Understanding Michael Porter: A book review by Bob Morris

Understanding Michael Porter: The Essential Guide to Competition and Strategy
Joan Magretta
Harvard Business Review Press (2011)

How and why organizations can achieve and then sustain competitive advantage, especially in turbulent and uncertain times

Although this book offers – in my opinion — the single best introduction to the major insights of Michael Porter, other than an extended period of one-on-one time with him during which he explains them, Joan Magretta also offers other invaluable business information, insights, and wisdom within a much larger context.  Those who have read her earlier business classic, What Management Is: How It Works and Why It’s Everyone’s Business, already know that she possesses highly-developed perspectives on both the scope and depth of business, and, the specific details (and relevance thereof) of what management is and does as well as how its core competencies can be developed and then applied to achieve sustainable high-impact and superior performance.

Her brilliant analysis of Porter and his major contributions includes:

o How to develop the right mind-set for competition
o “The Five Competitive Forces That Shape Strategy”
o How and why a value chain can be a decisive competitive advantage
o What the “core” is and how it can help to create value
o How and why trade-offs are strategy’s “linchpin”
o How and why the value or cost of one activity is affected by how other activities are performed
o How and why continuity enables development of competitive advantage

The coverage of Porter material includes an Epilogue that consists of “A Short List of Implications, followed by Magretta’s interview of Porter and a “A Porter Glossary: Key Concepts.”

All this would be more than sufficient to establish Magretta’s book as a “business classic” but there is more, so much more that she offers. After providing a vigorous and comprehensive discussion of Porter’s major insights, she then calls upon her expertise as a business historian and her skills as an educator to help her reader to select and then apply whatever would be most relevant – and most appropriate — to the reader’s own specific needs, interests, strategic objectives, and resources. This is the “context” for understanding to which I referred earlier.

Here is a partial list of the mini-commentaries that Magretta’s inserts throughout her lively and eloquent narrative:

“One-Upmanship Is Not Strategy” (Page 25)
“The Fundamental Equation: Profit = Price – Cost” (40-41)
“The Five Forces: Competing for Profits” (61)
“Do You Really Have a Competitive Advantage? First You Quantify, and Then You Disaggregate” (82-83)
“Discovering New Positions: Where to Begin” (118-119)
“Keep the Core, Outsource the Rest? Not So Fast” (153)
“Ten Practical Implications” of mastering Porter’s major concepts (184-185)

As indicated, what we have in this immensely valuable book are separate but related, indeed interdependent discussions of “the essential Porter” and how that material can serve as an enduring foundation for decisive competitive advantage, one that almost any organization can achieve and then sustain, whatever its size and nature may be. Congratulations to Joan Magretta on a brilliant achievement. Bravo!

Here Are Three Drucker Resolutions to Add to Your List

Here is a recent post featured online by the Drucker Exchange (Dx),  a platform for bettering society through effective management and responsible leadership. It is produced by the Drucker Institute, a think tank and action tank based at Claremont Graduate University that was established to advance the ideas and ideals of Peter F. Drucker, the father of modern management.

To check out a wealth of resources and subscribe to its online newsletter, please click here.

*     *     *

For Peter Drucker, New Year’s resolutions came in August. Or least that’s when he liked to take a look back at the 12 months just gone by.

“I’ve learned to sit down with myself for two weeks in August and review my work over the past year,” Drucker revealed in Managing the Nonprofit Organization. “Where should I concentrate next year so as not only to give my best but also to get the most out of it?

Over this past year, we here at the Drucker Exchange have presented a lot of Drucker’s notable insights on management, economics and politics, among other things. To usher in the coming year, we’d like to review three lesser-trumpeted but highly valuable Drucker tips that readers might consider incorporating into their own resolution lists.

1.    If you’re doing something really well, but it’s not really a fit with your values, ditch it.

“What one does well—even very well—and successfully may not fit with one’s value system,” Drucker wrote, in a passage flagged in Joe’s Journal earlier this year. “I was doing extremely well as a young investment banker in London in the mid-1930s; it clearly fitted my strengths. Yet I did not see myself making a contribution as an asset manager. . . . Despite the continuing Depression, I quit—and it was the right thing to do. Values, in other words, are and should be the ultimate test.”

2.    Never forget that people, including your employees and bosses, often do not get what you’re saying. But talking to people in terms of their experience can help.

“Just as the human ear does not hear sounds above a certain pitch, so does human perception altogether not perceive what is beyond its range of perception,” Drucker noted in Management: Tasks, Responsibilities, Practices. (Misunderstandings were something we asked about early this summer—hoping we’d be understood .) “One can only communicate in the recipient’s language or altogether in his terms. And the terms have to be experience-based. It, therefore, does very little good to try to explain terms to people if the terms are not of their own experience.”

3.    If an inside voice says “whoa there” after you’ve made some decision, then hang on—for a moment, at least.

Drucker said that wise executives know to heed the “inner voice, somewhere in the bowels, that whispers” a warning sound. “Nine times out of 10 the uneasiness turns out to be over some silly detail,” Drucker wrote in The Effective Executive. “But the 10th time one suddenly realizes that one has overlooked the most important fact in the problem, has made an elementary blunder, or has misjudged altogether.” Still, this was no excuse for inaction: “The effective decision-maker does not wait long—a few days, at the most a few weeks.”

What work-related resolutions do you plan for the coming year?

Please join the conversation here and also take the rapid-fire Urtak survey by clicking here.

 

 

Sears & Rock Music & Hollywood and Blackberry & (“Old”) Malls are in Trouble — A Few Observations at the End of 2011

(Personal note – call this a bit of a rambling reflection on the close of 2011.  This is just me, kind of thinking out loud).

I went to a couple of movies this week.  That should not be a big deal to note – but, you see, I haven’t been to many movies for quite a while.  But, I am also no longer the target audience for movies (boy, does that make me feel old…).  I liked the movies – they were ok, gripping even.  But, they were old/new/old; sequels (to sequels to sequels).  One of them, the new Sherlock Holmes, is a sequel to countless sequels that came before.  (A little over 30 years ago, I went to an all-night marathon of old Basil Rathbone Sherlock Holmes movies).

I shopped some for Christmas.  Nearly all of it on-line.  I am pleased with the outcome.  But I did my part to put the malls in jeopardy.

As I read, the malls are in some trouble.  Not too many Christmases ago, here in Dallas, Northpark, Valley View, The Galleria, and PrestonWood (and Richardson Square) were all full-to-overflowing at Christmas time.  Now, Northpark is definitely flourishing, but there is no PrestonWood or Richardson Square left, Valley View is at least half a ghost town and certainly on its last legs, (and I haven’t been to the Galleria – so no opinion on that one).  And Sears?  Well, I drove by a couple of their stores, and never saw enough cars in front to think “they’re having a good Christmas.”  And, it turns out, I was right – they are closing 100 to 120 stores (or more?)…

And, as for Hollywood, the box office is down.  And in terms of actual attendance (factoring out higher ticket prices), way! down!  And Rock Music is “zombified.”  Here’s the quote:

“2011 may well be remembered as the most numbing year for mainstream rock in music history,” declares New York Times critic Jon Caramanica. “Declaring a genre dead is the worst, least imaginative sort of proclamation, so let’s call it zombified.”  (Read the article here).

Blackberry will try again soon to revitalize its brand, but plenty are doubtful.  And the list could go on and on.  (Where did all the cafeterias go?)

This could all be inevitable, and even good.  Creative destruction; on-going economic innovation…  The old must die, the new will come.

I suspect that this is true.  The mall replaced the shopping center; the big box store replaced the mom and pop store; the virtual store, in many instances, is replacing the brick and mortar store.   The new businesses will replace the old.  The Shamrock Hotel in Houston gives way to the Gaylord Texan in Grapevine.  The new is so much “better” that the old is replaced, and the new is bigger, better, newer, more high-tech, more innovative.  Sometimes the old is simply leveled (Texas Stadium is gone, as is Reunion Arena, both replaced by far better, newer, bigger, “cooler” versions.  And, by the way, in the case of Reunion Arena, we tore it down before it was even fully paid for.  Amazing!)

This, of course, is not a post about rock music, or malls, or Hollywood, or where we shop, or where we work.  It is a post about our era – about this time in our history.

Montgomery Ward invented the catalogue, and lasted 129 years.  Sears made it 117 years before merging with Kmart in 2005, forming the current, now precarious, version.  BlackBerry has been around about 11 years – MySpace was practically dead and buried after about seven years.  The list is long, and growing longer.

I think this – we are in the midst of such an all-consuming, everywhere-permeating moment of “creative destruction.”  We are in the throes of giving birth, even as we are in the throes of (more than a few) deaths.  It is an uncertain time.  The optimists among us tell us that when the dust settles, it will be better.  And we will do just fine.  I hope so.  But it is unsettling as we go through it, don’t you think?  And as far as that “when the dust settles” part – I suspect that the next new new change will come so quickly after the next new change that the dust may never quite get a chance to fully settle again.