Why Porter's Monitor Consulting Company Failed
In 1983, Michael Porter co-founded his consulting company, the Monitor Group. In November 2012, Monitor was unable to pay its bills and filed for bankruptcy. One would think a strategy consulting firm would be able to avoid going into bankruptcy. Astonishly, the Monitor Group itself didnít believe in the Five Forces Analysis and hadnít used it for years.
Steve Denning in a Forbes.com article
wrote: "Porter began his publishing career in his March-April 1979 Harvard Business Review article, 'How Competitive Forces Shape Strategy', with a very strange sentence: 'The essence of strategy is coping with competition.' Ignoring Peter Druckerís foundational insight of 1973 that the only valid purpose of a business is to create a customer, Porter focused strategy on how to protect businesses from other business rivals: "The goal of strategy, business and business education was to find a safe haven for businesses from the destructive forces of competition."
In a following article
he concluded: "Firms will only survive if they respond to customersí wants and needs in a world in which customers have choices and accurate information as to what those choices are.
It was Monitorís failure to do this that led to their bankruptcy. Monitor appears to have been successful, but overall, it didnít generate enough customer delight to fund its various activities".
What might be some the lessons learned? One is to tread carefully before jumping onto a perceived guru's new idea. Is it valid? A possible myth? Fallacy?