Michael Porter has been one of the most prolific creators of business model analysis tools over the past 40 years or so. I am sure many of us have studied the Porter Five Forces or Porters Theory of Competitive Advantage in MBA’s or marketing degrees. However compelling and sensible these models are I have always found it difficult to make assessments between similar but independent business models for a single company. Using Porter, how do you assess the probability of success of one business model compared to another, particularly when the models are fundamentally different? As an old friend used to say, “it’s like comparing apples with kangaroos”. So, any differentiation can be somewhat abstract and difficult to quantify in real terms.
Like many people in leadership roles in business, I have looked at many models and techniques to help me make decisions. Here are a few you may have heard of… Boston Matrix, GE Matrix, Kepner-Tregoe Driving force analysis and Business Model Canvas. Although all of these are valuable tools they still don’t answer the question above about how you can compare apples with kangaroos. How can we say when creating one business model that it is superior to another, particularly when they are in different markets? Worse still, how can we compare two companies in different markets with different business models? As an investor, what makes one company better than another? How does she decide which company should be supported and which one should be left alone?