LIVING IN ENTREPRENEUR COUNT It might be a lot tougher than you think By Jonathan Simne
T
hose of you who read my blogs on the Entrepreneur Country website will have noted me highlighting the demise of the Monitor
Group, a consulting firm co-founded by university thinker and business school favourite, Michael Porter, which was recently forced to file for bankruptcy protection. For those not familiar with Porter’s work, he originated the ’five-force’ competitive analysis model that any MBA student of the last 30 years or so can recite in their sleep.
Founded in 1983, the same year IBM launched the PC, the Monitor Group generated hundreds of millions of dollars in fees from corporate and non- profit clients. It also became a revenue engine for other large strategy firms such as McKinsey, Bain and BCG, as organisations sought to create ’sustainable competitive advantage’ frameworks.
from Porter’s theoretical
Despite its initial success, Monitor’s bankruptcy wasn’t unexpected; its long slow slide into oblivion coincided with the global recession. You might be wondering why the consulting firm didn’t use the ’five force’ principles to manage their business better, but my bet is that even if they had, the world of business has changed so much since the` five forces’ was formulated that they have been rendered irrelevant.
The illusion of sustainable competitive advantage The problem for Monitor was that in the globalised digital world - except perhaps where artificially created, supported or protected by government regulation – the sustainable competitive advantage as envisaged by Porter simply isn’t achievable. However, that didn’t stop Porter’s theories becoming a convenient mantra for corporate management sitting Canute-like on their Herman Miller thrones, trying to shore up their business whilst the inevitable tide of change lapped around them. After all, why go through the entrepreneurial hassle of creating better products and services when the firm could simply erect a sea-wall that would position its business in a way that ensured endless above-average profits?
Protection from the gales of creative destruction In contrast to embracing innovation through Schumpeter’s `gales of creative destruction’ and ignoring fellow `management guru’ Peter Drucker’s previous insight that the only valid purpose of a business is to create a customer, Porter focused strategy on how to protect businesses from rivals.
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Strategy consultancies, business and business schools subsequently aligned to find safe havens from the forces of competition. How ironic, then, that Porter’s academic studies should have been conducted in the supposed bastion of raw capitalism and unbridled competition, the United States.
The problem was Porter’s basic premise. As Drucker indicated, and most entrepreneurs know intuitively, the positive purpose of business is to add value for customers, their community, and, ultimately, society at large. This is what should drive strategy. Porter’s negative view of business was driven by how to play the corporate game, avoiding competition and seeking out above-average profits protected by structural barriers; not taking the risks that making a better product or delivering a better service entail. What the `five forces` completely ignore is the inevitability that someone from the outside could decide to change the rules of the game. Those game changers started to appear in force in the 1990s as the digital revolution took hold – Amazon, Apple, Google, eBay and a host of now household names became a pack of digital disrupters hungry for change.
Enter Peter Alfred-Adekeye A potential example of what goes wrong when corporations founded on innovation appear to embrace Porters’ principles may be found in the story of British entrepreneur Peter Alfred-Adekeye. Alfred- Adekeye wanted to revolutionise the way Internet networks were supported and maintained. But his quest proved to be a long and often Kafka-esque battle.
His company, Multiven is undoubtedly revolutionary. It offers customers direct access to a handpicked cadre of nearly 1,000 of the world’s most experienced network technology experts. These are arranged into a social network and delivered as cloud resource, offered to customers affordably with utility-based start-and-stop-at-will pricing. When a network router or switch breaks, or some software malfunctions, Multiven customers log on to its website, post their problem and the consultants compete to solve the issue. The consultant that solves the issue is paid when the customer confirms they are satisfied with the fix.
Multiven’s model was inspired by Alfred-Adekeye’s experience as a technical leader and network engineer, both for Cisco and IBM respectively. He
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