Strategic Career Orientation with Porter’s Forces

During my last MBA course, I delved into various strategic business frameworks, with Porter’s Six Forces framework standing out for its relevance despite its age.

This framework, which is easy to explain yet complex to apply, evaluates an industry’s competitive dynamics to protect a company’s profitability. Interestingly, I found its application can also be extended to our careers, where we act as our own CEOs, guiding our professional journeys with strategic thinking.

Decoding Porter’s Six Forces

Michael Porter's framework introduces six pivotal forces that shape every industry and market:

• Competitive Rivalry: This force addresses the level of competition, the concentration, and the intensity of rivalry within an existing industry.
• Threat of New Entrants: It assesses how easily new competitors can enter the market and disrupt the status quo. Regulations, high initial investments, or a high level of expertise can form such barriers.
• Threat of Substitutes: This evaluates the likelihood of customers finding a different product or service that can replace the current offering. A train can sometimes be a substitute for a plane, for example.
• Bargaining Power of Suppliers: This force considers how much influence suppliers have in driving up the prices of goods. The fewer alternatives a company has to choose between suppliers or the higher the cost of switching between them, the more power suppliers have over it and the less margin you can make.
• Bargaining Power of Customers: Similarly, as per the suppliers, but at the other end, the more choices and easier it is for customers to choose and switch between products and services, the lower the power a company must dictate its pricing.
• Complementary Products or Services: Later added as a sixth force, it contemplates the impact of related goods or services, like the proliferation of connected devices in the smartphone industry, that can enhance or detract from the competitiveness of an industry.

While these forces are traditionally used to gauge an industry’s viability and profit potential, they can be equally potent when repurposed for mapping out a strategic career path.

Applying Porter’s Forces to Individual Career Planning

Viewing oneself as a personal enterprise, here's how you might translate Porter's forces to the digital and computer science fields:

• Competitive Rivalry: Measuring the intensity of competition within a job market by assessing factors such as the number of job openings in a specific sector and the influx of new graduates entering the field annually.
• Threat of New Entrants: Reflecting the accessibility of a field to newcomers, including fresh graduates and those shifting careers. The more advanced the degree or expertise needed, the more secure your position. However, if entry into one domain is becoming simpler, your competitive edge may diminish, necessitating an elevation of your qualifications. Data science, for example, was a challenging field to enter years ago due to its rigorous knowledge requirements. Nowadays, the proliferation of free resources and courses has lowered the threshold, enabling a broader demographic to enter the field.
• Threat of Substitutes: Both the presence of substitutes and new entrants have an impact on the market. Substitutes provide alternatives to existing services and expertise. For example, industrial automation in the previous century emerged as an alternative to manual labor, and today, artificial intelligence is likely to become a substitute for intellectual roles. Additionally, the rise of remote working has increased the potential for offshore contracting to serve as a substitute for local labor forces.
• Bargaining Power of Suppliers: In this context, suppliers encompass universities, certification centers, and other institutions that validate skills and competencies. The wider the range of educational options available, the greater the choice afforded to students and professionals. The surge in online learning platforms has notably reduced education costs, enhancing the bargaining power of individuals seeking these qualifications. This shift in the educational landscape influences the barriers to entry in various professional domains.
• Bargaining Power of Customers: In this scenario, customers are represented by employers or clients. The greater their access to a pool of individuals with similar skills and experience, the stronger their position in negotiating salaries or services. This dynamic is closely linked to the degree of competition present in the field.
• Complementary Services or Goods: This aspect refers to additional skills or offerings that, while not central to the core function of a profession, can enhance the value of services provided. These supplementary skills extend beyond formal academic and professional qualifications to include areas such as soft skills, thereby offering clients or employers a broader range of options.

In the competitive labor market, applying Porter's framework to career management is not without its challenges. Similar to its use in industry analysis, this approach may overlook regional variations and focus predominantly on optimizing profitability, which might not align with everyone's main objectives. However, this methodology presents a valuable perspective for those just entering the job market as well as seasoned professionals seeking new opportunities. The inclusion of emerging factors like the potential of AI as a substitute in certain job roles illustrates the adaptability of Porter’s forces in addressing evolving elements that can influence the competitive landscape.

I'm curious about your views: What do you think about applying such a framework to a personal career? How do you plan yours?