Michael Porter’s Three Great Strategy Contributions

He Saved, He Bolstered, and He Provoked

Source: Michael Porter’s X profile

Michael E. Porter is a giant in the field of business and last fall retired to Professor Emeritus status. On March 27, 2024, I am speaking at a Harvard Business School (HBS) seminar celebrating his life’s work. I thought I would give a more edgy version of what I will discuss at the seminar in Michael Porter’s Three Great Strategy Contributions: He Saved, He Bolstered, and He Provoked.

Saving his Domain

Mike has been a strategy academic for over half a century. Business strategy began as an academic field in the 1960s, mainly at HBS. The pioneers included HBS professors Alfred Chandler, C. Roland (not Clay) Christensen, and Kenneth Andrews, plus Igor Ansoff of Carnegie-Mellon and Vanderbilt. In 1962, Chandler published Strategy and Structure. In 1965, Andrews and Christensen and colleagues published Business Policy and Ansoff Corporate Strategy. And in 1971, Andrews came back with The Concept of Corporate Strategy. Together these books created the academic field of strategy within business schools.

Meanwhile, Bruce Henderson created the strategy consulting industry outside the academy. Henderson founded Boston Consulting Group (BCG) in 1963 and brought enduring strategy concepts such as experience curve and growth-share matrix to the field during the 1960s. BCG grew explosively and seven partners left to found Bain & Company in 1973, which experienced spectacular growth as well. BCG and Bain went on to spin off numerous firms that further expanded the industry, including SPA, LEK, Parthenon, and Telesis.

During the 1960s and 1970s, the strategy industry raced far, far ahead of the strategy academy. That was obvious to me when I entered the MBA program at HBS in the fall of 1979. Three of the five biggest recruiters were BCG, Bain, and McKinsey (the firm that began its life in 1920 as a cost accounting consultancy but in the wake of the massive success of BCG (and later Bain) rebranded itself as a strategy consultancy). However, HBS, which had been the epicenter of the strategy academy, did not have a single course with ‘strategy’ in the title as of 1979–1981.

It did have Business Policy, a required course split between the spring of the first year (BP1) and the fall of the second year (BP2), with the latter being the only required course in the entire second year. The message was: Take whatever you want with your other eleven second year courses, but this one is a must! Business Policy represented the best of the Chandler, Andrews, Christensen tradition — and even shared the exact title of the 1965 Andrews, Christensen, et al book.

Sadly, Business Policy was by a wide margin the worst course I have taken in my entire educational career. The total intellectual content of the course was: As a manager, it is critical that you make good choices and avoid making bad ones. How could you tell if a choice was good or bad? A good choice produces desirable results, while a bad one produces undesirable results. How could you figure out in advance, what would be a good choice and not a bad one? Think carefully. Which choices should you focus on? The important ones.

It would be nearly another decade until I started my long collaboration with Professor Chris Argyris, father of organizational learning, who would help me understand that knowledge on which action cannot be taken is barely worth having. Unequipped at the time to have a useful critique for my BP professors, I just sat in class flabbergasted as I was taught utterly unactionable knowledge. Instead, my (arguably childish) approach was to miss as many BP2 classes as I could get away with without being kicked out of HBS.

That (sans Mike Porter) was the state of the academic contribution to the field of business strategy as of 1979 — a full 16 years after the founding of powerhouse strategy firm BCG, and six years after the founding of mini-powerhouse Bain.

However, there was one shining star in the HBS strategy sky: Industry & Competitive Analysis, Mike’s second-year elective. Even though it was merely an elective, it attracted (by my best recollection) about 500 of the 770 second-year students. His seminal work, Competitive Strategy, came out during my second year on October 1, 1980, and became the world’s first business best seller. It contained truly useful theories about strategy — ones that would help a manager understand before making a strategic decision whether it had a better or worse chance of producing a favorable outcome. It was nothing short of a game changer.

It saved his domain, academic strategy, from obscurity and embarrassment. On his own, Mike dragged the strategy academy from hopelessly trailing non-academics to leading in the creation of actionable intellectual property in the domain of strategy — knowledge that the business world actually used.

His example also provided encouragement to others, like INSEAD professors W. Chan Kim and Renée Mauborgne of Blue Ocean Strategy fame and IMD professor Yves Pigneur and his PhD student Alex Osterwalder of Business Model Generation fame, to continue to create strategy intellectual property from within the academy that ensured that consultants and business executives wouldn’t leave business academics fully in their wake, as was the case as of 1979.

In that way, he saved his domain — a huge contribution.

Bolstering a Movement

The biggest threat to strategy has always been and continues to be planning, as I argue in this surprisingly viral video. Planning is the process of determining a list of sensible initiatives to pursue with the company’s resources. Strategy, in bold contrast, is an integrated set of choices that compels desired customer action.

In the early days of the discipline called business strategy, planning dominated strategy. In the 1960s and 1970s, strategy was mainly a technocratic discipline. It was organized, rigorous, and managerial — featuring lots of analyses (like SWOT). This was the tradition of Andrews, Ansoff, Chandler and Christensen.

Bruce Henderson struck the first blow for strategy by explaining how choices needed to be made to produce a desired competitive outcome. For him, a company needed to price ahead of the experience curve to gain a cumulative scale advantage enabling lower prices and the ability to outcompete all competition and maintain/grow its cumulative scale advantage. That theory was further elaborated in the growth-share matrix. He struck a blow for strategy as a set of choices based on a prescriptive theory — and a far more useful theory than ‘make good choices on the important issues.’

Against the emerging sea of planning-masquerading-as-strategy, Mike bolstered strategy enormously, striking a further blow against planning with his contributions, starting with Competitive Strategy but importantly including Competitive Advantage five years later and the incredibly important Harvard Business Review article What is Strategy? in 1996.

By bolstering the Henderson initiation of the commercial practice of true strategy, Mike was instrumental in creating what I think of the golden age of strategy, roughly the two decades of the 1980s and 1990s. During that period, strategy superseded planning and seemed to be winning the battle.

But planning struck back! McKinsey was an important force. Given its cost accounting background, planning was more instinctual for it than strategy. Its response to BCG and Bain was the 7-S Framework — a planning tool, which argued for making sensible choices across seven named domains. Plus, in response to the fame and fortune of BCG’s growth-share matrix, it created a knockoff, the McKinsey/GE nine-box — like the growth-share matrix only less prescriptive and more managerial.

In due course, many executives realized that planning gave them plausible deniability. If they planned thoroughly and the board approved the plan, but it produced bad results, they could claim that the results were the product of forces outside their control.

Sadly, strategy has become a lost art while planning has returned to prominence. Strategy has not been helped by the academy, which has closed ranks around ‘the resource-based view of the firm,’ a theory that has little use in the business world but makes strategy academics giddy. Nor has it been helped by the ‘strategy consulting firms,’ which have greatly deprioritized strategy as a line of business because post-merger integration, overhead cost reduction, structural reorganization, and digital transformation are far, far more lucrative service lines.

However, at least there are four bodies of strategy intellectual property that have significant traction in the business world and are fighting a rearguard action against the dominance of planning. Mike’s is one of them — of which I am a part. Branches of the Henderson tree form a second, Blue Ocean Strategy is the third, and Business Model Generation the fourth. Everything else is a rounding error.

In this second way, Mike has played a seminal role in helping strategy survive — even though it is under sustained attack.

Provoking a Fundamental Shift

His third contribution will take decades to become clear — and is barely understood today. But Mike’s work created a challenge for the structure of both companies and the business academy.

When strategy became cool in the 1960s and 1970s, many firms followed the lead of General Electric (GE), which was considered the paragon of management in those days, by creating corporate strategy functions. Then over a decade later, business schools started creating strategy departments, which have gotten very large. Typically, strategy and finance are the two biggest departments in business schools (e.g. they are #1 and #2 in size, respectively, in my old School — Rotman). Marketing had a much longer history, with companies having had marketing functions and business schools marketing departments for many decades before strategy came along.

But when Mike put a name to and a set of concepts around differentiation, it created a problem: there was no longer a real difference between what marketing historically did and what strategy began to do when it comes to differentiation strategies. Strategists need to understand customer needs thoroughly enough to design an offering that appeals uniquely (Product), figure out how to get it to customers (Place), determine what to charge for it (Price), and how to build the kind of awareness that is needed (Promotion). It is, at the same time, strategy and the four Ps of classic marketing. I have made this point before — much to the chagrin of many who say marketing and strategy are surely different, though they can never provide a convincing rationale for why they supposedly are.

The implication of Mike’s work on this front is highly provocative. Companies have two functions — marketing and strategy — that should be one, and business schools have two departments that should be one. But since possession is nine tenths of the law — and more than that in academia — these useless overlaps are continuing and probably will for decades. But Mike’s work foretells the long-term inevitability of convergence on this front.

Practitioner Insights

First, if you are lucky to have the chance to hang around an exceptional person, make the most of the opportunity. I hung around Mike quite a bit over a decade and a half, and I was much better for it. I can guarantee it wasn’t easy — at all. But it was well worth it.

Second, ideas matter. All ideas are not created equal. There are ones that enable you to shape the world and others that simply document and describe it. Both have utility. But they sure aren’t equal. Mike contributed mightily to my understanding of that distinction — and, like him, my pursuit of the former.

Third, never assume what you are being taught has utility. Business Policy had zero. But I was cowed: it was HBS, it was taught by famous professors, and BP2 was the only required second year course. I felt I must be missing something, but I wasn’t. I sometimes think I should have boycotted it fully and risked being punted out of school. But then I wouldn’t have been able to take Mike’s Industry & Competitive Analysis — and my path would have suffered.