Thursday, November 29, 2012

Porter, Monitor Bankruptcy and the Consulting Profession

Although Michael Porter, the strategy guru behind five forces and value chain analysis, may still be busy working on big issues like the rescue of the U.S economy, the fall of Monitor Group this month, the consultancy Porter co-founded back in the 1980s, is stirring up fierce discussions in the business world as well as in the blogsphere.

In the business world, some believed Monitor's bankruptcy has a lot to do with its working relationship to the former Libyan government and its supreme leader Muammar Qadhafi. Others went beyond this, and offered a variety of possible explanations to its demise, including ineffective strategic choice (itself may not believe in five forces etc.), inefficient internal operations, or even too much emphasis on innovation! Yet some took a more value-based view, arguing that it is its customers who are unwilling to buy what the company is selling eventually killed Monitor.

Besides the discussion on Monitor and the gurus behind it, bloggers like the two Freakonomists went one step further. Through their radio channel, Steve Levitt and Stephen Dubner shared their personal views on the consulting profession at large. For the newest profession in the world, there is always skepticism (here and here) and at least somewhat equal forceful voice of defense (here and here). As to me, I always believe in the power of management - not because I am currently involved in it (don't confuse the outcome with the cause), but because of the fact that it is very difficult to explain sustainable competitive advantage* that some company possesses but others don't. Years of research has shown that one potential cause cannot tell the whole story - whether it is at the industry level, the corporate level, or the business unit level, or whether it is due to the structure, the functions or the processes, or whether there are any systematic relationships or it's just completely out of fluke. Many forces are at play. However, the managers of those firms with superior performance have got to get some things right - by choice or by accident, and how they got it right in the first place may exactly reflect the power of management. Just like the fall of Long Term Capital Management isn't the demise of modern finance or the financial industry, the fall of Monitor is also not the death knell of management or the consulting profession. Porter's (as well as many other management gurus') prescription is certainly not a cure-all, because there is always the unexplained, the unexpected or the uncertain. But for management scholars and practitioners, they need to push the current knowledge frontier forward so that the rest of us can learn more and act better.

* For those who doubt the notion of 'sustainable competitive advantage' in the first place, economists and strategy scholars have offered facts and evidence to show that there is such a thing.