The Beauty of Porter's Five Forces

Kapil Edke explains why Porter's Five Forces Model assumes a special place in management textbooks.

The Porter’s Five Forces Model, developed by Michael Porter, a leading strategist and a management Guru, is very famous amongst the management students. It has been talked about many times and it’s inevitable part of nearly every discussion on strategic management. However, I wish to make this article generic enough for the layman and hence explaining from basics:

Porter’s five forces model is used in assessing the attractiveness of the industry with respect to its profitability. It says, there are five broad forces which decide how attractive the industry is, to make investments:

a) Entry barriers: Higher the entry barriers, more attractive is the industry, as the threat of new entrants is low.

b) Extent of competition: Lower the number of competitors, more attractive is the industry.

c) Bargaining power of suppliers: Lower the bargaining power of suppliers, more attractive is the industry.

d) Bargaining power of customers: Lower the bargaining power of customers, more attractive is the industry.

e) Threat of substitutes: Lower the possibility of replacing the industry products by substitutes, more attractive is the industry.

As an example, consider airlines industry. It ranks low on profitability scale when Porter’s five forces model is used, as the entry barriers are moderate, competition is high, bargaining power of suppliers (oil marketing companies and aircraft manufacturing companies) is high, bargaining power of customers is high (as many options as available) and threat of substitutes is moderate (other modes of transport, especially for domestic travel).

The beauty of Porter’s five forces model lies in its intuitiveness, simplicity and creativity. It is intuitive, logically convincible, as we saw in the example of airlines industry. It is simple to understand. Yet, it is creative. Who else before Porter had considered the suppliers and customers as competitors? No wonder, it assumes a special place in management textbooks. 

Self-motivation and Leadership

The following article by Kapil Edke explains what it means being self-motivated and why many people are not self-motivated.

What is self-motivation? It simply means inspiring self to do things which are otherwise not must. If someone else is inspiring and energising you to do those things, it is not self-motivation. However, if urge to perform comes from within then surely it can be called as self-motivation.

In today's organizational context, this term holds the key and differentiates above average from average. We have reached a stage today where people above certain hierarchical level need not be told what they should do, need not be given work, but they should decide themselves what work should be done by them and where should they focus their time and energy so as to best optimize the output. In this process, those who are ordinary concentrate upon routine tasks which are both necessary and sufficient for their survival in the organization but those who are above average, self-motivated, plan new initiatives, set higher goals for themselves which are otherwise not formally asked for. While doing this, they leave their competitors behind and grow ahead in the corporate ladder.

Why many people are not self-motivated? There are many reasons behind this, some obvious, some not so simple:

1) Complacency: This is the most crucial reason. The statistics show that people become complacent after they achieve the results formally expected from them and take pride in their achievements, without thinking about improvement and enhancement.

2) Improper time management: This is the second most major reason. It is frequently observed that people mismanage their time, and spend too much time in achieving what they are expected to achieve. This process itself exhausts all their available time and they are left with hardly any time for anything else.

3) Work life balance: Some people fear that taking new initiatives and doing more work would mean that they are workoholic and would leave little time for other activities. However, the statistics show that self-motivated people do not necessarily have poorer work life balance as compared to their peers. That means, there ios no correlation between being self-motivated and being workaholic.

4) Negative attitude: People fear that they would not be able to achieve results in areas which are not clearly defined for them, as they may be more abstract. Hence, they feel spending energy in these areas may be waste of time. However, it is observed that even small results in these areas can be greatly appreciated by superiors, as they are something extra, like a delight.

The data shows that most of the great leaders in the world were/ are self-motivated and don't get satisfied or complacent easily. Perhaps that is the single most important reason behind their success! I think this is something to ponder upon for everybody ...

Leadership, Churchill and Hitler

In the following article Kapil Edke has discussed the leadership styles in the context of two world-famous leaders in 1940's, whose actions changed the future of the world for decades.

A few days ago, I attended a conference related to leadership skills. The conference was attended mostly by human resource professionals like me and had some really good discussion on topics like leadership style, motivation etc.

One of the modules in this conference discussed leadership in the context of two leaders from World War II era, Winston Churchill of UK and Adolf Hitler of Germany. There are numerous similarities as well as differences between their leadership styles. However, one is considered as brilliant strategist whose actions saved the democracy and freedom, while the other is looked at with disdain because of his atrocities and is blamed squarely for waging the world war.

Similarities:

1) Both Hitler and Churchill were "non-serious" students. They used to hate mathematics and like arts and history (so a leader need not be brilliant in academic sense).

2) Both these men faced initial failures in politics. During World War I in 1915, Churchill was blamed for failure in Battle of Gallipoli and resigned from the government, while Hitler failed in Munich Putsch (coup in Bavaria) and suffered hard time in politics for the years to come.

3) Both these men had certain ideologies which they didn't change or modify for political gain. For example, Hitler was against the Treaty of Versailles which he used to consider to be against German welfare, while Churchill was against appeasement of Nazis/ Fascists and opposed developments like Munich Pact.

4) Both of them gained popularity when times and situations changed and their view of the world started appearing correct to the general public, after slowdown in Germany in 1930's (Hitler) and after Germany's attack on Poland in 1939 (Churchill).

5) Both of them hated communism. However, because of political and military compulsions each of them had to make friendship pact with Soviet Russia, albeit at different times. However, during the pact, each of them looked at Soviets with suspicion while Soviet leader Stalin tried to extract maximum benefit through the pact.


Differences:

1) In general, Hitler is considered Charismatic leader (charisma: divinely conferred gift or power), while Churchill is considered Inspirational leader (inspire: influence, animate or motivate). While the charismatic leader makes people believe in him entirely, inspirational leader highly motivates them and gets things done easily.

2) Hitler was more of a micro-manager who insisted on his involvement in military decisions, which not just slowed down Germany's progress in the war, but also lead to several wrong decisions as they were taken by Hitler based on gut feeling or instinct rather than understanding ground realities. Churchill confined himself to broad strategy, and left its implementation on his generals.

3)  Churchill had served in military in different countries like Cuba, India, South Africa etc. and hence understood the military aspects of the war and world geographies better than Hitler, who had never served in the military.

4) Hitler believed that he can't go wrong and hence had low tolerance if his generals protested or opposed his decisions. Compared to him, Churchill being a democratically elected leader and not a dictator knew his limitations and boundaries and hence was more tolerant wrt difference of opinion.


Interesting, isn't it? Leadership style of every leader in the world is unique, and it is difficult to declare one as right and the other as wrong. However, in general, Churchill's qualities helped him motivate the Britishers when the going was tough, win solid allies like US and Soviets, and plan the right strategy which lead to the success of allies.

Management and Textbooks

In the following article Kapil Edke has discussed whether management can be taught through textbooks and whether the learning methods used in the schools are useful in management.

Can management be taught through textbooks? To answer this question, we should first answer the question which is more basic one. Can management be taught? In my opinion, the answer is no. Management is something which is to be experienced. However, certainly one can be introduced to the management and related concepts in management schools, which would better equip him to experience the managerial role in the future and handle the associated responsibilities. Management education can broaden one's view towards the world by introducing him to a variety of fields like economy, operations, quantitative skills, marketing, accounts, people management, communications, social sciences, as most of these subjects are studied for the first time by the aspiring managers. No doubt, one can achieve great success in the business world without getting a formal management education. However, studying management in formal way can enlarge one's perspective of looking at the business as he would be better able to related theory with practical experience.

The usefulness of textbooks in management education varies as per the field. Sadly, many of the textbooks that are widely used in India are written by foreign authors, keeping in mind the business scenario in those countries,  and sometimes may even have low relevance in the Indian context. However, certain basic features of the field remain the same regardless of the geography and can definitely be absorbed through textbook learning. For example, no matter where one works, if one is into human resources, he would need to handle processes like recruitment, performance evaluation, retirement and pension benefits and so on. Similarly, production techniques in developed and developing countries may differ, but inventory management, demand-supply matching, transport planning are some of the common issues in operations. Similarly the field of finance involves risk analysis and due diligence, calculating returns and profitability etc.

The point is, that every field has certain basic concepts which are common across the geographies and even across the time periods and these concepts are interrelated across the fields. For example, operations manager will have to keep labor issues in mind (HR management) as well as costs involved in production processes (financial management). Such inter-related aspects can be better appreciated if one has acquired formal management education.

Of course, this does not mean that only textbook learning is sufficient for a quality management education. Therefore, most of the management programmes include case studies, study tours, internships etc.

One last point before concluding this article: Today's managers must also look at the practical aspects of management with open eyes and mind, so that they can effectively apply the concepts they learn at management schools. For example, art of selling may not be taught by any textbook, but can be easily learnt from a chaiwala or a hawker. In that sense, I would say that the management is both science and art; and it can best be understood as science through formal education and as art through practical observation and actual experience!

Kapil Edke is a human resource professional with about twelve years of experience and writes on variety of topics.

Management Lessons from Amundsen Expedition

Kapil Edke has also written an article about History and Individuals. One can compare the two articles to understand how history can be effectively used in management lessons.

I am a fan of Roald Amundsen, the first person who visited the geographical South Pole of this Earth. I am also a management professional and HR Executive. Thus, linking my profession to my passion and connecting the dots is something very natural.

When Amundsen decided to go for South Pole expedition, the first task was to arrange the finances. It was difficult to get sponsors in 1910 for purely adventurous tour, and hence some research work was also involved as a part of the expedition (of course, the expedition was initially declared to be heading towards the North Pole, the entirely different story which may be told in some other article). It won't be incorrect to say that the success of such risky travel was dependent heavily on finances, as only adequate finances could ensure hiring right people, right kind of ship, sledges and other tools, buying adequate, healthy food and fuel.

Marketing the self and the expedition was another crucial aspect, not just for arranging finances but also to generate interest among the general public about the expedition and thus, attract the best human talent.

Operations was of paramount importance throughout the tour. But what I think would be one of the best operations management problems is to optimize the locations of food depots on Antarctica that the party set up in summer of 1911.

While Amundsen's expedition is being analysed from various aspects of financial, marketing and operations management, one must not forget human resources aspect - my bread and butter - which ultimately proved to be of supreme importance as frictions between Amundsen and Johansen endangered the success of the expedition and it was only after resolving these conflicts that the party could succeed in their mission.

In summary, Amundsen's expedition (especially his book, "The South Pole") can serve as an excellent study material for a management student, be from any branch of management. I would strongly recommend reading this book to understand the practical applications of management concepts, that too in hostile and challenging environment.

- Kapil Edke, the Human Resource Professional from Bangalore writes articles and short stories.

History and Individuals

Kapil Edke analyses the importance of team work in performance evaluation of individuals in today's corporate world, and compares it with the way the history is viewed traditionally.

Being a Human Resources professional from Bangalore, the Silicon valley of India, makes it imperative for me to understand people's behaviour and establish objective parameters for their performance evaluation. Today's corporate world gives great importance to team work while doing performance evaluation, as it is now commonly accepted fact across industries that the great things are accomplished by a group of people working towards common goal, and not by individuals alone. This is evident from recent trends in recruitment processes, criteria set while promoting the employees and deciding salary increments. In all these decisions, the performance as a team member now matters more than individual performance. It is truly a challenge for today's young individuals to maintain competitive edge over their peers while displaying smooth team work spirit.

While what I just said has been pointed out numerous times by other HR professionals, what tries to set this article apart is the comparison of this fact with the way history is viewed and studied traditionally. We generally believe that history is made by individuals, the wars are fought alone and the new things are invented by aloof scientists working in remote laboratories.

Just to give few example: If we think about the first person who conquered the South Pole - we would name the Norwegian explorer Roald Amundsen (although it was a team of 5 people including Amundsen who reached the pole). If  we ask - who attacked India in 325 BC - we would say, it was Alexander the Great. But if one is asked to name a few of his generals, probably most of us would not be able to name even a single! So the history assumes that the individuals make the history and the study of history can be accomplished by knowing the actions and decisions of individuals.

Isn't it funny? Isn't it injustice to the thousands of people whose actual on-ground actions decide the fate of any plan? Doesn't it mean that we make individuals larger than life and give them credit for even those things which they may not have done? The answer to most of these questions is, sadly, 'yes'.

Is there any other way we can study the history? The answer is, again sadly, no. That's because it is convenient to study the history the way we study it. It is not practically possible for us to remember the names of all the people behind any move or plan, nor is it required to do so; as in most of the cases, the ideas are proposed and decisions are taken by only a few individuals, the rest only follow the orders. Also, if the plan fails, the same individuals (who are otherwise credited for success) would be held responsible by history and hence all-in-all, it appears to be a fair deal. And although this approach makes individuals larger than life, it also portrays them as the role models for thousands of others. 

In a nutshell, performance evaluation in history and in today's corporate world are done in drastically different ways, and each process is right in its own way!

What determines success of the leader?

The following passage by Kapil Edke tells how to measure leader's success.

How do we determine whether a particular leader was a successful leader or not? Does it depend on the number of victories achieved by him? Or does it depend upon the percentage of wins? Or does it depend upon the opinion of the teammates about him and his ability to maintain harmony within the team? Or does it depend upon the number of years for which the leader assumed the his post?

I think the leader’s success is not measured based upon any of the above criteria. These parameters are at best the objective parameters which throw some light on the leader’s capabilities but should not be considered as the measurement criteria for the leader’s success. For example, there were many kings who never lost a battle or many sports captains who hardly lost a game, but may not be considered among the best of the leaders. The harmonious relationship may exist among the team members even if the leader is of goody-goody type, who does not want to pressurize his people to get things done. That would result in inefficient working of the team and the leader will certainly not be amongst the best.

For me, the successful leader is the one who leaves a legacy behind him. He sets the vision and guides the teammates towards reaching that vision. After he sets the tone, even if he temporarily or permanently remains absent (say because of illness, death or any other reason), the team continues to work in the directions set by him, without getting confused or deviating from its path. The unsuccessful leaders on the other hand are those, after whose tenure the successors and the followers don’t know how to continue and either deviate from the path or start from scratch.

If you agree with me, then you can do a simple task: Take any five leaders from any field from the past and check by applying the above criteria how successful you think they were. Thanks.