Blog #4 week 5
Updated: Feb 5
Interview excerpts with Michael Porter.
*I’ll include my favorite questions and answers from the interview between Magretta and Michael Porter.
Margretta: “What are the most common strategy mistakes you see?”
Porter: The granddaddy of all mistakes is competing to be the best, going down the same path as everybody else and thinking that somehow you can achieve better results. “…Another mistake is to overestimate strengths. There’s an inward looking bias in many organizations.” “…Another common mistake is getting the definition of the business wrong. “…Reflecting on my experience, however, I’d have to say that the worst mistake-and the most common one-is not having a strategy at all. Most executives think they have a strategy when they really don’t.”
Margretta: “Why do so few companies have really great strategies? What are the biggest obstacles to good strategy?”
Porter: “I believe that many companies undermine their own strategies. Nobody does it to them. They do it to themselves. Their strategies fail from within.” “…Capital markets have become toxic for strategy. The single-minded pursuit of shareholder value… has been enormously destructive for strategy and value creation.”
Margretta: “Any further advice about tackling foreign markets?”
Porter: “When you go to a foreign market, remember that you’re not trying to serve the whole market. You’re looking for the segment that values what you do.”
Margretta: “What is a disruptive technology? Where does it intersect with your thinking about strategy?”
Porter: “A disruptive technology is one that invalidates value chain configurations and product configurations in ways that allow one company to leap ahead of another and/or make it hard for incumbents to match or respond because of the existing assets they have. So a disruptive technology is one that would invalidate important competitive advantages.”
“…Disruptive technology is compelling as a metaphor, but managers need to be rigorous about what’s creating the disruption.”
Magretta: “The term “business model” gets a lot of attention in the business press, especially in the context of innovative new businesses. Is a business model the same thing as a strategy?”
Porter: “The business model is the most basic step in thinking about the viability of a company. If you’re satisfied with just being viable, stop there. If you want to achieve superior profitability then strategy-as I define it- will take you to the next level.”
Magretta: “How do you do a five forces analysis if you’re an entrepreneur starting a new business in a completely new market space?”
Porter: “Strategy is relevant for any organization at any point in it trajectory. “...the five forces exercise is fundamentally the same with one big exception: instead of analyzing what already exists, you’re forecasting. “…it’s crucial to see different paths for how the industry might evolve, and to ask the basic questions about the five forces, so that you can make choices that will put the industry on the best possible path.”
Margretta, Joan. Understanding Michael Porter: The Essential Guide to Competition and Strategy. Harvard Business Review: Boston 2012.