However, Monitor slid financially downward after the economic recession of 2008/2009, compounded by Prof. Porter’s having been personally involved in a major scandal involving working for Gadhafi, head of Libya. Monitor Consulting ended up declaring Chapter 11 Bankruptcy in November 2012. This form of Bankruptcy allows the company to stay in business, with the courts appointing financial oversight and controls until the company can become profitable again, or is sold. In Monitor’s case, a deal to sell to a rival consulting firm, Deloitte was already in the making when Bankruptcy was declared. In January 2013, Monitor was sold to Deloitte Consulting.
Meanwhile, never one to stay down, Prof. Porter now focuses on the Institute for Strategy and Competitiveness at Harvard Business School, where he also chairs a new initiative at Harvard Business School to help new CEOs. He remains an independent consultant, as well, with a large part of his focus now on the healthcare industry and systems.
The November 2012 article in Forbes dives into what caused Prof. Michael E Porter’s company, Monitor, to go bankrupt. To me, the article seems to ramble and lose its focus. However, a profound part of this review, buried in the middle of the article, may get to the heart of Monitor’s fall:
“Sound business is … unlike warfare or sports in that one company’s success does not require its rivals to fail. Unlike competition in sports, every company can choose to invent its own game. As Joan Magretta points out, ‘A better analogy than war or sports is the performing arts. There can be many good singers or actors—each outstanding and successful in a distinctive way. Each finds and creates an audience. The more good performers there are, the more audiences grow and the arts flourish.’
What’s gone wrong here was Porter’s initial thought. The purpose of strategy…is not about coping with competition–i.e. a contest in which a winner is selected from among rivals. The purpose of business is to add value for customers and ultimately society. There is a straight line from this conceptual error at the outset of Porter’s writing to the debacle of Monitor’s bankruptcy. Monitor failed to add value to customers. Eventually customers realized this and stopped paying Monitor for its services…. Monitor wasn’t killed by any of the five forces of competitive rivalry. Ultimately what killed Monitor was the fact that its customers were no longer willing to buy what Monitor was selling. Monitor was crushed by the single dominant force in today’s marketplace: the customer.”
In stark contrast to the Forbes article is “Monitor Group Bankruptcy – the Downfall“, a self-published article in CaseInterview.com by Victor Cheng. Founder of CaseInterview.com, Mr. Cheng is an independent consultant working as a strategic advisor to CEOs of Fortune 500 companies and previously was with a number of the top consulting firms, including Monitor. In his article, he attributes the decline of Monitor as being due to DENIAL, of not addressing the underlying fundamentals of cash flow and profitability (or doing too little too late), and of focusing on strategy, not innovation and operations. In sharp contrast to the Forbes article, which did not mention the Libya debacle, he addresses it head on as symbolic of the flawed moral leadership of Prof. Porter. He summarizes three key learnings from Monitor’s downfall: 1) Always protect your REPUTATION [maintain ethics/integrity]; 2) Don’t let PRIDE and EGO get in the way; and 3) Don’t underestimate the difficulty of EXECUTION [that implementing a strategy is far more difficult in reality than most consultants recognize].
This last advice from Mr. Cheng resonates with me, as CEO of Innovara. From our own experience for over 30 years as a business and management development firm committed to helping our clients achieve RESULTS, often in emerging countries, we often find ourselves “cleaning up” the aftermath of other big-name consulting firms because their strategies become non-implementable in practical terms. We all know that the big money of such firms is in the up-front analysis, not back end execution, by these firms – and as Mr. Cheng alludes to, these same consultants do not understand nor appreciate the operational challenges. In short, they get out before they are held accountable for results.
Since declaring bankruptcy, as a consultant and strategist supreme, Prof. Porter appears to have been concentrating on leading his new roles and responsibilities at Harvard, particularly reaching out to new CEOs. He also continues to concentrate on positioning himself as a guru of healthcare system reform in the USA and globally. In that capacity, he appears to be shifting focus from healthcare manufacturers to governments and payers.
My advice is to caution everyone not to “throw the baby out with the bathwater” – meaning, move beyond the Monitor debacle and don’t let it bias you against Prof. Porter. I say this without any “pro-Harvard bias”. (Incidentally, I chose to go to Columbia Business School myself, even though I was accepted to Harvard.). He is a brilliant strategist and he is ever deepening his understanding of healthcare systems and challenges including in emerging markets. And I predict he will increasingly be involved in and potentially drive healthcare reform around the globe.
Some of you may recall a final Journal Club presentation on the last day of the Innovara seminar last October, Advanced Strategic Marketing, where one of your colleagues reviewed a most recent HBR article by Prof. Porter about his proposal for a new model for healthcare strategy. This elegantly and seemingly simple model was not the result of sudden inspiration. It was based upon years of research, culminating in several other articles and a book on the healthcare system dating back 5 years, including an article published in 2008 in the New England Journal of Medicine.
Undoubtedly we will be reading more articles in Harvard Business Review by Prof. Porter in the years to come, and learning more about how he is engaged with across multiple stakeholders in healthcare. This is particularly likely to happen, now that Boston – his home base – is officially the largest healthcare biotech and innovation center of the world.
Three predictions I would therefore give to all of the ASM followers of Michael Porter: 1) He is likely to embrace innovation as a driver of good and sustainable business, and in such a way as to link it solidly to good competitive strategy; 2) He will focus on emerging innovator (biotech) companies to prove his theories; and 3) All over the world, particularly in emerging countries of importance to Harvard, he will increasingly be involved in governmental policies and practices in healthcare reform. In this regard, I hope his focus will including working across diverse ethnicities, economies and stakeholders to increase access to new drugs, technologies and know-how to serve an ever-growing global population at risk of cancer and other heretofore acute and fatal diseases.
