Porter details his particular areas of expertise and his perspectives on economics.
Question: What do you do?
Michael Porter: Well I would say that in general terms, I’m in the business of really creating intellectual capital or creating ideas for looking at a different way at very large, messy, complicated problems all of which have something to do with competition, and economic value, and really delivering value in terms of organizations working.
I started out with a fairly focused, although very complicated question, which is: what makes some industries prosper and not others? And then later: what makes some companies prosper and not others?
But ultimately that core set of ideas, and frameworks, and ways of thinking gave rise to work in some very powerfully connected areas like economic development, and most recently in healthcare delivery.
Healthcare delivery is a large, complex, multidimensional problem. It involves organizations delivering value who are competing in some way against other entities. And so that classic problems are the ones that I’ve evolved my work into looking at. And although I have a hopelessly broad bandwidth in the sense of I work in a lot of different fields – I work in the environment, social responsibility, philanthropy – it all emanates from that common set of perspectives and ways of looking at organizations doing something to deliver value.
Question: What are you best known for?
Michael Porter: I suspect just traveling around the world and talking to people and meeting people that probably. At this moment in history, I’d probably be best known for the notion of the five forces; because it’s such a visible and clear framework that when people encounter it, all of a sudden it kind of totally changes the way they look at industries and markets. A lot of students get exposed to it during their training, and therefore it sticks with them.
I think probably the close second would be the value chain – the notion of how we think about how an entity actually creates value and think about the cost of creating that value in a systematic way.
My roots are in economics, and that’s where my doctorate is. And in economics, there’s a very simple conception of, there’s a production function, there’s labor capital that’s converted into output, and that’s fine for many economic applications. But in order to really understand how to think about strategy and competition and value, you need to go beyond that. So I think probably then would come the diamond theory of looking at locations and clusters, which is a close present.
So there’s been a succession of these frameworks; and you know, I’m not done. I keep pounding away at these kind of problems, because what I find is that today as we think about how ideas develop, certainly in the economic and managerial domain, there’s a tendency to reduce, to simply, to partition, to specialize, to look at the piece if you will, not the whole.
And of course Clay Christiansen, my beloved mentor, this was his sermon almost every day in class. It’s the whole. The parts are important, but it’s the whole. There’s something unique about the whole, and how you think about the whole, and how you get the parts to fit together. And that’s the essence of what creates true success in most situations. And so it’s that struggle to understand the whole in these interrelated domains that really motivates me.
Recorded on: June 11, 2007