What move to make next; E6-E7 or D3-D7? Perhaps surprise them with the Queen instead? Or the Tower. Use the Tower and hit them hard. And what countermove will they then make? But hey; this is actually the totally wrong way to think about business nowadays. A much better way is explained here.
It´s an old metaphor for industry. Chess. It was also a great one, once upon a time. This simple idea: as a business leader we are playing chess. But this metaphor is in our way today. Using it could even kill your business.
The thing is; we are not playing chess anymore.
The theory of the Five forces, developed by the Harvard Business Professor and management-guru Michael Porter. Used by many of us over the years. It really did help us to find strategic options and figure out what to do next. A really strong tool. Also, a well spread one.
If we contact one of the big global management consultancy firms of today and ask a random manager if they know about Porter and his theories, we should become really surprised if we stumble on one who doesn’t know it. The five forces; probably one of the most widespread business theories on the planet today.
Historically, that tool was used for a really good reason, because it was useful.
What kind of model is actually the five forces? The basic underlying idea behind the model of the Five forces is this; it´s a stable industrial business landscape. You are for instance able to identify; who´s part of your industry, and who is not? You are even able to identify so called customers, suppliers, substitutes, competitors and new potential entrances.
When you have done all that; it´s just a question on how to create a position for yourself, so you can balance between all these actors, and win.
For such kind of situation in reality, playing chess is a great metaphor.
It´s a predefined game. A lot of pieces that can act in different ways, but have to follow the rules of the game. There is also a chessboard, 64 squares, where the whole fight is being settled.
No external unknown players are allowed to suddenly mess with an ongoing game of chess, and none of the players are allowed to invent totally new kind of moves outside the rule-book. Existing players are not even allowed to add pieces that does not exist – like perhaps a new kind of queen-horse that not only can move as the queen but also jump like the horse.
All that is fine, if we are in a stable industrial situation. But we are not in a stable industrial situation, anymore. Today we are actually in everything else but a stable industrial situation.
In nearly all industries of today we see unexpected competition. We are not really even able to define our competitors, substitute, and suppliers. And that is a clear sign of a defined game of chess not being the same game as it previously was.
Amazon is a great example. They are a book-store, right? A digital one, but still. How come then that this bookstore is able to compete with all global existing car-manufacturers – Alexa? Adding to that, Amazon are today nearly established in all industries even existing, how could that be the case?
Well, all this is because of digitalization, changing the name of the game in nearly all existing industries today. The mere existence of Amazon show that the Five Forces Model is not that well suited for our present times. Actors like Amazon show us today that we are not in a stable industrial situation anymore, hence; the metaphor of playing chess is just not of use anymore.
Look at in this way…imagine you did play chess, or actually did work in a stable industry. During such kind of circumstances, a tool like the five forces can really be useful. Never underestimate a good chess-trainer like Porter. It is seriously difficult to win in chess. Gazillions of strategies and different moves possible.
However; today’s business landscape is actually looking far more like this…
We sit there and play and then suddenly an unknown person pops up and snatches away our game of chess – digitalization, leading to what? Then that unknown person is giving us a new kind of game instead. And then that person just leaves, without telling us what the new game is about, nor how to play it.
While leaving the room the person also tells us something like “sorry but neither I know the name of this new game, but don´t worry; you will figure out during the road, while you play, and the new rules will actually partly be set depending on how you actually play…good luck”.
That story is a far better metaphor describing today’s situation, than a stable game of chess with just two chess players involved.
The point is that during such kind of situation there is no point continuing in playing chess. It is far better, much more useful, for the players, to spend time trying to understand the new game instead…before they start playing again.
It is absolutely nothing wrong with the five forces. A hammer can always be a great tool, particularly if you use it in order to hammer a nail. And Porter is not to blame if we use his hammer in a situation where it was not intended – I have never heard himself seriously claiming that this tool actually should be useful for today´s situation. We are instead to be blamed if we use his tool in the wrong situation.
I really have nothing at all against his model. I´m just claiming; we just got to stop using it.
It really is no coincidence then that models of disruption, which is a world of models built upon a non-stable industry-structure, compared to a stable one, have gained position during the last decades. It´s simply because; they mirror todays situation in a far better way. And that theory is exactly about a “new game being developed”, ending up with new rules for that game – not about how to play a game where the rules are already set.
So please; stop pretending that we are playing chess. Spend time instead figuring out the rules of the new game.
In perhaps a couple of decades from today, when all industries, that digital power in combination with entrepreneurial people, has been re-created, then we perhaps can start playing chess, and use the tool of Five Forces, again.
By the way; The classical SWOT-tool, another of today´s popular management-tools, is also based upon the same circumstances as the Five forces. So, now when you have already stopped using the five forces, I suggest you also stop using the SWOT-tool.
Put your effort in trying to figure out the rules of the new game instead.