six-forces-models

Six Forces Model And Why It Matters In Business

The Six Forces Model is a variation of Porter’s Five Forces. The sixth force, according to this model, is the complementary products. In short, the six forces model is an adaptation especially used in the tech business world to assess the change of the context, based on new market entrants and whether those can play out initially as complementary products and in the long-term substitutes.

The Six Forces Model: Beyond Porter’s Five Forces

porter-five-forces
Porter’s Five Forces is a model that helps organizations to gain a better understanding of their industries and competition. Published for the first time by Professor Michael Porter in his book “Competitive Strategy” in the 1980s. The model breaks down industries and markets by analyzing them through five forces.

The traditional Five Forces Model moves around:

  • Competition or rivalry among existing competitors.
  • The threat of new entratnts.
  • Bargaining power of suppliers.
  • Bargaining power of buyers.
  • The threat of substitute products.

A sixth force is about complementary products or those that do not directly overlap with ours but can become substitutes in the long run. Indeed, complementors might reshape whole industries, and that is why it’s important to understand the state of complementary products in a tech-driven industry.

A quick dive into to the Six Forces Model and why it matters in business tech

Another important variation of Porter’s Five Forces Model is the Six Forces Model, where the sixth force is represented by complementary products. This force has been added throughout the 1990s, when different markets, especially in the tech industries had been reshaped by innovations, which were seen by consumers as complementary products first, then replaced completely existing products. 

Indeed, Andrew Grove, former Intel’s CEO and the father of the OKR Goal-Setting System, in his book “Only The Paranoid Survive” highlighted how the sixth force – complementary products – was one of the key forces that determined a complete reshaping of the way of doing business

And therefore, one of the forces that most (especially in the tech industry traveling at a faster speed compared to other sectors) had the ability to change business models, and leading to what Andrew Grove called a strategic inflection point. A point from which the way of doing business would never be the same. 

This could become both a big threat for existing players, an opportunity for new entrants, but also a way for existing dominant players to redefine completely their business models. That is why, it makes sense, especially for companies operating in the tech business world, to map and analyze the context by adding this sixth force. 

Read Next: Porter’s Five Forces.

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Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which target is to reach over two million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get in touch with Gennaro here