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The Chairman Repents
I was out of bounds in my analysis of Prof. Porter’s “Competitive Strategy,” saying that it was insipid and completely devoid of any principles or foundation for decision making or scholarly analysis that could have been drawn from such fields as economics, ecology, evolution, or modeling.
I said that his academic papers were a mishmash of bad statistics, descriptive anecdotes that could fit in with a myriad of competing theories, and case studies that seemed like they were cribbed from his graduate students’ papers (for example, his use of the saw blade industry to prove his points about concentration).
Also, that the author commits the fatal conceit of encouraging communitarian strategies by companies and industries guided by the helping hand of altruistic regulators, presumably selected from HBS faculty rather than the dispersed knowledge and know-how of pitiless consumers intent on better price and quality, and purveyors focusing on providing same.
Yes, all that on retrospect was true and much too kind.
I went to the other extreme, however, in harshly saying there was nothing of value that one could get vis-a-vis stock selection from the promotions and extensions of his consulting firm and the affiliated Institute for Strategy and Competitiveness at Harvard. You see, I ran a search of " competitive policy, NYSE” on google and that brought up a nice 1,000 entries of companies that apparently believed in the buzz work and were trying to be stylish and conformist, thereby signaling a laxity and sponginess that would lead one to eschew. One notes for example that Professor Porter has served as a counselor on competitive strategy to companies including AT&T, Credit Suisse First Boston, DuPont, Proctor & Gamble and Royal Dutch Shell, and currently serves on the boards of Parametric Technology Corp, R & D Falcon Corp and Inforte Corp. I note also that companies like Southwest Airlines were big proponents of competitive strategy.
What is really required is a study of the performance of companies that mention competitive strategy (or, for that matter. Six Sigma) as one of their mantras, from the time of first mention relative to the market in subsequent years. I hypothesize (but not retrospectively like the highly flawed work of good and bad companies where he looked the stock prices to determine the good and bad and then concluded that the good had better stock performance than the bad) that a prospective study would show major inferior performance of such competitive strategy-captured companies.
But unlike Professor Porter’s sensible-sounding homilies (try to lower your costs, or pick an industry where barriers to entry are high), this hypothesis must be tested. If I am wrong I will be the first person to apologize to the professor for leaping to this natural conclusion from a detached reading of his book.