Week 3: Five Forces in Action

Having come from a small-medium size commercial real estate (CRE) software startup, I witnessed C-level executives doing market and competitive analysis first-hand. As a SAAS company disrupting an industry that primarily ran on legacy tools and processes, it found itself at a competitive advantage. Although, as an outside observer of their competitive analysis and strategy planning, I think they considered many of the ideas presented in our readings this week, they sometimes failed to take full advantage of these tools in ways that could have improved their company strategy.

Given that the majority of the CRE industry uses Excel and email for day-to-day activities, these were known substitutes from the beginning. However, company leadership failed to consider substitutes outside of this obvious realm. For example, a new organization and analysis product ‘Airtable’ has recently gained momentum as a potential substitute for Excel. Given that Airtable’s primary space is not the CRE industry, I think it’s quite hard to foresee such a substitute early on, particularly in today’s fast-paced technology age. Although it’s vital to consider all five forces in a competitive analysis, it seems that harder than ever before to consider all possibilities as new software companies are constantly sprouting up everywhere.

This company is ‘blurring industry boundaries’ of software technology and CRE.¹ Although being a new player in a dated space was clearly an advantage, it also made positioning quite difficult. There were a diverse set of competitors each with slightly different products trying to infiltrate and disrupt the same industry. The ultimate goal of these competitors was not always clear and their success was yet to be seen. Thus, it was difficult to place them on the positioning map or rate their relative strengths and establish a trajectory with confidence. As a result, the company was blind-sided by a company they had not previously seen as a competitor. 

Lastly, I think the most challenging part of analyzing industry competition using the five forces is prioritizing which factors are most threatening to a company. As a company leader, how can I measure and identify the largest threat to my company? Do I do an in-depth analysis of how each factor affects my company’s financial projections? Although understanding how these five forces shape my company’s industry is essential, I think it’s rather difficult to come to a conclusion about the action it should drive.

(1) The Global Forces Inspiring a New Narrative of Progress (McKinsey Quarterly, April 2017); https://www.mckinsey.com/business-functions/strategy-andcorporate%20finance/our-insights/the-global-forces-inspiring-a-new-narrative-of-progress