rate of change

Where Competition Has Met It’s Match

by Dan Robles on June 4, 2012

(update; as of November 2012, The Monitor Group headed by Michael E. Porter, the subject of this article, declared bankruptcy ending an era of C-Suite omnipotence strategy thinking.  This article compares competitive strategy to collaborative strategy)


The B-School staple “Porter’s 5 Forces” has been the mainstay of corporate competitive analysis since it’s creation in 1979 by World regarded Harvard Business School Professor, Michael E. Porter. Porter developed a model of industry analysis in his seminal book,  Competitive Strategy: Techniques for Analyzing Industries and Competitors

In short, a competitive company’s position in a market is threatened by five main forces acting on the corporate asset:

  • new competition,
  • substitute products or services,
  • bargaining power of customers,
  • bargaining power of suppliers,
  • intensity of competitive rivalries.

Any changes in these 5 forces would be cause for the company to re-evaluate their place in the market … thus leading to healthy consulting practices for strategists the world over.

The Rate of Change

In the 1990’s critics began to argue that Porter’s 5 Forces thesis assumes that the forces are static and non-related.  At the time, the world was becoming more dynamic and more interrelated. For example:

  • Buyers, competitors, and suppliers can interact, and even collude.
  • Value cannot be created in the long run by constantly introducing barriers to entry
  • Participants in a market have the ability to plan and respond to competitive behavior.

As a result, they added another Force called “complementors” while introducing rudimentary game theory to explain the role of strategic alliances to the analysis.

Constant Change

Now in the year 2012, we routinely assume that all players can instantaneously access the same real-time dynamic market information from the cloud.  We readily accept that all players will collaborate massively with whomever they want from anywhere in the World.  As a result, we must assume that all five forces will change constantly and rapidly in real time.

Now imagine how 1990’s game theory would manage conditions where the company AND their competitors must continuously re-evaluate their position in a market under the circumstances of continuous change.  In effect, nobody has the ability to compete with each other, they are competing with the game, therefore, they are cooperating to keep the game in play.

Is Collaboration Underrated?

If any player tries to introduce a barrier to entry, THEY risk get knocked out while the game continues without them. In fact, value is created by applications that remove barriers … and brokers are punished. All of these factors cause the game to self energize and improve as players preserve the asset rather than consume it.

The Value Game

It should not be surprising therefore that Porter’s 5 forces now resemble what we call the Value Game that we have described here (and here, and here).  In the ultimate manifestation, however, The Value Game will play automatically through multiagent algorithmic game applications where tangible and intangible assets would be accounted equally in a Value Game. Individual would own, manage, and deploy their secret sauce of knowledge assets through their personal API that interfaces with the game that is most relevant to their highest abilities.

Where competition has met it’s match

Remember that little regarded fact of Capitalism: Markets are efficient where there is perfect information.  This means that if everyone involved in a transaction has the exact same information as everyone else, the true supply can meet the true demand.  Nobody ever said that this must be accomplished through competition especially if collaboration can do it better.

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The Wisdom of Wisdom

by Dan Robles on May 25, 2010

1011442.largeObviously data are related to information and information is related to knowledge and knowledge is related to innovation and innovation is related to wisdom (whew!). But how are they related? What few people realize is that if you take out any of these components, the whole relationship falls apart.

data > information > knowledge > innovation > wisdom

For example, if data are corrupted, then everything that follows becomes corrupted; hence the advanced mathematical equation: “garbage in = garbage out”. Few people realize that at the end of the relationship, the wrong wisdom creates the wrong data and therefore “garbage out = garbage in” starts the process all over again.

Going from one component to the next is called transformation. If the transformation fails, no value is created. Google Transforms data into information. Human intellect transforms the information into knowledge. Knowledge is shared among other people and transformed into innovation. The success and failure of innovation is transformed into wisdom. Community wisdom, through the behavior of individuals, is transformed into data.

Entrepreneurs are concerned with transformation – this is where value is created. The entrepreneur identifies assets operating at a lower level and transforms the asset into a higher level. That is what entrepreneurs do.

The key to monetization is not coffee beans, it’s the transformation of $0.20 worth of coffee beans into a $2.00 Latte.

Transformation is where the most value is created, but it is also where the most risk exists. As such, it is the area where most entrepreneurial opportunity exists to manage risk, eliminate risk, diversify risk, and mitigate risk. To control the node of the transaction is to control the entire transaction. This is where the garbage enters. This is where the garbage is eliminated, this is where the garbage moves on. It’s all about the transformation.

Any asset that fails to change fails to remain an asset. Value is derived from the rate at which assets change. If I produce more in less time, I become more valuable. The RATE OF CHANGE in a phenomenon carries the most interesting and valuable information about that phenomenon. This is an important distinction that many people just cannot wrap their heads around – but they must if they hope to prosper in the next economic paradigm.

Transformation of the wisdom of crowds in social media is the next great opportunity, don’t trash it.

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They’re Finally Saying Something New About Social Media

March 8, 2010

Now, all of a sudden, a new idea is emerging…it’s barely an audible chirp, but it will become a tectonic rumble before long: Social Media is beginning to take on the characteristics of Financial Instruments.

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Treating the consequences, not the symptoms?

June 10, 2009

Problems are often so complex and so integrated across the globe that no single person can accumulate in a lifetime the experience needed to manage effectively. Actions without wisdom have unintended consequences for yet unknown victims.

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Change You Can Bank on

June 5, 2009

Social media allows us to express the dynamics of our world in real time and at great speed. Feedback loops are shorter and cause and effect can be more easily differentiated.

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Finally, A Definition for Innovation

December 5, 2008

Innovation: The rate of change in knowledge with respect to time  [In earlier post we identified the 5 essential elements of a market economy. What would be the currency of an innovation economy? Currency is anything that serves as a medium of exchange, a stored value, and a standard of value. Basically we are asking; […]

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