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суббота, 21 декабря 2024 г.

De Mey and De Ridder's Business Model Framework

 


Short description of framework: A framework illustrating how value is created and captured in the interaction between organizations through relationships and transactions.

Main strengths: The framework captures relationships, monetary and non-monetary transactions between organizations, and provides a snapshot of the interactions and dependencies on certain external actors. Transactions between several organizations in multiple steps can be illustrated, enabling a good understanding for the different revenue streams.

Background

The framework was originally created by De Mey and De Ridder (www.boardofinnovation.com) in 2009 to create a common visual language and consisted of 10 framework elements initially focusing on the sales side of a business with the only actors being the company itself and its client. The remaining 8 framework elements was items that can be transferred between the company and its client; product, service, experience, reputation, exposure, attention, money and less money.


In 2010 the business model framework was revisited and updated to include 16 framework elements to capture more aspects of a business case. Still, De Mey and De Ridder argues that they prefer not to include what they call secondary stakeholders, showing the supplier side of a business case.

Framework details

The 2010 version contains 16 framework elements, divided into players and objects to exchange further described below. De Mey and De Ridder do not provide their own definitions of the framework elements, so the definitions below are of the general meaning of the terms, based on how the objects are used by De Mey and De Ridder.


Example using the framework

In the illustration below De Mey and De Ridder illustrates the business model of Niiu, a German start-up providing customized physical newspapers. Niiu will provide personalized and customized newspapers based on content from a variety of different news companies enabling the consumer to combine different sections from different newspapers. By using print-on-demand technology Niiu will create a unique paper version and deliver to each subscriber. The reader will pay for the newspaper and be exposed to targeted advertising based on their content preferences.


List of Key Terms

The term ‘business model’ has historically been defined differently by different academics and consultants, with no common consensus being established. It is not until the last few years that a common definition of what a ‘business model’ is has started to emerge, with an increasing number of authors emphasizing the concepts of value creation and value capture as central to the definition.


One challenge is that frameworks developed from the perspective of enabling business model innovation, are often equated with a definition of the concept of the business model itself. This creates considerable confusion in terms of the differences between the business model of a company, the business model concept as such, and ways of describing business models by adopting different perspectives and frameworks.


In order to provide posts that are easy to follow and to reduce the risk of misunderstandings and confusion, I use the definitions below:

Business model – the way an organization creates and captures value

Business model concept – the general idea of illustrating how value is created and captured

Business model element – a component of how value is created and captured by an organization

Business model framework – an abstraction to describe and represent different business models

Business model framework element (or framework element) – a component of a business model framework

Business model innovation – an innovative business model or the process of innovating a business model

Business modeling – the process of testing and simulating different business models

Please consult the list above when confused about my use of any of the terms.



https://tinyurl.com/52hpbc7u

пятница, 22 ноября 2024 г.

RoundMap® : Framework 12 Principles

 


Unveiling the Twelve Cornerstones of RoundMap: Pioneering Principles for Transformative Business Success

 

Welcome to our guide on the Core Principles of RoundMap®—your compass to conquering business complexities and propelling sustainable growth. RoundMap®, not just a framework but a holistic ecosystem, fortifies modern organizations with crucial insights and strategies sculpted around its foundational principles.

At the heart of RoundMap® lie twelve robust principles (in alphabetical order):

1.                All-Encompassing Integration – Merges various business facets into a unified, holistic framework, ensuring a seamless interplay between different operational areas.

2.              Applied Systems Thinking – A holistic approach that views an organization as interconnected, emphasizing understanding complex interdependencies and long-term impacts.

3.              Augmented Execution – Harnesses the power of technology and advanced intelligence to enhance strategic planning and execution, pushing the boundaries of traditional business practices.

4.             Consentric Alignment – Facilitates consent-driven decision-making, distributed from the center to the constellation of teams, thereby enhancing resilience, adaptability, and accountability.

5.             Cyclical Evolution – Advocates for continuous improvement through cyclical processes, fostering an environment of perpetual growth and adaptation.

6.             Empowered Action – Promotes a leadership style that is collaborative and empowering, distributing responsibilities across the organization to encourage innovation and engagement at all levels.

7.              Integrative Diversity – Balances specialized expertise with a broad, holistic understanding, embracing diverse perspectives for comprehensive problem-solving and innovation.

8.             Impact-Focused Approach – Prioritizes actions and strategies that yield sustainable and positive impacts within the organization and the wider community.

9.             Human-Centric Orientation – Puts people at the forefront, focusing on human needs and experiences to drive organizational success and employee satisfaction.

10.           Skillful Mastery – Highlights the importance of skill development and effective utilization, ensuring team members are equipped to contribute their best.

11.             Story-Driven Communication – Utilizes the power of storytelling to convey the organization’s values, vision, and mission, creating a compelling and relatable narrative.

12.           Whole System Engagement – Concentrates on nurturing the overall health and dynamism of businesses, engaging every aspect of the organization in the journey toward excellence.

Our guide will delve into understanding each of these principles, exploring how they drive the effectiveness of RoundMap® across diverse business contexts. Beyond theoretical knowledge, you’ll gain invaluable insights into implementing these principles, propelling your organization toward sustainable prosperity.

Whether you’re a seasoned leader, a start-up entrepreneur, or an aspiring business professional, gaining insights into these principles will empower you to navigate the intricate corridors of the business landscape confidently. Prepare to embark on a profound learning journey that fundamentally redefines how you perceive and act within the business world.

Unravel the RoundMap® framework, derived from its eight core principles, to illuminate your pathway toward sustained relevance and prosperity. Dig in, and let your journey toward business excellence commence.

Navigating the Twelve Principles of RoundMap

 


 

1. All-encompassing Integration


RoundMap® is an all-encompassing framework meticulously designed to integrate every facet of organizational dynamics. Whether addressing strategy, operations, marketing, or stakeholder engagement, RoundMap® offers a holistic view, ensuring that no element is viewed in isolation. It recognizes the interconnectedness of all organizational components and promotes a cohesive approach to decision-making and value delivery.

By providing a comprehensive roadmap transcending departmental silos and industry-specific challenges, RoundMap® empowers organizations to achieve optimal coherence, drive alignment, and ensure that every action contributes harmoniously to the overarching objectives.

2. Applied Systems Thinking


Systems Thinking, as a principle within the RoundMap framework, is an approach that views an organization not just as a collection of independent components but as a cohesive, interconnected whole. This perspective emphasizes understanding how different parts of the organization interact and influence one another, creating a network of relationships that defines the overall system. In Systems Thinking, the focus shifts from isolated issues or challenges to the broader patterns and structures that drive behaviors and outcomes. This holistic view encourages looking beyond immediate causes and effects, considering the longer-term implications and the dynamic interplay of various elements within the system.

Applied Systems Thinking in an organizational context involves recognizing the complex and often subtle interdependencies within and beyond the organization’s boundaries. It prompts leaders and team members to consider how decisions and actions in one area can ripple through the entire system, impacting other areas in ways that may not be immediately obvious. This approach fosters a deeper understanding of the organization’s functioning, enabling more strategic and effective decision-making. By adopting Systems Thinking, organizations can anticipate unintended consequences, identify leverage points for change, and develop solutions that address root causes rather than symptoms, leading to more sustainable and resilient outcomes.

3. Augmented Execution

RoundMap’s augmentative ability is a testament to the integration of expansive thought and cutting-edge technology in business intelligence. Its 48 Thinking Caps gives executives a comprehensive panoptic view of business operations. This multi-faceted perspective allows decision-makers to dive deep into every nook and cranny of their organization, from its strategies and structures to its underlying culture and purpose. 

Furthermore, leveraging the power of augmented intelligence with an interactive chat agent, RoundMap® systematically maps out the current business dynamics—highlighting strengths, pinpointing opportunities, identifying challenges, and laying out visions, missions, plans, and more. In an era where business complexities continue escalating, making it increasingly challenging to account for every variable, RoundMap® is an invaluable compass, guiding executives to make informed and strategically sound decisions for their journey.

4. Consentric Alignment

Consentric Alignment, as envisioned in the Consentricity™ model, marks a significant departure from the traditional top-down command-and-control structures still prevalent in many organizations. This innovative approach to organizational design is inspired by the concept of concentric circles, where each circle represents different roles and functions, yet all are interconnected and harmoniously aligned. At its core lies the Circle of Confluence, a pivotal forum where collaborative governance and equitable decision-making occur. Embodying the organization’s highest values, this central circle sets the tone for decision-making, ethical conduct, and cultural resonance, ensuring that these core principles permeate every layer of the organization.

Around the central Circle of Confluence are various concentric circles – including Councilors, Catalysts, Coordinators, and the Constellation of Teams – each with distinct roles but working in an integrated fashion. This structure fosters a consent-based decision-making process, where decisions are not imposed from the top but are reached through collective agreement, respecting and valuing the input of each circle. Such an arrangement promotes inclusivity and ensures that every decision aligns with the organization’s core values and objectives. The Consentricity™ model, therefore, creates a cohesive and harmonious system where the traditional hierarchies are replaced with a more fluid, dynamic, and inclusive form of governance, reflecting a deep commitment to collective success and ethical standards

5. Cyclical Evolution

At its essence, a market participant is driven by the ethos of efficient value creation and optimization, always aiming for the cost of value production to be lower than the value retrieved upon its delivery to the market. However, in the VUCA (Volatility, Uncertainty, Complexity, and Ambiguity) world, organizations might confront scenarios where the expense of realizing value temporarily surpasses its creation. This deviation doesn’t detract from the ultimate goal of profitability but underscores the imperative of adaptability and building resilience for the future. 

Herein lies the significance of cyclical leadership—a leadership style that recognizes the inherent ebb and flow of business cycles, adapting strategies and tactics in response to the changing rhythms of the market. Rather than being linear and fixed in approach, cyclical leaders iterate, pivot, and evolve, ensuring their organization’s long-term viability and competitiveness in perpetually evolving market terrains. This agility and cyclical perspective position organizations to weather challenges and capitalize on emerging opportunities.

6. Empowered Action

RoundMap champions Empowered Action and Distributed Leadership, moving away from traditional leadership models where authority is concentrated at the top. This paradigm shift recognizes that every team member, with their unique blend of skills, knowledge, and experience, plays a vital role in guiding the organization. By empowering individuals at all levels, this approach fosters a culture where responsibility, engagement, and ownership are not just top-down mandates but are ingrained in every aspect of the organization.

Empowered Action offers numerous advantages. It significantly bolsters employee engagement and commitment by giving all members a direct role in decision-making and leadership. This empowerment leads to a surge in innovation as diverse perspectives contribute to creative problem-solving and strategic thinking. Team morale and motivation also soar, driven by collective responsibility and shared achievement. This approach adeptly spreads decision-making and leadership tasks in an era of organizational complexity, ensuring agility and adaptability. Moreover, dispersing authority provides a robust foundation for resilience during change, maintaining continuity and stability. This focus on Empowered Action is not just about distributing tasks; it’s about instilling a sense of leadership at every level, turning the entire organization into a dynamic, responsive, and cohesive entity.

7. Integrative Diversity

Balancing individuals with deep expertise and polymaths – deep and broad knowledge – is crucial for fostering creativity, innovation, complex problem-solving, and synthesis in organizations. Specialists bring focused, in-depth insights, while polymaths contribute wide-ranging perspectives that can bridge diverse areas of knowledge. 

This blend enhances the organization’s ability to generate novel ideas, tackle complex issues, and integrate different viewpoints for more comprehensive solutions. It creates a dynamic environment where diverse skills and perspectives coalesce, driving forward-thinking and innovative outcomes.

8. Impact-Focused Approach

The impact-driven core principle of RoundMap® emphasizes driving meaningful change within and beyond an organization. It involves a comprehensive approach to analyzing, formulating, implementing, and evaluating operations based on their impact. 

This four-step recursive process integrates impact assessment into the strategic framework, ensuring business objectives align with positive outcomes. An impact-driven organization continuously refines its approach, like maintaining a well-oiled machine, striving to create beneficial changes, differentiate itself, and improve long-term performance while contributing positively to the global landscape.

9. Human-Centric Orientation

Human-centric organizing, anchored in virtuous cycle leadership, revolutionizes organizational culture by emphasizing human value. It fosters environments of psychological safety, enabling open communication and innovation. This approach cultivates resilience and adaptability, enhancing stakeholder satisfaction and aligning internal and external success. 

The virtuous cycle principle underlines the reciprocal benefits of caring for employees and customers, reinforcing that valuing individuals drives transformative growth. Integrating this theory encourages organizations to focus on their people, creating a thriving internal ecosystem that promotes sustained growth and shared prosperity.

10. Skillful Mastery

Skills-First, a pioneering principle in modern talent acquisition, revolutionizes traditional hiring paradigms by prioritizing the development of essential competencies over static qualifications. This strategic approach recognizes that an individual’s skill set, practical abilities, and aptitudes indicate their potential success in a role more than conventional markers such as degrees or certifications. It represents a departure from the one-size-fits-all mentality, fostering an environment where diverse skills contribute to a dynamic and enriched workplace. Embracing Skills-First ensures real-world relevance, promotes diversity and inclusion, and positions organizations to adapt swiftly to evolving industry landscapes.

This transformative philosophy enhances recruitment strategies and unlocks the full potential of individuals within an organization. By valuing and cultivating diverse skills, Skills-First allows for tailored development paths, fostering a meritocratic environment where advancement is based on demonstrated abilities. This approach enhances employee engagement and satisfaction and acts as a proactive strategy for future-proofing talent, ensuring organizations are equipped with the capabilities needed to stay competitive in an ever-evolving business landscape.

11. Story-Driven Communication

Storytelling, an age-old art, plays an invaluable role in the intricate dance of value signaling. Whether illuminating a compelling need or showcasing an abundant surplus, a well-crafted story built upon a riveting plot can evoke emotions, drive action, and foster connections. Enter the realm of StoryCasting™, a dynamic fusion of storytelling and casting a line, much like an angler aiming to attract fish. Storycasting is a strategic lure in business, drawing customers into a brand’s narrative. 

At its heart, every potent story pivots on its plot—a series of interconnected events or moments that lay the foundation for the narrative. Through this plotted journey, brands can effectively communicate their value propositions, resonating with the desires and aspirations of their audience. As such, a masterfully told story informs and beckons, guiding listeners toward the intended value, be it a call to action or an invitation to partake in a surplus offering.

12. Whole System Engagement

Whole System Engagement, as a key principle of RoundMap®, is a transformative approach that integrates the entire human system of an organization into the process of change and development. Rooted in the principles of Appreciative Inquiry, this method centers on discovering and amplifying the existing strengths of an organization – its team, management, systems, and processes. Rather than focusing solely on fixing problems, it encourages exploring and building upon what already works well. This positive focus creates a fertile ground for innovation and growth.

In this approach, every individual in the organization is invited to participate in shaping its future. This inclusive, collaborative process not only ensures a deeper understanding and alignment with the organization’s mission but also fosters a sense of ownership and commitment among all stakeholders. By empowering individuals to contribute their insights and ideas, Whole System Engagement leads to more robust, sustainable changes. It’s a shift from traditional top-down decision-making to a more democratic, bottom-up approach, where change is co-created, reflecting the collective aspirations and strengths of the entire organization.


суббота, 2 ноября 2024 г.

RoundMap® : Framework 8 Masteries


 

360° Mastery: A Complete Guide to Achieving Sustainable Business Growth


RoundMap® empowers leaders with a panoramic understanding of the dynamic forces shaping their business landscape, both internally and externally. By delving deeper into these insights, leaders can navigate with foresight and strategic acumen, ensuring actions are deeply rooted in their long-term aspirations and core values. This deliberate approach transcends the pitfalls of impulsive decisions, safeguarding the business’s integrity and fostering sustainable growth.

Uninformed leaders making hasty decisions risk a multitude of adverse outcomes, including:

  • Strategic Misalignment: Hasty decisions may not align with the organization’s long-term goals and strategy, leading to misdirected efforts and resources.
  • Resource Wastage: Without adequate information, leaders might allocate resources inefficiently, wasting time, money, and manpower on initiatives that do not yield the desired results.
  • Decreased Morale and Trust: Quick, uninformed decisions can undermine employee confidence in leadership, decreasing morale, engagement, and trust within the organization.
  • Reputational Damage: Poorly made decisions can affect an organization’s reputation among stakeholders, including customers, partners, and investors, potentially leading to loss of business and opportunities.
  • Increased Stress and Anxiety: A culture of hasty decision-making can create an environment of constant uncertainty and stress, impacting the well-being of leaders and employees alike.
  • Operational Inefficiencies: Decisions made without a complete understanding of operational realities can lead to inefficiencies, bottlenecks, and errors in business processes.
  • Missed Opportunities: Rushing to make decisions without thorough analysis may cause leaders to overlook better opportunities or innovative solutions.
  • Legal and Financial Repercussions: In some cases, uninformed decisions can lead to legal challenges or financial losses, primarily if they result in non-compliance with regulations or poor financial management.

By being well-informed and ready, leaders can prevent problems from being caught off guard. RoundMap is designed to make businesses more resilient and adaptable, turning challenges into opportunities for growth. It’s a framework for leaders who want to build a lasting legacy and succeed in a constantly changing world.

The 360° Mastery Blueprint

Let’s consider RoundMap’s 360° Mastery Blueprint for achieving sustainable and equitable long-term success in business:

1. Strategic Foundation Mastery

  • Core Business Mastery
    • Business Model Mastery
    • Market Mastery
    • Strategic Mastery
  • Growth and Expansion Mastery
    • M&A Mastery
    • Situational Mastery

2. Operational and Financial Excellence Mastery

  • Operational Excellence Mastery
    • Operational Mastery
    • Supply Chain Mastery
    • Financial Mastery
  • Risk and Resilience Mastery
    • Conditional Mastery
    • Resilience Mastery
    • Legal Mastery

3. Innovation and Technology Mastery

  • Adaptability and Innovation Mastery
    • Transitional Mastery
    • Foresight Mastery
    • Innovation Mastery
  • Technology and Digital Transformation Mastery
    • Digital Mastery
    • Data Mastery
    • AI Mastery
    • Technology Ethics and Sustainability Mastery
      • Technology Ethics Mastery
      • Sustainability in Technology Mastery

4. People, Culture, and Leadership Mastery

  • People and Leadership Mastery
    • Leadership Development Mastery
    • Talent Mastery
  • Cultural and Ethical Mastery
    • Cultural Mastery
    • Ethics and Integrity Mastery
      • Ethical Leadership Mastery
      • Corporate Governance Mastery
  • Health, Wellbeing, and Work Environment Mastery
    • Employee Wellbeing Mastery
    • Work Environment Mastery

5. Relationship, Communication, and Brand Mastery

  • Relationship and Stakeholder Mastery
    • Stakeholder Mastery
    • Customer Mastery
  • Communication and Brand Mastery
    • Communication Mastery
    • Brand Mastery
    • Reputation Mastery

6. Sustainability, Social Impact, and Global Engagement Mastery

  • Sustainability and Social Impact Mastery
    • Sustainability Mastery
    • Social Responsibility Mastery
  • Globalization and Localization Mastery
    • Globalization Mastery
    • Localization Mastery
  • Intercultural Competence and Global Leadership Mastery
    • Intercultural Competence Mastery
    • Global Leadership Mastery

7. Entrepreneurship, Value Creation, and Future Workforce Mastery

  • Entrepreneurial and Intrapreneurial Mastery
    • Entrepreneurial Mastery
    • Intrapreneurial Mastery
  • Value Chain and Circular Economy Mastery
    • Value Chain Mastery
    • Circular Economy Mastery
  • Future Workforce and Organizational Design Mastery
    • Future Workforce Mastery
    • Organizational Design Mastery

8. Learning, Development, and Innovation Mastery

  • Innovation and Research Mastery
    • Research Mastery
    • Experimental Mastery
  • Learning and Development Mastery
    • Continuous Learning Mastery
    • Knowledge Management Mastery
This comprehensive framework provides a holistic view, emphasizing the interplay between strategy, operations, people, technology, and sustainability. It reflects a comprehensive approach to mastering the complexities of modern business, facilitating more straightforward navigation and application of the mastery aspects for sustainable and equitable long-term success.


https://tinyurl.com/mrybveys

пятница, 11 октября 2024 г.

Porter Five Forces- Best Guide, Free Templates and Modern Insights

 


The Porter Five Forces model frames the level of competition among the competitors in the sector, the bargaining power of the customers, the bargaining power of the suppliers, the threat posed by the new enterprises in the sector, the threat posed by the substitute products that can be an alternative to the product of the enterprise are measured and analyzed.

What Is Porter’s Five Forces Model?

Porter’s Five Forces is a strategic framework developed by Michael Porter in 1979 to help businesses analyse the competitive forces within an industry.

The Porter Five Forces framework offers a structured way to analyse market dynamics that influence profitability and industry attractiveness.

The model focuses on five forces that determine competition and, ultimately, a company’s ability to achieve sustainable profitability.

The five forces are:

  • Threat of New Entrants
  • Bargaining Power of Suppliers
  • Bargaining Power of Buyers
  • Threat of Substitutes
  • Competitive Rivalry

Understanding how the diiferent parts of the Porter five forces interacts help you to better position your firm within its industry, and develop or maintain a competitive edge.

The Porter Five Forces Explained




1. Porter Five Forces Analysis: Threat of New Entrants

Traditional View:
The Threat of New Entrants force measures how easily new competitors can enter the market and disrupt established players.

Industries with high barriers to entry, such as those requiring significant capital investment or regulatory approval, are less likely to face new entrants. Businesses in these markets often have an advantage due to economies of scale, brand loyalty, or access to proprietary technology.

Contemporary View:
In modern markets, particularly in tech-driven industries, the barriers to entry are much lower – often because the infrastructure, development layers include common code libraries enabling rapid development.

Digital platforms, reduced capital assets requirements, and globalised supply chains make it easier for startups and new players to enter and compete with established businesses.

For instance, in the e-commerce or fintech sectors, new companies can rapidly scale with the help of cloud-based technologies, which reduce the need for heavy capital investment. As an example, consider how rapidly the Revolut business model became a major digital banking contender.

Strategic Decisions:

  • Innovate continuously: Companies must invest in R&D to stay ahead of potential disruptors.
  • Strengthen customer loyalty: Building strong customer relationships through loyalty programmes or personalised offerings can mitigate the risk of new entrants stealing market share.
  • Use economies of scale: Large firms can leverage their cost advantages to make it difficult for new competitors to match their pricing structures.

Example of the Porter Five Forces Analysis for threat of new entrants:
In the streaming service industry, the Netflix business model has faced the threat of new entrants like Disney+ and Apple TV+. Netflix’s established content library and data-driven personalisation have helped it maintain a competitive position, despite new competition from well-funded rivals.


2. Porter Five Forces Analysis: Bargaining Power of Suppliers

Traditional View:
When you analyse thelevel of influence suppliers have in the Porter Five Forces model you are looking to see how dominate supplers control pricing and are a bottleneck for supplies.

This analysis seeks to understand if suppliers are concentrated or hold unique resources, they can drive up prices, limit availability, or reduce the quality of inputs. Industries that rely on specialised suppliers or face high switching costs tend to have weaker bargaining power against their suppliers.

Contemporary View:
With globalisation and the rise of multiple sourcing options, the bargaining power of suppliers has shifted in some industries.

While suppliers of specialised materials (such as rare earth metals for tech manufacturing) still hold significant power, many companies can now diversify their supplier base more easily, which reduces dependency on any single supplier. Additionally, digital platforms have streamlined supply chain management, allowing businesses to negotiate more favourable terms.

Strategic Decisions:

  • Develop multiple sourcing strategies: Diversifying suppliers can reduce the influence of any single supplier.
  • Invest in supplier relationships: Strengthening partnerships and fostering collaboration can lead to better terms and long-term stability.
  • Backward integration: Companies with significant resources can consider acquiring or developing their own supply chain infrastructure to reduce reliance on external suppliers.

Example of the Porter Five Forces Analysis for bargaining power of suppliers:
Apple mitigates supplier bargaining power by diversifying its suppliers for components like semiconductors and screens, while also investing in long-term contracts to secure the necessary volume. This reduces the risk of price increases or supply interruptions from any one supplier.



3. Porter Five Forces Analysis: Bargaining Power of Buyers

Traditional View:
This Porter Five Forces model examines the influence buyers have over companies. When buyers are concentrated, or when there are many alternative providers in the market, they can demand lower prices, higher quality, or additional features. The power of buyers is strongest in markets where switching costs are low, products are undifferentiated, or customers have access to full market information.

Contemporary View:
In today’s digital economy, customer expectations have risen significantly, which increases their bargaining power. With the availability of online reviews, price comparison tools, and platforms that aggregate options, customers can easily switch between providers. For industries like retail, travel, and software, the customer’s ability to move quickly between competitors has given them more leverage in negotiating prices and demanding better service.

Strategic Decisions:

  • Enhance customer experience: Improving service and product quality can reduce customers’ motivation to switch to competitors.
  • Differentiate offerings: Companies that offer unique products or services with high perceived value can maintain pricing power, even in competitive markets.
  • Build brand loyalty: Engaging with customers through loyalty programmes or exclusive benefits can reduce their desire to seek alternatives.

Example of the Porter Five Forces Analysis for barginaing power of buyers:
In the smartphone industry, Samsung faces high buyer bargaining power, as consumers can easily compare models from different brands. Samsung combats this by offering differentiated features, regular updates, and strong brand loyalty programmes.


4. Porter Five Forces Analysis: Threat of Substitutes

Traditional View:
The Porter Five Forces model takes into account the threat of substitutes that are likely to occur. This involves customers switching to a different product or service that meets the same need.

High substitute threats exist when alternative products offer similar benefits at a lower cost, or when innovations create entirely new ways to satisfy customer demand. This force can limit a company’s pricing power if customers perceive substitutes as comparable in quality.

Contemporary View:
In today’s economy, technological advancements have accelerated the creation of substitutes.

For example, ride-sharing services like the Uber business model and Lyft have disrupted traditional taxi services, and streaming platforms have replaced traditional cable TV for many consumers.

Companies in industries where substitutes can easily replace existing offerings must innovate continuously to stay ahead of alternative solutions.

Strategic Decisions:

  • Focus on innovation: Continuous improvement and the development of new features or products can reduce the impact of substitutes.
  • Increase switching costs: Making it harder or less desirable for customers to switch to substitutes, through contracts or ecosystem lock-in, can reduce this threat.
  • Monitor industry trends: Keeping a close watch on emerging technologies or alternative business models can help businesses stay ahead of potential disruptions.

Example of the Porter Five Forces Analysis for substitutes:
Traditional brick-and-mortar retailers, such as the Walmart buiness model, have adapted to the threat of online retail substitutes by building robust e-commerce platforms and offering hybrid shopping experiences like click-and-collect to mitigate the risk of losing customers to competitors like the Amazon business model.


5. Competitive Rivalry

Traditional View:
The Porter Five Forces also analyses the intensity of competition within an industry. High levels of competitive rivalry are typically found in industries with many competitors, low product differentiation, and slow industry growth. Companies operating in such markets must constantly strive for efficiency, innovation, and customer retention to maintain profitability.

Contemporary View:
In many industries, digital transformation has intensified competitive rivalry. The rise of global competition, along with the increased pace of technological change, has forced companies to innovate more frequently and adapt to shifting market conditions.

Industries like telecommunications, retail, and consumer technology see intense competitive rivalry due to the constant introduction of new products and services.

Porter Five Forces Analysis and Strategic Decisions:

  • Invest in differentiation: Creating unique products or services helps companies stand out in highly competitive markets.
  • Focus on operational efficiency: Streamlining operations can improve margins even in fiercely competitive environments.
  • Consolidate or acquire: In highly fragmented markets, merging with or acquiring competitors can help reduce competition and increase market share.

Example of the Porter Five Forces Analysis for competitive rivalry:
The smartphone market exemplifies intense competitive rivalry, with players like AppleSamsung, and Huawei constantly competing for market share. Each brand differentiates itself through technology, design, and ecosystems to maintain their competitive edge.

How to Use Porter’s Five Forces – Step-by-Step Guide

Porter Five Forces Analysis Step 1: Define the Industry

  • Start by clearly identifying the industry or sector you are analysing. Specify the geographical scope (e.g., global, regional, or local) and the particular segment of the industry (e.g., luxury goods within the broader retail market). Precise industry definition is crucial because the dynamics can vary significantly across sectors.

Porter Five Forces Analysis Step 2: Analyse Each of the Five Forces

  • Threat of New Entrants: Assess the ease with which new competitors could enter the market. Consider barriers such as capital requirements, access to distribution channels, brand loyalty, regulatory constraints, and economies of scale.
  • Bargaining Power of Suppliers: Examine the supply side of your industry. How many suppliers are there? Are they concentrated, or are there numerous suppliers that reduce their power? Consider the uniqueness of the supplied materials and the switching costs associated with changing suppliers.
  • Bargaining Power of Buyers: Look at the customer base. Are there a few large buyers with significant power, or is the market more fragmented? Assess how easily buyers can switch to competing products or services, and whether they can negotiate for better terms or prices.
  • Threat of Substitutes: Identify alternative products or services that customers might switch to. These could come from different industries but fulfil the same need. Consider how easily customers can substitute your product and the price-performance trade-offs involved.
  • Competitive Rivalry: Gauge the level of competition in the market. Factors to consider include the number of competitors, the growth rate of the industry, product differentiation, and the presence of exit barriers. Highly competitive industries often experience price wars and pressure on margins.

Porter Five Forces Analysis Step 3: Evaluate the Strength of Each Force

  • Assign a qualitative rating to each force, such as “low,” “moderate,” or “high.” This helps to prioritise which forces pose the greatest threat or opportunity to your business. For example, a high threat of new entrants may signal the need for stronger competitive barriers, while high supplier power may require diversification of suppliers.

Porter Five Forces Analysis Step 4: Develop Strategic Responses

  • Once you understand the relative strength of each force, formulate strategies to either mitigate threats or leverage opportunities. These might include:
    • Strengthening barriers to entry by enhancing brand loyalty or achieving economies of scale.
    • Building stronger relationships with suppliers to reduce their power.
    • Enhancing customer loyalty programmes to minimise buyer power.
    • Innovating continuously to stay ahead of potential substitutes.
    • Differentiating products to reduce the intensity of competitive rivalry.

Step 5: Monitor and Adapt

  • The competitive landscape can change rapidly, especially with technological advances and shifting market conditions. Regularly reassess the Five Forces and adapt your strategy accordingly. External factors like regulation changes, globalisation, and digital transformation can alter the dynamics, requiring ongoing analysis.

Is the Porter Five Forces Model Still A Relevant?

I’ve produced these insights to highlight key changes leaders must focus on when considering their competitive landscape.

1. Evolution of Porter’s Five Forces

Porter’s model still helps to identify the forces that shape industry competition. These are the threat of new entrants, bargaining power of buyers and suppliers, the threat of substitutes, and rivalry among existing competitors.

While this framework offers a strong foundation, critics argue it is too static, lacking the flexibility to accommodate today’s fast-paced changes driven by technology and global integration.

2. Limitations of the Original Framework

The original model assumes relatively stable competition within defined industry boundaries.

Yet, the rapid pace of technological development, especially in IT, has reshaped competition.

Digital platforms blur industry lines, enabling new players to enter markets that traditional incumbents might not have considered as competitive threats.

This static nature is a major limitation in industries where digital disruption and global competition are the norm.

3. The Need for Augmented Forces

Porter’s Five Forces now need to be supplemented with four additional competitive forces to reflect the realities of the 21st century:

  • Digitalization: Companies must now compete across industries. Firms that embrace digital transformation will have a significant advantage, as digital platforms enhance speed, scalability, and customer reach.
  • Globalization: Businesses must operate globally, managing international supply chains and adapting to multiple regulatory environments. Globalization intensifies competition by breaking down geographic and market boundaries.
  • Innovativeness: Innovation is no longer just an internal advantage; it is a vital competitive force. Firms that fail to innovate rapidly risk losing market share to faster-moving rivals.
  • Regulation/Deregulation: Regulatory pressures are increasing, especially around data privacy, environmental concerns, and anti-competitive behaviour. Firms must monitor changes closely and adapt to protect their market position.

These forces provide a more comprehensive understanding of the competitive pressures that firms face today.

Leaders must factor them into their strategic decision-making processes to stay competitive.

4. Industry Comparisons: Mining vs. IT

By comparing the capital-intensive mining industry with the knowledge-intensive IT industry, we can identifi key differences in how these forces play out.

In mining, traditional factors such as location, capital investment, and resource availability remain dominant. However, digital technologies are transforming mining by improving efficiency and safety. The IT industry, by contrast, is driven by innovation, rapid scaling, and agility.

Both industries face increased pressure from globalization and digitalization. For example, mining firms are adopting IoT and AI to optimise operations, while pure digital companies are pushing innovation to shorter product cycles and globalised services.


As I’ve discussed, industries are being shaped by digital technology, globalization, and the fast pace of innovation, which in turn demands an updated approach.

I’ve highlighted the key shifts in the framework that leaders must consider when evaluating their competitive landscape.

1. Evolution of Porter’s Five Forces

Porter’s model still provides a useful way to understand the forces that influence competition within industries.

However, critics argue that the model, originally designed for stable markets, lacks flexibility in today’s fast-moving industries where technological change and global competition are constant.

2. Limitations of the Original Framework

The original framework assumes competition is contained within defined industry boundaries, yet the rise of digital platforms has blurred these lines.

New competitors often emerge from outside traditional sectors, disrupting industries in ways that the model doesn’t fully capture – as an example the Uber business model didn’t compete as another taxi firm within the industry. This static nature limits its ability to account for rapidly changing factors, especially in technology-driven markets where competition can shift quickly.

3. The Need for Augmented Forces

To address these challenges, I suggest augmenting Porter’s framework with four additional forces:

  • Digitalization: Digital technology is transforming industries by increasing competition both within and across sectors. Companies that embrace digital transformation gain a significant edge by improving speed, scalability, and customer reach.
  • Globalization: Operating across borders introduces new competitive pressures. Companies must manage international supply chains, navigate complex regulations, and respond to global competitors, making globalization a crucial competitive force.
  • Innovativeness: Rapid innovation has become a key driver of competition. Companies that fail to innovate quickly risk falling behind, particularly in industries like IT, where product life cycles are shrinking.
  • Regulation/Deregulation: Increasing regulatory complexity, particularly around data privacy and environmental standards, creates additional challenges. Companies need to stay ahead of both new regulations and deregulation trends to maintain a competitive advantage.

These forces provide a more comprehensive view of modern competition, and leaders should integrate them into their strategic decision-making to stay competitive.

4. Industry Comparisons: Mining vs. IT

Comparing the capital-intensive mining industry with the knowledge-driven IT industry highlights how these forces play out differently. In mining, traditional factors like resource availability and capital investment remain crucial, but digital technologies are now improving efficiency and safety. Meanwhile, the IT industry thrives on rapid innovation and the ability to scale services globally.

Both industries must contend with the pressures of digitalization and globalization. Mining companies are increasingly adopting technologies like AI and IoT, while IT firms must constantly innovate and respond to evolving customer needs.

5. Strategic Actions for Leaders

By considering these forces, I’ve identified five strategic actions that leaders must take to remain competitive:

  1. Embrace Digital Transformation: Digital technology is a competitive necessity, not just for IT but for all industries. Invest in AI, IoT, and data analytics to improve operational efficiency and customer engagement. For industries like mining, which traditionally lag in innovation, moving quickly is critical.
  2. Foster a Culture of Innovation: Innovation cycles are getting shorter across industries. Leaders need to embed innovation into their organisations, whether through product development or operational improvements. Mining companies should focus on new digital tools for exploration and extraction, while IT companies need to accelerate their product development.
  3. Expand Global Operations: In today’s interconnected world, companies must think globally. Managing international partnerships, regulatory requirements, and supply chains is essential to maintaining a competitive edge.
  4. Stay Ahead of Regulatory Changes: Companies must anticipate and adapt to new regulations, especially in highly regulated industries like IT, where data privacy laws are evolving rapidly. In the mining sector, adapting to environmental regulations will be a key challenge.
  5. Leverage Globalization for Growth: Success in a globalised world isn’t just about expanding markets, it’s about building strong international networks. Leaders must focus on managing cross-border operations efficiently and developing partnerships that enhance their competitiveness.

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Strategy Frameworks Related to Porter Five Forces

  1. PESTLE Analysis
    This framework helps businesses understand the PoliticalEconomicSocialTechnologicalLegal, and Environmental factors affecting their industry. It complements Porter’s Five Forces by offering a broader view of the external macro-environment, which can impact the forces, particularly threat of new entrants and supplier power.
  2. SWOT Analysis
    SWOT focuses on identifying a company’s StrengthsWeaknessesOpportunities, and Threats. It works well with Porter’s Five Forces by aligning internal capabilities (strengths and weaknesses) with external competitive dynamics (opportunities and threats), providing a more holistic view of strategic positioning.
  3. Value Chain Analysis
    This tool examines how a company creates value through its various business activities, from production to distribution. By understanding the value chain, companies can address competitive rivalry and supplier powerby optimising their operations and building stronger supplier relationships.
  4. BCG Matrix
    The BCG Matrix helps companies assess their product portfolio based on market share and market growth. This can complement Porter’s model by giving insights into which products are in highly competitive markets and need different strategies to cope with intense competitive rivalry or buyer power.
  5. VRIO Framework
    VRIO evaluates resources based on whether they are ValuableRare, difficult to Imitate, and whether the organisation can exploit them. It fits well with Porter’s model by allowing companies to evaluate their internal strengths against external competitive pressures, such as buyer bargaining power and threat of substitutes.
  6. Blue Ocean Strategy
    This framework pushes businesses to focus on creating new, uncontested market spaces (“Blue Oceans”) rather than competing in crowded markets (“Red Oceans”). It aligns with Porter’s Five Forces by helping companies reduce competitive rivalry and threat of substitutes through innovation and differentiation.
  7. McKinsey 7S Framework
    This model focuses on internal elements—StrategyStructureSystemsShared ValuesSkillsStyle, and Staff—to ensure organisational effectiveness. When paired with Porter’s Five Forces, it helps align a company’s internal strengths with external competitive forces to respond more effectively to industry dynamics.
  8. Ansoff Matrix
    The Ansoff Matrix explores growth options based on whether to expand products or markets. It complements Porter’s analysis by guiding companies on how to pursue growth in light of competitive rivalry and potential new entrants.
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