Things we learned in business school 15-20 years ago:
- Porter’s 5 Forces: Threats of competitors, new entrants, suppliers, customers & substitutes should drive business strategy.
- BCG Matrix: Market growth rate and Market share should drive corporate prioritization between business lines.
- Marketing’s 4 P’s: Product, price, placement & promotion should drive marketing strategy
- NPV, ROI & Discounted Cash Flows: Ultimately it’s all about the numbers.
- SWOT: Strengths & weaknesses vs competitors within and industry plus opportunities & threats from outside the industry shape competitive strategy.
These frameworks did help me in business… But not as much as we all expected.
Here’s what really happened:
- Lehman & Goldman: Government overwhelmed the “5 forces”: Central banks picked winners (Goldman – bailout) and losers (Lehman – No bailout). Subsequently, QE & reg policy distorted market forces in ways that propped up some companies and crushed others.
- General Electric: The world’s most valuable public company 1-2 decades ago had plenty of “cash cows” and “stars” in the BCG Matrix. GE is down over 80% and dropped from the global top 100 in 2018.
- Tesla: Brands now became global powerhouses without traditional marketing & advertising. (See also: Kiley Jenner, Donald Trump, PewDiePie…)
- Amazon & Netflix. Amazon spent 2 decades earning less than zero and still barely makes a profit, but it is among the top 5 most valuable public companies in the world (and is #1 on some days). Nexflix hemorrhages cash, yet is trades at 99x accounting earnings, with a market cap about the same as Nike or McDonalds.
- BitCoin, TikTok & Tide Pods : Absolute proof we cannot really see “opportunities” and “threats” ahead of time. Bitcoin conjured up >$100b of market cap with some code that nobody owns. TikTok was launched in 2017 and now has more active users than than there are people in North America. The Tide brand got lots of free publicity when kids died eating their delicious looking concentrated poison soap pods.
What’s the lesson here?
Ha ha ha ha! No idea. Please tell me when you figure things out. But since you asked…
My take aways:
- Hubris – We know less than we think
- Pragmatism – Avoid rigid frameworks & ideologies. Go with what works.
- Adaptability – MBA’s clearly go stale in a decade or two. Keep building your “talent stack” to adapt to evolving market developments. Python is a thing 20 now.
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