TL;DR
Porter’s strategic frameworks, originally designed for businesses, can be effectively applied to personal career management
“Every [one] competing in [the job market] has a competitive strategy, whether explicit or implicit. The strategy may have been developed explicitly through a planning process or it may have evolved implicitly through the activities of the various [phases of one’s life].” ~ Michael Porter, Competitive Strategy (Appropriations are represented in brackets).
If you know anything about Prof. Michael Eugene Porter, you may be wondering how his name ended up in the same sentence with the word career – and rightly so. Throughout his long and illustrious career, Prof. Porter has never written directly about careers.
Nonetheless, the way we think of and plan for our careers can benefit enormously from Porter’s thinking. For two reasons; first, because the current nature of work, with increased dynamism and globalization condemns us to be strategic players; secondly, because the demand-and-supply approach to thinking about the labour market, with its hidden assumption of stasis, is no longer sufficient. We have to appreciate the changes in our environment and leverage our agency to trace fulfilling careers for ourselves.
Anyone who is old enough to be reading a blog post about career strategies is most likely living in a labour market that is very different from the one in which they were born; the ascendancy of technology and globalization have significantly changed the labour market. On its part, technology has and is still changing the way we perform tasks, many of which have been key aspects of certain professions. More often than not, these changes are simplifications, which significantly lower the bar of entry and empower those who have already mastered the craft. Globalization, on the other hand, has largely wiped out the provincial advantages of career paths. The combined result of these two factors is a sort of commodification of work; whereas work historically tended to look and feel more like a craft and a medium for self-expression, it is increasingly looking like and feeling like a game of legos in which we can plug and play almost any piece in any direction. As a consequence of these and many more factors, it is very likely that you have been or are in the process of being trained for a job that may have changed so much when you check in for your first day; and even if you somehow benefit from a forward-looking training process, by the time you are ready, the job you aspire to may have moved abroad or have been taken by someone who came from abroad.
Historically, we have used the model of supply and demand as inputs for our career decisions. This model’s major shortcoming is that the fact of our agency as rational actors in the labour market is not immediately obvious; when we speak of our jobs in terms of demand of supply only, it is easy to stop at thinking that some government act of regulation, or some decisive action by the labour union leaders should protect our interests. What if we spoke of our jobs in the same terms with which we speak about companies and the products they sell? For all it is worth, we are all short-term, dispensable contractors who sell ever-evolving services, in the new labour market, and we can benefit enormously by speaking of our situation in ways that augment our thinking and improve the outcomes of our actions: language and metaphors constrain our thinking, and we have to continuously seek out the right ones. When companies face competition, they innovate on their products, offer new services and business models, execute mergers and acquisitions, expand (or move out) of certain geographic regions etc. It is high time we realized how much agency thinking of ourselves like companies grants us, and to borrow as much as we can from that model to improve our career decisions.
In this sense, there seems to be no business thinker whose work can serve as a better starting point for making the proposed transition in the way we think of our careers than Michael Porter. When seen through a career lens, Porter’s work can be seen as addressing the questions: What is driving competition for the services/products I offer? What actions are my competitors likely to take, and what is the best way to respond? How will my industry evolve? How can I be best positioned to compete in the long run? The framework Porter provides to guide our quest to answer these questions is excellent in that it combines considerations for the possibility of new entrants and substitutes, as well as competitive rivalry into considerations that tackle aspects of demand and supply.
So what are Porter’s ideas, and how can we use them?
Porter’s Five Forces is a framework for understanding the competitive landscape of an industry. There five forces are: competitive rivalry, supplier power, buyer power, threat of substitution, and the threat of new entrants. Porter’s unique insight is that the stronger these five forces are, the harder it is to craft a unique and profitable competitive advantage. In other words, it may be possible to still do well in a career that is under such strong forces, but the stronger the forces, the harder it becomesA keen reader may have realized at this point that Porter’s framework is not best used as a tool to pick a career path: there are no considerations for personal aptitude, available networks, long-term goals, etc. This failure is a feature and not a bug, as the framework is meant to facilitate our understanding of the competitive landscape of an industry. There are better guides for deciding upon a career path, and this article assumes that one has done that or is advanced in the process.
To quote Porter directly,
“The goal of competitive strategy for an individual in an industry is to find a position in the industry where the individual can best defend itself against these competitive forces or can influence them in their favour. Since the collective strength of the forces may well be painfully apparent to all competitors, the key to developing strategy is to delve below the surface and analyze the sources of each. Knowledge of these underlying sources of competitive pressure highlights the critical strengths and weaknesses of the individual, animates its positioning in its positioning in its industry, clarifies the areas where strategic changes may yield the greatest payoff, and highlights the areas where industry trends promise to hold the greatest significance as either opportunities or threats”.
Porter suggests three generic strategies to be deployed once the structure of the industry has been properly understood: 1) cost leadership, 2) differentiation, and 3) focus. While the names of the last two strategies are self-explanatory, it is important to highlight, to avoid misinterpretation, that cost leadership is only established when one has found less expensive and equally (or more) efficient ways to deliver the same value. In the context of a career, one who simply “lowballs themselves” will not be achieving cost-leadership; they will be leaving earned rewards on the table. A cost leadership position can be established if, for example, one finds more effective ways to work, and as a result can complete tasks in half the time typical of the industry, thereby freeing up time to take on more responsibility and earning more rewards. It is also important to note, that these strategies are not panaceas, as there is a considerable chance that even after mentally commiting to a strategy, one is unable to realise it, and any strategic advantage may be eroded with the evolution of the industry. With these risk factors in mind, it is nonetheless valuable to interpret these generic strategies from a career perspective.
The cost leadership strategy can protect one’s career because bargaining can only reduce expected rewards until those of close competitors are too little to justify further competition, and because less efficient competitors are often almost entirely decimated. Firstly, a cost leadership strategy protects one’s career from the bargaining power of employers because prices going down do not immediately render one’s operations untenable, and to the extent that they render untenable those of one’s competitors, one could end up with more customers as competitors go out of business. Secondly, the cost leader is also more flexible to cope with price fluctuations in inputs (in the context of a career, this could be anything that enables one to do their job and that one must purchase for themselves). Thirdly, the cost leader protects themselves from the threat of new entrants because new entrants are forced to start off competing with higher costs, and substitutes can only be considered if they are cheap enough; assuming cost leadership was established through innovative, proprietary, or hard-to-replicate processes, the level of protection is significantly higher and more sustainable.
The differentiation strategy does exactly what its name suggests; it provides a unique experience and often leads to above-average rewards. Firstly, differentiation provides protection against rivals because it leads to greater loyalty from customers and less sensitivity to price. The uniqueness that comes with differentiation creates a barrier that is often hard to overcome even for competitors that occupy a cost leadership position. Secondly, because differentiation provides more leeway for dealing with suppliers of inputs, and the switching costs are enough to keep customers in check. The loyalty and switching costs combine to protect one’s career from substitutes, and the threat of new entrants.
By attempting to serve a particular target very well, the focus strategy combines the benefits of the cost leadership and differentiation strategies without stretching so much as to become vulnerable.
A strong critique to this sort of approach to careers is that it is “too much thinking” that complicates a “simple problem”. A response that is as insightful as the criticism is that there is no such thing as too much thinking, there is only bad thinking. Jokes aside, proponents of such arguments must consider that 1) the significant changes we are seeing in the labour market make the career problem much more complicated than it was two decades ago, and 2) those who embrace a strategy simply for its simplicity are bound to lose to those who embrace a strategy for its superiority and accuracy; simplicity is not a virtue when it comes with failing to rise up to the challenge. Some take this critique too far by saying things to the tune of: “you just got to wing it, and you’ll be fine”, insinuating that there is no need for a strategy. The problem, of course, is that not having a strategy is a strategy; the question therefore becomes, is it the best strategy?
Another equally strong critique is the idea that using Porter’s ideas to think about our ideas assumes the existence of a zero-sum competitive landscape, and does not account for what one may call “blue ocean” career paths. Such criticism assumes that the intention is to pontificate Porter’s ideas on all career paths. That is false. The intention has been to present these ideas as an optional tool that may be useful to those who are forced to compete under the new realities of the job market. Their validity is not intended to be general, but subjectively embraced based on the career in question and the circumstance under consideration.
In conclusion, although Porter’s ideas have historically been appreciated as applicable in the context of firms and industries, the current nature of the labour market makes them useful in a surprisingly unexpected context. As technology and globalization continue to reshape the competitive landscape, adopting a strategic mindset is no longer just advantageous, but necessary. Porter’s five forces, and his three generic strategies, are an easy to apply framework for better positioning in an evolving world of work.