Blog | Robert Davis 11.06.17

Masters of Innovation, Part Deux

Newsflash: Ad Guy Crushed by Porter's Five Forces

 

Recapping where we’ve been 

In case you missed my last post in this series, here’s the setup: Mid-career, I’m back in school, getting an MS in Innovation from Northeastern University. I’m blogging here about my experience.

Full disclosure

I have to be upfront about my professional origin story. I started out as a graphic designer, because that’s what I had a degree in. Which I got because that’s what I always wanted to do growing up. In retrospect, even though I spent 15 years working in advertising as a creative, my journey to strategy started almost right away. I clearly remember my writer partners telling me not to spend so much time with the brief, more than a few times. In the second half of my ad career, working as a strategist, I’ve been scrappy about filling the gaps in my brand, marketing and digital strategy toolkits. As far as I can tell, that’s gone pretty well.

Enter Mr. Porter and his Five Fascinating Forces

Not having gone to business school, though, I was definitely missing some of the foundations of business strategy. That’s a gap the Northeastern program started filling from day one. My first assignment in my excellent consumer insights class was to analyze PJA’s industry using Porter’s Five Forces model. As a slightly nervous “returning student,” I took some time trying to get it right – and the five or six hours it took to do the research and fill in the framework crystallized a bunch of the random data points I’ve been living with for the past five years. My finished analysis painted a crystal-clear picture of just how challenging the ad business has become for mid-sized B2B shops. 

If you’re not up to speed on Porter, here are the five forces his model identifies: 

  • Bargaining power of buyers
  • Bargaining power of suppliers
  • Threat of new entrants
  • Threat of substitutes
  • Intensity of rivalry

Sound familiar? Let’s try a few of them out together, OK?

Turn your head and cough, please

Here’s a light-hearted sampling of three of my findings:

1. Threat of new substitutes: Do you have a client who hasn’t built an in-house marketing stack and hired an internal team to run it? I don’t. How about media “partners” who have skilled up to deliver services directly to your clients? Classic substitutes.

2. Bargaining power of buyers: Used to be that only the largest companies sent us through rigorous (and by rigorous, I mean flaying the skin from your body) procurement reviews. Today, your ideas and your rates never appear in the same room. The marketing team may love your ideas, but procurement is going to get pretty forensic on your staffing model, rates, and every other little detail – and use it to get as much for as little as they can. If you don’t want to play ball, that’s fine. Just don’t expect to win the business.

3. Threat of new entrants: Deloitte, Accenture, etc., are rapidly acquiring/building digital agencies. Say no more.

I started this assignment thinking of the five forces as a nice organizing metaphor for some dispassionate business analysis. By the end, I was feeling like William Wallace (as played by Mel Gibson) in the closing scene from Braveheart. You know, when they crush him under heavy rocks and then pull out his intestines.

You’ll be fine, Bill. Some smart people at Harvard say there’s hope.  ©Paramount Pictures

Learning to look on the bright side

Along with the Five Forces framework, we were assigned a reading on industry analysis written by Ramon Casadesus-Masanell, the Herman C. Krannert Professor of Business Administration at Harvard Business School. The first 93 pages provide an insightful walk-through of the analysis process, or “the drawing and quartering,” as I like to call it. Then, on page 94, a shaft of hope pierced the virtual cloud of my intellectual gloom:

“The point of industry analysis is not to declare an industry attractive or unattractive; it is, as we’ve noted, first to spot profit opportunities and develop a strategy to exploit them, and then to identify threats to profits and develop a strategy to counter those threats.”

Oh, right, that’s why I’m here

Thank you, Ramon, for pulling me out of my strategy tailspin. Strategy is about making things happen in the conditions on the ground, among many other things. And in this business, few of us have the luxury of going the clubhouse and waiting for better conditions. This is it – no better day than today to spot the opportunities. We’ve got a strategy at PJA that I like a lot – ask me about it sometime – and I’m even more charged at the chance to have a bunch of new tools to make it happen better, faster and yes, Ramon, even more profitably. 

Dramatic foreshadowing of things to come: In another Northeastern class, four classmates and I are working in a small group to develop a product, service and marketing innovation for a major Boston-area consumer goods company. I’ll share an update next month.

Check out D’Amore-McKim’s MS in Innovation.

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