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.

Component	Description
Origin	Developed by Charles W. King and Marc H. Meyer in their book “The New Competitor Intelligence: The Complete Resource for Finding, Analyzing, and Using Information about Your Competitors” (2003).
Overview	The Six Forces Model is a strategic framework used for analyzing competitive dynamics in an industry or market. It expands on Michael Porter’s Five Forces Model by incorporating a sixth force, “complementors,” to provide a more comprehensive view of competitive influences.
Key Elements	– Traditional Five Forces: The model includes the traditional five forces proposed by Michael Porter: rivalry among existing competitors, threat of new entrants, bargaining power of buyers, bargaining power of suppliers, and threat of substitute products or services.
	– Complementors: The sixth force, complementors, refers to entities or businesses that provide products or services that enhance or complement the focal industry’s offerings. Complementors can have a significant impact on the industry’s dynamics.
Analyzing the Forces	The Six Forces Model encourages organizations to evaluate the following aspects for each force:
	– Intensity: Assess the degree of competition or influence exerted by each force. High intensity may lead to greater challenges and risks.
	– Drivers: Identify the key factors or drivers that affect each force, such as market trends, technological advancements, or regulatory changes.
	– Impact: Determine how each force affects the industry’s profitability, market share, and competitive positioning.
Applications	– Strategic Planning: Used to develop strategies and make informed decisions in response to competitive pressures.
	– Market Analysis: Helps businesses understand their industry’s competitive landscape and identify opportunities and threats.
	– Innovation: Supports innovation by considering how complementors can enhance product or service offerings.
Benefits	– Provides a structured framework for analyzing competitive forces and their impact.
	– Offers a more holistic view of competition by including complementors.
	– Helps organizations proactively respond to changing market dynamics.
Drawbacks	– Complexity: Assessing all six forces can be resource-intensive and may require substantial data and analysis.
	– Subjectivity: Determining the intensity and impact of forces can involve subjective judgments.
Key Takeaway	The Six Forces Model expands on Michael Porter’s Five Forces Model by incorporating “complementors” as a sixth competitive force. It is used for strategic planning and market analysis, providing a more comprehensive view of competitive dynamics. While it offers valuable insights, it can be complex and subjective to apply effectively.

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 entrants.
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 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 was 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, 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 their business models completely.

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.

Drawbacks of the Six Forces Model

Increased Complexity:

Complex Analysis: Adding an additional force to Porter’s original Five Forces Model increases the complexity of analysis, which can be challenging and time-consuming, particularly for small businesses or those with limited resources.
Risk of Overcomplication: The inclusion of a sixth force might lead to an overly complicated analysis, potentially obscuring clear strategic insights.

Potential for Overemphasis on One Force:

Imbalance in Analysis: There’s a risk of overemphasizing the sixth force (typically governmental or complementary products and services), which might lead to neglecting the analysis of the other five forces.
Difficulty in Assessing the Sixth Force: Measuring the impact of the sixth force, which often involves broader societal, governmental, or legal factors, can be more challenging than assessing the original five forces.

Applicability and Relevance Issues:

Not Universally Applicable: The relevance and impact of the sixth force can vary significantly across different industries and markets, making the model less universally applicable.
Dynamic Market Conditions: The model, like Porter’s original, can be criticized for not adequately addressing the rapidly changing market conditions and the dynamic nature of industries.

Resource and Skill Requirements:

Requires In-Depth Knowledge: Effective application of the Six Forces Model requires in-depth industry knowledge and analytical skills.
Resource-Intensive: Conducting a comprehensive six-force analysis can require significant time and resources, which might not be feasible for all organizations.

When to Use the Six Forces Model

Suitable Scenarios:

In-Depth Industry Analysis: Particularly useful for a thorough industry analysis when entering a new market or considering a new product launch.
Strategic Planning: Can be effective for strategic planning in industries where the sixth force (e.g., government policies, complementary products/services) is particularly influential.

Strategic Application:

Understanding Competitive Landscape: Helps businesses understand the broader competitive landscape, including factors beyond the immediate industry competition.
Policy Impact Analysis: Useful for analyzing the impact of government policies, regulations, or societal changes on the industry.

How to Use the Six Forces Model

Implementing the Framework:

Analyze Traditional Five Forces: Conduct a standard analysis of Porter’s five forces – threat of new entrants, threat of substitutes, bargaining power of customers, bargaining power of suppliers, and industry rivalry.
Identify and Analyze the Sixth Force: Determine the relevant sixth force for the industry (e.g., government, complementary products/services) and analyze its impact.
Integrated Analysis: Integrate the findings from the sixth force analysis with the traditional five forces to gain a comprehensive understanding of the industry dynamics.

Best Practices:

Balanced Approach: Ensure a balanced approach where equal importance is given to all forces.
Continuous Monitoring: Regularly update the analysis to reflect changes in the industry and market conditions.
Contextual Adaptation: Adapt the model to fit the specific context and nuances of the industry being analyzed.

What to Expect from Implementing the Six Forces Model

Enhanced Strategic Insights:

Broader Perspective: Provides a more comprehensive view of the industry and competitive environment.
Deeper Understanding of External Factors: Offers deeper insights into the impact of external factors, such as government policies or complementary products/services, on the industry.

Considerations in Application:

Complexity in Analysis: Be prepared for a more complex and potentially time-consuming analysis process.
Need for Expertise: Effective application may require industry expertise and a deep understanding of various economic, societal, and political factors.

In summary, the Six Forces Model expands on Porter’s Five Forces Model by adding an additional element, which can provide a more comprehensive view of the competitive environment.

This added dimension is particularly useful in industries where external factors like government regulations, social changes, or complementary products and services play a significant role.

However, its application requires careful consideration to maintain balance and avoid overcomplication.

The model is most effective when used with a thorough understanding of the industry and when regularly updated to reflect changing market dynamics.

It’s a valuable tool for businesses seeking to gain deeper insights into their competitive landscape and to inform strategic planning and decision-making processes.

Case Studies

Smartphones and Apps:
- Competition (Force 1): App developers compete to offer unique and valuable apps for smartphones, driving innovation and enhancing the user experience.
- New Entrants (Force 2): New app developers continually enter the market, making it dynamic and competitive.
- Suppliers (Force 3): Developers and app stores (e.g., Apple App Store, Google Play) have bargaining power in terms of app distribution.
- Buyers (Force 4): Smartphone users have the power to choose from a wide range of apps based on their preferences.
- Substitutes (Force 5): Apps can substitute for various standalone products or services, such as GPS devices, cameras, and fitness trackers.
- Complementary Products (Force 6): Apps are essential complementary products for smartphones, significantly enhancing their utility and value.
Video Game Consoles and Games:
- Competition (Force 1): Game developers compete to create compelling games, driving console sales and user engagement.
- New Entrants (Force 2): New game developers can enter the market, fostering innovation and competition.
- Suppliers (Force 3): Game developers have bargaining power when negotiating with console manufacturers.
- Buyers (Force 4): Gamers have choices in selecting games based on their preferences.
- Substitutes (Force 5): Games can substitute for other entertainment options, such as movies or outdoor activities.
- Complementary Products (Force 6): Games are vital complementary products for consoles, influencing their adoption and longevity.
Streaming Services and Smart TVs:
- Competition (Force 1): Streaming service providers compete for subscribers by offering exclusive content and user-friendly interfaces.
- New Entrants (Force 2): New streaming platforms can enter the market, intensifying competition.
- Suppliers (Force 3): Content creators have bargaining power, especially if their content is in high demand.
- Buyers (Force 4): Consumers have choices when selecting streaming services based on their content preferences.
- Substitutes (Force 5): Traditional cable TV can be a substitute for streaming services.
- Complementary Products (Force 6): Smart TVs are complementary to streaming services, providing a convenient way to access and enjoy content.
Electric Vehicles (EVs) and Charging Infrastructure:
- Competition (Force 1): EV manufacturers compete to offer efficient and affordable vehicles, while charging station providers compete to offer convenient access to charging.
- New Entrants (Force 2): New EV manufacturers and charging infrastructure providers can enter the market, increasing competition.
- Suppliers (Force 3): Suppliers of EV components and charging equipment have bargaining power.
- Buyers (Force 4): EV buyers have choices among different EV models and charging networks.
- Substitutes (Force 5): Traditional gasoline-powered vehicles are substitutes for EVs.
- Complementary Products (Force 6): Charging infrastructure is complementary to EVs, as widespread availability encourages EV adoption.
E-Readers and E-Books:
- Competition (Force 1): E-reader manufacturers compete on features and design, while e-book platforms compete on content and pricing.
- New Entrants (Force 2): New e-reader and e-book platform providers can enter the market, increasing competition.
- Suppliers (Force 3): Content creators have bargaining power in negotiations with e-book platforms.
- Buyers (Force 4): Readers have choices in selecting e-readers and e-books based on their preferences.
- Substitutes (Force 5): Physical books can be substitutes for e-books.
- Complementary Products (Force 6): E-books are complementary to e-readers, enhancing their value by providing a wide range of reading materials.
Mobile Phones and Mobile Accessories:
- Competition (Force 1): Mobile accessory manufacturers compete to provide innovative and protective accessories, enhancing the functionality and aesthetics of mobile phones.
- New Entrants (Force 2): New companies can enter the mobile accessory market, offering a wide range of choices to consumers.
- Suppliers (Force 3): Suppliers of materials for mobile accessories have bargaining power in terms of pricing and quality.
- Buyers (Force 4): Mobile phone users have the flexibility to choose accessories based on their preferences and needs.
- Substitutes (Force 5): Alternative mobile phone protection methods, such as insurance, can serve as substitutes for accessories.
- Complementary Products (Force 6): Mobile accessories, including cases, screen protectors, and headphones, are essential complementary products for mobile phones, enhancing their durability, aesthetics, and functionality.
Personal Computers and Software:
- Competition (Force 1): Software developers compete to provide operating systems, productivity software, and applications that enhance the utility of personal computers.
- New Entrants (Force 2): New software developers can enter the market, offering a variety of software solutions to consumers.
- Suppliers (Force 3): Suppliers of software development tools and resources have bargaining power.
- Buyers (Force 4): PC users have the flexibility to choose software based on their needs and preferences.
- Substitutes (Force 5): Users can substitute PCs with other devices like tablets or smartphones for certain tasks.
- Complementary Products (Force 6): Software, including operating systems, productivity suites, and specialized applications, are complementary to personal computers, enabling users to perform a wide range of tasks and functions.
Fitness Trackers and Health Apps:
- Competition (Force 1): Health app developers compete to provide user-friendly and feature-rich apps that sync with fitness trackers, enhancing the user’s health and fitness monitoring experience.
- New Entrants (Force 2): New app developers can enter the market, offering innovative health and fitness apps.
- Suppliers (Force 3): Suppliers of sensors and components used in fitness trackers have bargaining power.
- Buyers (Force 4): Consumers can choose from a variety of fitness trackers and health apps based on their fitness goals and preferences.
- Substitutes (Force 5): Traditional exercise equipment can be substitutes for fitness trackers and health apps.
- Complementary Products (Force 6): Health and fitness apps are complementary to fitness trackers, providing users with valuable data and insights to track and improve their health and fitness.
Home Assistants (e.g., Amazon Echo) and Skills:
- Competition (Force 1): Developers of voice-activated skills and applications for home assistants compete to offer diverse and useful voice-activated functionalities.
- New Entrants (Force 2): New developers can enter the market, expanding the range of skills and capabilities available to users.
- Suppliers (Force 3): Suppliers of voice recognition technology and hardware components have bargaining power.
- Buyers (Force 4): Consumers have the freedom to choose and customize their home assistant’s skills based on their needs and preferences.
- Substitutes (Force 5): Traditional methods of performing tasks (e.g., manually turning on lights) can serve as substitutes for voice-activated home assistant skills.
- Complementary Products (Force 6): Voice-activated skills and applications are complementary to home assistants, allowing users to control smart devices, access information, and streamline daily tasks through voice commands.

Key Highlights:

Six Forces Model: The Six Forces Model is an extension of Porter’s Five Forces framework, specifically used in the tech business world to assess changes in the market context. It goes beyond the traditional five forces by adding a sixth force, which focuses on complementary products.
Porter’s Five Forces: Porter’s Five Forces is a well-known model for analyzing industries and competition. It considers five key forces: competition among existing competitors, the threat of new entrants, the bargaining power of suppliers, the bargaining power of buyers, and the threat of substitute products.
The Sixth Force – Complementary Products: The sixth force in the Six Forces Model represents complementary products. These are products that may not directly compete but can become substitutes in the long term. Understanding the role of complementary products is crucial, especially in the tech industry.
Reshaping Industries: Complementary products can have a significant impact on industries, reshaping the way businesses operate. Innovations often start as complementary products before potentially replacing existing products entirely.
Andrew Grove’s Insights: Andrew Grove, the former CEO of Intel and a prominent figure in the tech industry, emphasized the importance of complementary products in his book “Only The Paranoid Survive.” He highlighted how these products could lead to strategic inflection points, fundamentally changing the business landscape.
Threats and Opportunities: Complementary products can pose threats to existing players, create opportunities for new entrants, and even prompt dominant players to redefine their business models. The dynamic nature of the tech industry makes understanding and analyzing these forces crucial for companies.
Strategic Inflection Points: Complementary products are capable of triggering strategic inflection points, where the way business is conducted undergoes a fundamental shift. This can be a pivotal moment with far-reaching consequences.
Mapping and Analysis: Companies operating in the tech sector, which evolves rapidly, should consider adding the sixth force (complementary products) when mapping and analyzing their business context. It helps them stay adaptable and prepared for changes in the industry landscape.

Alternative Frameworks

Framework	Description	Key Features
Five Forces Model	Developed by Michael Porter, it analyzes the competitive forces within an industry, including the threat of new entrants, the bargaining power of buyers, the bargaining power of suppliers, the threat of substitute products or services, and the intensity of competitive rivalry.	– Provides a systematic framework for assessing industry attractiveness and competitiveness. – Identifies key factors shaping industry profitability and strategic positioning.
PESTLE Analysis	Examines the external macro-environmental factors that may impact an industry or organization, including political, economic, social, technological, legal, and environmental factors, to understand the broader industry context and potential opportunities and threats.	– Offers a comprehensive view of external factors influencing industry dynamics and business strategy. – Helps organizations anticipate and adapt to changes in the operating environment.
SWOT Analysis	Assesses the internal strengths and weaknesses and external opportunities and threats facing an organization or industry, providing insights into its competitive position and strategic options.	– Identifies internal capabilities and external factors affecting industry or organizational performance. – Facilitates strategy formulation by matching strengths and weaknesses with opportunities and threats.
Value Chain Analysis	Analyzes the sequence of activities or processes involved in creating and delivering value to customers within an industry, identifying opportunities for cost reduction, process improvement, and value creation along the supply chain.	– Maps out the primary and support activities involved in delivering products or services to customers. – Identifies areas of competitive advantage and opportunities for value creation and optimization.
Scenario Planning	Develops multiple plausible future scenarios based on different combinations of critical uncertainties, allowing organizations to anticipate and prepare for various possible futures within an industry or market.	– Identifies key drivers of change and uncertainties. – Develops multiple scenarios to explore various future outcomes.