I am Tom Stewart, Editor and Managing Director of the Harvard Business Review.
Our guest today is Michael Porter, Professor at Harvard University
and Head of the Institute for Strategy and Competitiveness.
He is the author of the forthcoming HBR article,
“The Five Competitive Forces That Shape Strategy”,
a reaffirmation, update, and extension
of his groundbreaking 1979 article “How Competitive Forces Shape Strategy”.
Mike, thanks for joining the program.
To start, let us remind our viewers of what the five competitive forces are.
Well Tom, the basic idea of the competitive forces starts with the notion
好的 汤姆 有关竞争力的基本观点
that competition is often looked at too narrowly by managers,
and the five forces say that, yes you are competing with your direct competitors,
but you are also in a fight for profits with a broader extended set of competitors,
customers who have bargaining powers,
suppliers who can have bargaining power,
new entrants who might come in and kind of grab a piece of the action,
and substitute products or services
that essentially place a constraint or a cap on your profitability and growth.
So the five forces is kind of a holistic way of looking at any industry
and understanding the structural underlying drivers of profitability and competence.
So I use this to think about my rival makes it difficult for me.
The threat of substitutes means I cannot overcharge.
The threat of new entrants means I cannot overcharge.
– The same thing with the buyers and suppliers. – Buyers and suppliers.
– 购买者和供应商也一样 – 是的 也一样
And there is underlying drivers of each of those forces
that the model really sort of unveils
and then you can actually apply this.
Every industry is different.
Every industry will have a different set of economic fundamentals,
but the five forces help you hone in on,
first of all, what is really causing profitability in the industry.
What are the trends that are most likely to be significant
in changing the game in the industry?
Where are the constraints, which if you can relax,
it might allow you to find a really strong competitive position?
so how would you apply this analysis to an industry, airlines for example.
Airlines is a great industry.
Actually you will see in the article or you have seen in the article
that there is a chart that compares profitability of industries,
and airlines, I think has been on the bottom of that list for decades.
It is among the least profitable industries known to man,
and the five forces really allow you very quickly to understand why.
I mean, let us just go around the chart.
The nature of rivalry is incredibly intense and it is almost exclusively on price.
It has been very hard to differentiate,
to get the customer to wait even an extra two or three minutes for another flight
if they can get on the flight with a cheaper price.
So there has been a very intense price competition,
low barriers to entry.
Constant stream of new airlines coming into the industry
despite the fact that probability is low.
It always puzzles me.
Low barriers to entry because you can rent a plane,
you do not have to buy them.
You can rent a plane. You can lease a gate.
You know, it is all generic technology.
You can start with one flight between two city pairs.
You don’t have to, you know there is no real need to have a whole network in the beginning,
and yet, people keep coming in.
I think it is just one of those “sexy” industries.
我认为 航空业就属于 “诱惑性” 行业
It is a great example of how sexiness or coolness or hotness or cheapness
has nothing to do with industry profitability.
The underlying structure is what drives profitability.
Yeah, the customer is very fickle and price sensitive.
Suppliers of aircraft and aircraft engines
and even aircraft gates at airports now have a lot of clout.
They can bargain away most of the profits.
GE, and Rolls-Royce, and Airbus, and Boeing make a lot more money than Airlines.
通用 劳斯莱斯 空客还有波音比航空公司赚的多多了
They get most of the profit.
And then of course, there is always the substitute of getting on the train or driving your car
当然 总是有替代出行方案 火车或自驾
or shipping your goods by air
and that set has kind of kept a continuum.
You have powerful suppliers of labor too.
That is another powerful supplier.
There is a great case where you have unionized labor.
Unlike other industries, in this industry particularly with the pilots,
不同于其他行业 这个行业的劳动力 特别是飞行员
the labor can literally shut you down, and there is no way around them.
So, it is an industry where there are spurts
of what you might call mediocre profitability
punctuated by long periods of terrible profitability.
So everyone of the five forces is very strong in that industry
and you could take another industry where the five forces are relatively benign.
Right, like soft drinks.
同意 比如 软饮料
I mean, soft drinks have been a license to mint money
and again, it is the opposite kind of analysis.
When I talk with students, we kind of joke around,
where all the forces are attractive like soft drinks.
There are zero-star industries
where all the forces are unfavorable like airlines,
and we are always trying to understand,
okay, what is the configuration of underlying economic drivers
that is going to really shape the profit potential of this industry
and then armed with that insight, what do I do about it?
How do I try to relax the constraint that is holding back industry profitability?
How can I position myself
to kind of insulate from some of the gales, gale winds of those forces?
Those implications of the five forces are something
that this new article has developed in much more detail.
You conceived this framework nearly three decades ago
and it has been the most extensively used
both in management scholarship and management practice of any strategy framework,
it changed the definition of strategy in a lot of ways.
In these three decades, what have you learned?
What have you learned about the application of these ideas
in the real world of business?
Well, the wonderful thing of course we learned is
that these concepts can be applied to literally any, any industry,
to product, to service, high-tech, low-tech,
无论是产品 服务 高科技 低技术
emerging economies, developed economies.
Indeed, what one of the powers of the framework is
it helps you get avoid getting trapped or tricked
by the latest trend or the latest technological sensation,
and really allows you to focus on the underlying fundamentals.
The internet is a good example.
We got very, very confused by the internet
because people saw the internet as a force
as opposed to really enabling technology
that might or might not impact the underlying structure of the industry.
So I think one thing I have learned is the framework is very, very robust,
所以 我认为我的一个收获是 这个框架相当强大
but I have also learned
that there is a lot of confusion and complexity in
actually applying the framework in actual practice
and we tried to clear as many of those areas up as we could in this new article.
For example, how to think about rivalry?
What what’s the really… How do we understand
when rivalry is really positive-sum, which allows many companies to do well?
When does rivalry become really zero-sum,
where everybody is kind of dragged down into a destructive battle that you cannot win.
Well, I can understand zero-sum.
I mean, if we get in a price war,
the only one who wins is the consumer, which is nice if you are a consumer.
– Yeah. – But what do you mean by positive-sum competition?
– 是的 没错 – 不过 你说的正和竞争是什么意思？
Well, you know the trouble with the zero-sum competition
is then the consumer gets a little price,
but they really got no choice,
and a positive-sum competition is where companies can compete
on different attributes, services, features, customer support,
基于不同属性 服务 特征 客户支持的
that is actually relevant to particular groups of customers.
And the most really positive-sum competition
is where companies are really competing on different things
in order to meet the needs of different segment.
So we are growing the pie and there is a piece for each of us.
所以 我们在做馅饼 每人都有一份
There is a piece for each of us.
In fact, one of the things we talked about in the new article,
one of the things I did in the new article
that we really probably did not have the experience to do so many years ago,
was really talk a lot about the implications.
If this is the way competition works, what do you do about it?
One of them is might be
in some industries rather than go for market share against your rivals,
you might be much better off just really expanding the pie,
expanding the whole profit pool of the industry.
That may be the best way for a market leader
to actually improve their circumstances
rather than to trigger a destructive battle with their head-to-head rival.
How should a company get started using the five forces framework?
You are working your strategy and you decide, “This really works for me.”
你在制定自己的战略 并决断 “这真的于我有益”
How do you begin?
Well, I think industry analysis and looking at the competitive environment is of course,
probably the starting basic discipline of any strategy formulation process.
If you do not know what your industry looks like,
if you do not know how it is changing,
if you do not know what the drivers or competition are,
you know, strategy is going to be marginally useful, if not destructive.
你懂的 即便没有破坏作用 战略所起到的作用也微乎其微
So we got to start with industry analysis figuring out
what your industry is and drawing the right boundaries.
That is not always easy.
It is not always easy.
We have added a box in this new article,
which really addresses that question
because I encountered so many companies that struggled with industry definition,
you know, identifying really
what the industry structure is in your particular industry.
And then there is another thing that a lot of managers do.
They kind of go through the industry analysis
and they say, “Okay. This is good, this is bad.
会说 “这个可以 那个不行
This is good, this is bad.
This is an attractive industry or unattractive industry.”
But of course the real question is how is that industry changing?
Some have believed and taken the five forces as really a static snapshot,
but of course the five forces give you the tools
for understanding the dynamics
and where is that industry structure changing?
How are buyers and suppliers and substitutes and potential entry evolving?
买家 供应商 替代品以及潜在进入者是如何演化的？
And then what implications does that hold for your strategy?
How do you position yourself to find that spot within the industry
that you’re at where you can command a really good profit given the five forces?
How can you maybe reshape the nature of the industry structure?
We have got some great new examples
that are very, very contemporary in this article
that I think will help the manager community and the investor community
really understand the application of this.
Sometimes when people think about strategy, they think about a group of people,
maybe from a management consulting firm
or maybe on the 33rd floor of the building, whatever it is,
but it is sort of elite strategy priesthood that goes in and does this.
They are almost divorced from the rest of the management of the company,
the 99% of the other people working in the company.
How can a strategy become part of the day-to-day life
of a working stiff manager in a company?
How do you apply this framework, this thinking?
How do you use it?
We think that this way of looking at an industry
needs to be very, very broadly understood in the organization, I mean.
And the thing about it is that managers, even rank and file employees, it is intuitive.
People understand. We have these customers, we have these suppliers,
人们清楚 我们有这些顾客 有这些供应商
we are struggling with them everyday.
They are trying to get a better deal, we are trying to get a better deal.
So intuitively, I think this is a way of helping people sort of step back
from all the excruciating little details that characterize any business
and say “what’s really important here?”
And then of course we have learned that strategy is completely useless,
当然 我们也明白了 战略本身完全起不了作用
again, unless the results of the strategy process,
the position that you choose to occupy
the way you’re going to drive your company is well understood quite broadly
because the number one purpose of strategy is aligned.
It’s really to get all the people in the organization
making good choices reinforcing each other’s choices
because everybody is pursuing a common value proposition
or common way of gaining competitive advantage.
So you know, I remember when I wrote this article,
there were many people who believed
that strategy documents should be locked in the safe at night
and should not be made available to the rank and file.
There was a concern that some competitor would find some secret.
Well, we have actually learned now that it is the opposite.
而事实上 我们现在已经知道 情况恰恰相反
Your employees got to know your strategy, your channels have to know your strategy,
your suppliers have to know your strategy.
Your competitors probably knew it already.
Well, and frankly, again the competition is not zero-sum.
坦率讲 再说一遍 竞争不是零和的
If every company finds a unique need that it can set out to meet,
if it tries to deliver something different than its rivals,
multiple rivals can be successful.
And If your competitors can understand what you stand for
and what you are committed to,
maybe they will make a different choice,
rather than get dragged into this kind of mindless price wars that we see in so many industries.
The five forces that shape strategy have been around for 30 years,
they are going to be around for, well, they have been around long before you wrote about it.
– That is right. – They have been around as long as business has been around.
– 的确是 – 五力模型和商业存在的时间一样久
They are going to be around as long as business is around.
The new article is just fabulous.
-Thank you so much. -Thank you.
Well, I am looking forward to kind of getting another surge of feedback
from the practitioners, and we will keep learning.