large
fees to strategists to find sustainable competitive advantage just from
studying the numbers.

Monitor eventually learned the hardest lesson of all: strategy, business and
business education are not about pursuing the chimera of sustainable
competitive advantage.

Monitor wasn’t killed by any of the five forces of competitive rivalry.
Ultimately what killed Monitor was the fact that its customers were no longer
willing to buy what Monitor was selling. Monitor was crushed by the single
dominant force in today’s marketplace: the customer.

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