Porter's five forces - expanding Vs. creating a new industry

What's the difference between expanding an existing industry and creating a new one?

Expanding an existing industry requires analytical work, the five forces framework developed by Prof. Michael Porter offers an awesome resource and guide to do so.

Porter's Five Forces Framework

Analysing an industry requires you to:

  1. Define the boundaries of your industry;

  2. Define the main players in the industry.

Your job as a strategist is to identify opportunities to expand the overall pool of profits generated by the industry.

To do so, you need to look for possibilities of expanding the boundaries of your industry, opening up opportunities for new positioning.

Industry Analysis - Boundaries

The five forces framework suggests how competition in an industry can be characterised as positive (constructive) or negative (destructive).

Positive competition occurs when industry players offer different value propositions, addressing diverse customers' needs.

Negative competition occurs when competitors offer similar value propositions, therefore competing is on price.

While the five forces framework still a great contribution to strategy making, it limits the job of the strategist to rational, incremental thinking.

Time has come for business strategists to combine rationality with creative thinking.

To think creatively you need to switch your attention from your industry to the market, particularly towards your users/customers' unmet needs.

Rational and creative business thinking

While industry analysis tells you a lot about the shifts occurring in producing/manufacturing a product/service, the market suggests you new possibilities for value creation.

Analysing an industry therefore suffers, to me, from incremental thinking. There is only so much space you can create by expanding the boundaries of an existing industry, and when you have done it, competition quickly will try to copy your positioning.

Creativity aims at create an entirely new industry rather than expanding an existing one. To be created, a new industry requires a shift in perception which can happen at two levels:

  1. The customer need

  2. Your product

This video explains the difference between incremental (rational) thinking and disruptive (creative) thinking which is needed in envisioning a new industry.

Watch video full-screen or on my YouTube channel.

It's a very interesting time to be a business strategist. Finally, the value of creativity and creative thinking has made it into the business world, this blog aims at sharing thoughts and experiences as they unfold in our lives of both rational and creative strategists.

Enjoy the journey.

#StrategicDesign #DesignThinking #IndustryAnalysis

138 views0 comments