I’m often asked whether there is any debate between Michael E. Porter and myself, since he is so strongly associated with the concept of sustainable competitive advantage. So I was wondering whether it would come up when both of us landed on the same program in Korea, the Dong-A Business forum. It didn’t. For the record, I should say that I have deep respect for Porter’s ideas and for the enormous impact he has had in advancing the field of strategy. Under the right boundary conditions (relatively clear and stable industry boundaries, a significant ability to create entry barriers, intra-industry competition as the main predictor of profits and the ability to sustain a stable position), the ideas work very well. My concern is that those conditions don’t’ apply to more and more of our economy, and trying to manage as though they do can be a trap.
It turns out that Porter was there not to debate with me, but with Michael Sandel on the future of capitalism. Porter argues that capitalism’s savior will be ‘creating shared value’. I’m a lot more dubious. Like William Lazonick and Clay Christensen I fear instead that we have created a system of incentives for those that run organizations which rewards under-investing in innovation, failing to share productivity gains fairly with employees and generally hollowing out organizational capabilities to carve out massive rewards for investors and executives.
What to do about the situation was central to the discussion at the Drucker Forum, in which various thinkers including Clay, Roger Martin, Gary Hamel, Nilofer Merchant, Rick Goings and many others tried to tackle how they would go about fixing the dilemma that while companies, investors and executives are doing very well, many others in society are not. You can read about some of the proposals at the Drucker Forum web site. A nice post covering many of the highlights with photos can be found here.