Firm Founded By World's 'Foremost Expert on Competition' Declares BankruptcySubmitted by Peace Gold Love on Thu, 11/22/2012 - 09:48
Except where generated by government regulation, sustainable competitive advantage simply doesn’t exist.
Forbes: What killed the Monitor Group, the consulting firm co-founded by the legendary business guru, Michael Porter? In November 2012, Monitor was unable to pay its bills and was forced to file for bankruptcy protection. Why didn’t the highly paid consultants of Monitor use Porter’s famous five-force analysis to save themselves?
What went wrong?
Was Monitor’s demise something that happened unexpectedly like a bolt from the blue? Well, not exactly. The death spiral has been going on for some time. In 2008, Monitor’s consulting work slowed dramatically during the financial crisis. In 2009, the firm’s partners had to advance $4.5 million to the company and pass on $20 million in bonuses. Then Monitor borrowed a further $51 million from private equity firm, Caltius Capital Management. Beginning in September 2012, the company was unable to pay monthly rent on its Cambridge, Mass., headquarters. In November 2012, Monitor also missed an interest payment to Caltius, putting the notes in default and driving the firm into bankruptcy.
Was it negligence, like the cobbler who forgot to repair his own children’s shoes? Had Monitor tried to implement Porter’s strategy and executed it poorly? Or had Monitor implemented Porter’s strategy well but the strategy didn’t work? If not, why not?
Was it missteps, such as chasing consulting revenue from the likes of the Gaddafi regime in Libya? Or had the world changed and Monitor didn’t adjust? Or was it, as others suggested, that Monitor had priced itself out of the market? Or was Monitor’s bankruptcy, as some apologists claimed, merely a clever way of selling its assets to Deloitte?
Or was it, as Peter Gorski wrote, that “even a blindfolded chimpanzee throwing darts at the Five Porter Forces framework can select a business strategy that performs as well as that prescribed by Dr. Porter and other high-paid strategy consultants?” If so, are other strategy consulting firms also doomed?
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