Porter’s Five Forces

Competition is often viewed narrowly and identifies threats solely by today’s direct competitors. Porter’s Five Forces is a framework utilizing five competitive forces identify an industry’s potential strengths and weaknesses. This useful method determines threats to a business’s strategy for a defined industry structure. It can be applied to virtually any industry segment. Details: competition, opportunity landscape, and increases decision power to maximize a business’s long term profitability.

Originally developed by Harvard Business School professor, Michael Porter, in his book “Competitive Strategy: Techniques for Analyzing Industries and Competitors“. Utilize this method to analyze an industry’s structure to better facilitate corporate strategy in understanding short and long term profit potential.

The Five Forces,

  1. Threats of New Entrants: The potential for additional companies to enter market. Industries with a high barrier to entry will have a low threat of new entrants.
  2. Bargaining Power of Suppliers: Power exerted by suppliers in the form of price, volume limitations, shifting costs to customer
  3. Bargaining Power of Customers: Customers can have the power to influence price, quality, and services/features.
  4. Threat of Substitutes: A substitute performs the same function as the industry’s offering, but does so through differing methods.
  5. Internal Rivalry: Existing competitors have power to influence the market through advertising/marketing, price, research and development, new features, and more.


Steps to Running a Five Forces Analysis

  1. Clearly define market definitions, value propositions, or jobs to be done. There will likely be multiple, list out all that are relevant, especially to your businesses operation.
    1. A useful tool to identify the value proposition(s) for your initiative is the Business Model Canvas.
  2. List businesses or products that meet some or all of the before mention value propositions – this is your competition.
  3. For one of the identified offerings to be a true competitor, it must meet all of the market definitions. Revisit the market definitions and value propositions to determine which are present in today’s market. Then break out which are differentiating factors for your new offering. The goal is to individually categorize each of the organizations as a competitor, substitute, or not of concern.
    1. A competitor meets all of the value propositions, and a customer may chose either offering to suit their needs. (Think Netflix vs. Hulu)
    2. A substitute meets some of the value propositions, but a customer may still chose to elect a different service. (Think Netflix/Hulu vs renting/buying a movie)
    3. An offering is not of concern when greatly varying from the value proposition, meaning the offering is not in the target market. (Think Netflix/Hulu vs. reading a book)
  4. With each of the offerings categorized, examine in a table to clearly indicate how each performs. See the below table for an example. A table is also a great way to show how your offering differentiates itself!
  1. Examine each of the competitors using the five forces. How might each of the forces disrupt your entrant and growth within the target marketplace? Each of these forces are threats to the success of your operation and are important to recognize.
  2. Develop strategies to counter and mitigate each of these threats.

Key Elements of a Strong Problem Statement

There are many brilliant people all around with truly innovative and disruptive solutions to the world’s most challenging problems. However, if these innovators can’t articulate a compelling business case as to why the problem matters and their solution makes a difference – the solution will never be seen. So what constitutes a strong problem statement and what is the goal of having a problem statement?

The general function of a problem statement is to align stakeholders around the problem at hand to ensure everyone is working on the same issue. A problem statement also builds the business case and reason to solve the challenge, so that you and your team receive sufficient resources and backing from executive stakeholders and sponsors to pursue. You ultimately want to answer WIIFM – “What’s In It For ME?”. Answering this question for executive stakeholders and team members is a powerful form of influence you may employ to increase the success of your program.

Where Does the Ask Come From & How to Integrate,

In an organization, a mix of senior leader and passionate influencers make four key decisions about the business’s problem solving strategy.

  1. What are we going to work on?
  2. Who is going to work on it?
  3. What will the strategy be?
  4. What resources are needed?

Passionate influencers are mentioned because senior company leaders may be blind or ignorant to what key (low-level) challenges the business is facing and what current state of the art exists to deploy in solving these challenges. Passionate influencers are the unsung heroes within an organization that drive to reverse mentor these leaders and gain a stake of trust within the business to advise of such challenges and provide a “voice of the employee” to senior stakeholders. If you’re an executive leader within an organization and don’t have one of these eccentric influencers co-developing your strategy, this is an opportunity to begin developing someone.

Key Deliverables in Defining a Challenge or Problem Statement,

  • Answer WIIFM – “What’s In It For ME?”
  • Develop a compelling goal, program scope, identify team roles and responsibilities, and rough plan of attack.
  • Develop a high level process map of and identify the key opportunity areas
  • Create a shared need by laying out the logic for the change
  • Identify CTQs (Customer Critical to Quality) characteristics. The customer is whoever receives or benefits from the output of the solution, a CTQ trait are the items most important to this customer.

Other Helpful Factors & Pitfalls with Problem Statements

  • Does the problem statement include a root cause or solution? (Beware of this bias)
  • Is the problem statement based on fact or fiction(someone’s “gut” feel on the issue)
  • How would customers feel if they knew you were working on this?

Developing SMART Goals

SMART is a helpful acronym to build effective goals, is one of many methods to do so, and is widely used and recognized. SMART = Specific, Measurable, Attainable, Relevant, Time Bound.

  • Specific
    • Answer the five “W” questions: What do you what to achieve? Why is this important? Who is on the team? Where is the problem? Which resources are needed?
  • Measurable
    • Measurable means you need a way to compare your initial state with your end state with a number. How many or % was reduced? How much time was saved? How much cost was removed? Answering these questions is to to knowing when the challenge has been solved and goal was met.
  • Attainable
    • Is your goal within the realm of possibility? How realistic is the goal given the constrains, such as team, timeline, financial resources, and the power over making the change? Potential benchmark against comparable industries to better know what can be accomplished.
  • Relevant
    • Does the organization care about this challenge being solved and is the effort really worthwhile? Are you the right person to lead this or is this the right place and time to implement the solution?
  • Time Bound
    • When will you accomplish the goal? Outline over time what you can do, similar to a 30/60/90 plan. What can you achieve in 30 days? 60 days? 90 days?

Example Problem Statement,

Bad Example,

The cost of non-quality for our parts is too high

Better Example,

In the last 4 months (When), the defect rate for the Support Housing, Part number DN609837B, has increased for machined surfaces. (What) The current defect rate has increased from 5% on average to 39%, where 50% of the defective parts are repairable and the rest are scrap. (Magnitude) Each non-conforming part causes a 3 day increase to assembly cycle time and has resulted in a cost of non-quality of $417,000 per month. (Impact)


The above example identifies a time-bound problem that is measurable within the given time-frame and illustrates the with numbers how you know there is a problem (39% from 5% increase in defect rate). The impact of this problem, as it relates to the business and the customer, is also clearly stated – the business cares about the increased cost, and the customer expects on-time-delivery of the parts. This is a problem statement ready to communicate to a team, coordinate stakeholders, and begin to develop a SMART goal.


Organizing Factors as In Scope or Out of Scope

An important strategy to consider when undertaking a new project is to clearly identify and communicate the definition of your project. This usually starts by writing a problem statement, why it matters, and the goal or intended outcome. A key issue to consider as your project progresses is “Scope Creep”. Scope Creep is when outside influences affect what your project addresses and adds additional aspects to the scope and deliverable. This is a key issue that can often lead to programs never being completed, alienation of stakeholders, and never-ending projects. It is vital to the successful completion of large programs to communicate the problem, scope, and goal to the project stakeholders. (See Developing Team Roles & Responsibilities Post)

One tool to easily communicate what features, areas, or processes are in scope of your project and out of scope is the “In Frame/ Out of Frame” method. How we frame the problem will define the success and timeliness of outcomes.

How to Use it,

As seen in the above example, there are three loations to place factors,

  • Inside the Frame: Factors in the frame are factors IN the scope of the program. These are factors you will be actively looking to influence or change through the course of solving the problem and reaching the goal.
  • Outside the Frame: Factors outside the frame are factors OUT of scope for the program. These factors were specifically identified as some that may affect your challenge, but you have limited or no control on how to change or influence.
  • On the Frame: Factors on the frame are factors that could be of significance to the success of the program, but will not be actively worked or investigated. In the case actions and/or improvements are identified within factors on the frame, leverage the appropriate stakeholder for executing initiatives

An effective and fast method to build the content in this tool, is to bring in the program team and stakeholders to identify factors and agree on thier placement. This activity will build agreement across the team on what this project IS and IS NOT.

Download a Free In Frame/Out of Frame Template

What if the Scope Needs Adjusting?

Just because an item is IN or OUT of frame, does not mean it must stay in this position. Factors may be adjusted from their original placement if they are identified as significant causal factors leading to the problem. However, if ANY adjustments are made to the scope of the program, the stakeholders must be in full agreement of the changes and communicate and potential changes in schedule. If the stakeholders are not on-board with the suggested change in strategy, then table the topic as a future initiative to launch or hand it over to the appropriate team to solve.


Developing Team Roles & Responsibilities

Beyond defining “Why” you’re working on this challenge and “What” you’re going to do about it, now its time to define the “Who”. Building a diverse team and clearly defining the roles and responsibilities of this team is paramount to your program’s success. Whether you’re launching a new business, kicking off a Six-Sigma project, or just putting up a new shed – the entire team having an understanding of what each team member is there to accomplish and who is held accountable for the various deliverables will ensure program delivery.

Here, you will be introduced the the ARMI and G.R.P.I. tools. Two simple methods to record team objectives, clarify roles & responsibility, and walking through your plan of action to ensure the full team is aligned.


The ARMI Tool

This tool helps identify the key stakeholders, their roles throughout the duration of your program, and when/how you should engage each stakeholder. ARMI stands for: Approver, Resource, Member, and Information/Interested Party.

One way the ARMI tool can be completed is by filling out the below table,

ARMI Tool Matrix

Along the top row, input each phase of your project, starting with launch (Phase 0). The planned date of each subsequent phase should be entered in the “–/–/–” placeholder. This will give your key stakeholders a rough idea when they should see the results from each phase. Be sure to define the output/expected deliverable(s) of each phase on your project charter (This should contain the Why and What of your challenge). You may enter the name(s) of the stakeholders of each of the blank cells.

Details on the ARMI categories,

  • Approver: Approves decisions outside project scope or initial goal/charter.  Often a business leader or executive sponsor of your project
  • Resource: Resources are those whose skills, expertise, and knowledge may be needed at different phases of your project.  These subject matter experts (SMEs) may be consulted on an ad-hoc basis.
  • Member: Active team member. Primary project workers driving change at various phases of the program strategy
  • Information/Interested Party: Interested parties in the project’s output and progress or people to be informed at the designated phase.  This could be someone working on a similar problem to share best practices, or could be someone affected by the program results.

The G.R.P.I. Method

The G.R.P.I. method is a simple tool for assessing the health of your team in relation to the challenge at hand. How well does your team understand the challenge? Does each person understand their role? Can the team trust each other? Does the team have a clear understanding of the path/method to be followed to reach the challenge’s goal? All of these questions are important to building trust and a healthy dynamic. It’s a great idea to use this tool during the launch phase of your project. G.R.P.I. may also be used to better understand why the team may be struggling at various phases of the program.

G.R.P.I Tool

How does G.R.P.I. Work?

Print off a copy of the G.R.P.I. matrix and hand one to each member of the team. Take a few minutes for each person to anonymously fill out their chart by circling 1, 2, 3, 4, or 5 for each section, where 1 is the lowest score and 5 is the highest. It is also useful for each person to fill in why they scored a particular section low with a few opportunities on how this score might be increased. Once everyone has completed their scoring, the project leader should combine each of the tables, record the minimum, maximum, and average score for each of the sections. Next, open a team discussion on where the team is functioning very well and where there are opportunities for improvement. For example, if “Roles” scores very low, there is an opportunity to discuss the expected roles and responsibilities of each team member – document any variances to original roles of each member and clarify how the team might improve.

It is best to check the G.R.P.I. tool in order from top to bottom: first Goals, then Roles, then Processes, and lastly Interpersonal. Also, it is OK and usually preferred to have healthy conflict during these discussions. With a lack of conflict, someone is m=likely not being stated and the team may experience future turmoil.


Download a Free Template for ARMI and G.R.P.I. Below!


Want to Learn How to More Effectively Improve Your Team’s Dynamics?

Check out Five Dysfunctions of a Team by Patrick Lencioni. This leadership book tells a story of conflict in a corporate setting and how to mediate this conflict into achieving an extraordinary team dynamic and results.


SIPOC / COPIS Process Mapping

SIPOC is an acronym representing Supplier, Input, Process, Output, Customer and is an effective means of generating a high level process map for the purpose of documenting a process. Also commonly written as COPIS, which puts the customer first and enforces a deeper focus on the customer’s needs over the organization’s process.


When to Use a SIPOC

Example SIPOC Process Map

The purpose of this tool is to identify at a fairly high level, the most relevant five to six steps of a process – this is an effective way to quickly coordinate a team’s activities and focus. If you have a process with steps A, B, C, D, E – and you only want to focus on steps C and D, you quickly map out all steps, A to E, and state that only steps C and D are in scope for this project.

SIPOC is an Acronym meaning,
  • Supplier: Whomever provides the input into the process
  • Input: Material (physical or data) sent to process for action
  • Process: Action placed on the material inputted that must be performed to satisfy the customer’s requirement. This is where the action happens.
  • Output: Resulting transformed material from the process per the customer’s requirement
  • Customer: Process output recipient, may be internal or external. Also defines the requirements for the output. The external customer is the final user that initiated the process, where an internal customer may be someone else within the organization that further refines the output in additional processes for the external customer.

How to Use a SIPOC,

SIPOC Template

A good practice when process mapping is to begin at the customer and essentially answer the below questions. This method of starting at the process end builds a customer centric map potentially reducing the addition of bias into the analysis.

  • Who is the customer?
  • What is the customer requesting?
  • How s this request fulfilled?
  • What materials or information is needed to fulfill the request?
  • Who supplies these materials?

NOTE: It may be useful at the end of creating a SIPOC beginning at the customer, re-write the process beginning with your organization’s process and identify non-value added inputs and processes for improvement or elimination.

While completing a SIPOC,you will likely find multiple processes with multiple inputs on a single map – and this is expected! See the below example on a completed SIPOC for a forged combination wrench.

Combination Wrench SIPOC Example

In the above example, you can quickly see the high level process for creating the wrenches. In this example, you may notice multiple customers including a secondary customer segment, “Metal Recycler”. In this process, you can identify where each output of the process is going by separating the products.

Download the Utilized PowerPoint Template Below!


3D SIPOC – Great for Internal Customer Management

Let’s say you have a very long process with many inputs and outputs throughout and you desire to have more details on your map. In this case, you can use a 3D SIPOC where each column represents a different process (Let’s call these swimlanes). Each of these swimlanes functions just as the previously described SIPOC where there is a supplier, input, process, output, and customer. In this case, the customer of one process, may become the supplier for the next. This is a great tool for managing internal process mapping.

Download the Swimlane SIPOC Template Below!


How Might We…


This magical phrase has completely changed the way I look at a problem! The single greatest mind shift in all of the methods, tools, and processes I’ve learned about resides in these three words, “How Might We…”. The words aren’t “How Can We…” or “How Should we…”, these words are specifically selected to inspire creativity and innovative solutions. “How Might We…” implies whatever you come up with… might not work… and that’s OK! The phrasing helps guide the team into asking the Right questions to tackle their biggest challenges.


A Bit of History,

Developed by Proctor & Gamble in the 1970s, popularized by IDEO (The prolific innovation and design firm), and now you see it mentioned in SPRINT by Jake Knapp (Brilliant process & Highly recommend!) and the Harvard Business Review in “The Secret Phrase Top Innovators Use“. IDEA breaks the phrase down: “HOW” assumes there are solutions out there, “MIGHT” means when we test ideas they might work and they might not, and the “WE” says we’re going to build it together. The “we” may be you and the customer, or it may be the full team, but innovation is a journey best traveled as a group.

Here are some Great Additional Resources,


Creative Confidence: Unleashing the Creative Potential Within Us All

Sprint: How to Solve Big Problems and Test New Ideas in Just Five Days

So How Does This Work?

As previously stated, the psychology within the phrase is intentional and is best used after some initial research into the problem and building a source of empathy feedback from people this challenge impacts (This can be learned through employing the “Voice of the Customer” tool). Once you’ve built a notebook of insights on the challenge, begin asking “How Might We…” to various aspects of the insights towards generating many problem statements.

For this tool, I will be walking you through a pitch competition called “The Flipping Finance Challenge” by Indiana Bond Bank, where this tool was successfully deployed in defining and solving a challenge.

Gary, IN provided various challenges and the below three led into my “How Might We…”

  • Becoming a “Smart Region” & National Transportation Hub
  • Matching Housing Stock with Targeted Populations
  • Manager Preserve & Maintain Nature Ecology While Growing

When developing a “How Might We…”, I am a BIG fan of utilizing white boards and sticky notes – pretty much any surface commandeerable for ideation is utilized – and abbreviate the phrase with HMW… placed in the top left corner of each brainstormed problem statement. (I often write HMW by mistake, but it lightens the mood). This will save lots of time and ink, because you’re expected to write it a lot! The below photo illustrates my thought process on building problem statements using HMW.

Sticky Note Storm – Understand Any of This?

The process began with the poster on the left. As insights are generated from empathy and challenge research, any opportunity or challenge found is then rephrased into a HMW statement. Below are a few examples,

HMW reduce the barrier to entry for tech startups?HMW utilize abandoned properties as a “carrot” to attract aspiring tech startups?
HMW transform Gary, IN into a team of regulatory entrepreneurs?HMW utilize Colorado-like resources & Chicago proximity to drive millennial tech growth?
HMW deploy a culture of permission-less innovation?HMW reduce barriers for new company adoption? (Housing cost, attracting talent, technological freedom, evasive entrepreneurs, risk taking, tech-enabled taxing)

Each of the above is an example HMW statement derived from insights or unanswered questions. Once a pile of stickies has been generated, the next step is to affinitize the stickies (This means identify common categories or families to form groups). You can see in the above picture the stickies were affinitized into “Gary = Proving Ground”, “Government Enablement”, and “Attracting “Things” & “People””.

All this work leads to the creation of a redefined problem statement! In this case, the problem statement became,

“How Might We Enable Gary’s Ecosystem To Attract Talent Utilizing Natural Resources (National Park, Dunes, Lake Michigan, Proximity To Chicago) to Become a Tech Start-up Proving Ground?”

NOTE: None of the above steps included ANY solutions or problem solving. In this phase, we only care about defining what challenge the team will be solving. A great thing about redefining the problem this way, is it forces the team to re-examine what really matters to the customer and determining the appropriate customer.


Steps & Supplies,

Supplies

Every person should have a stack of sticky notes (I prefer 3″ x 3″, but 3″ x 5″ work great) and a thick marker (Sharpie/dry erase). The thick marker forces the team to write clearly and succinct.

Steps

  • Write HMW in the upper left corner of a sticky note
  • Read, listen, or watch research on problem and challenge (Must include feedback from the customer’s perspective)
  • Hear something interesting? Form that thought into a question using HMW and write it on your sticky note.
  • Peel the note off and stick it somewhere
  • Repeat!

So What?

So you don’t to use this method, it is perfectly acceptable to approach a challenge the traditional way. The traditional method comes with a lot of assumptions including,

  • The customer actually knows what their problem is… (Rarely the case)
  • The customer and team solving the challenge has NO preconditioned solution or expected output from the exercise. (If you already know the solution, why are we here?)
  • The problem presented is the correct problem to be solved and not just a symptom of a much larger issue.

Using HMW and other tools to redefine the problem helps ensure the team is driving in the right direction and most closely identifies the root cause of the issue.

My personal experience when hearing pitch competitions and mentoring six-sigma projects is people and teams often approach a challenge with a solution. This solution was likely developed before the problem was defined and becomes analogous to using a hammer to vacuuming your carpet. How do you know this solution will work for your organization? Is this the best solution given the requirements? Do you know the requirements and what it takes to implement the solution? How might we identify additional stakeholders to ensure we’re solving the right issue and/or quickly receive feedback on the predetermined solution to gain an idea if this would actually work?

Always be sure to know the question before giving a solution – otherwise who may be saying, “Jesus is the answer!”, but the question was, “Who farted?”.


High Level Process Mapping


What is it?

High level process mapping is a tool used to identify, at a “high” level, the most significant steps of a process. Practically everything we do is some kind of process whether it is cleaning up the dishes or parts of our job. A process is a series of activities of inputs and outputs, where the final deliverable(or final output) creates value for the customer. The goal of a high level process map is to connect the various suppliers and their inputs with the process, and the process to the intended customer outputs.

Here are a few tools that help us do this, (Click the tool for more information!)

  • SIPOC (or COPIS) Supplier – Input – Process – Output – Customer: Identify who is the Supplier and what they’re inputting into the process. Contains a summary of the process and what it delivers(Output) to the Customer.
  • Value Stream Map: Map of all the tasks needed, both value-added and non-value added, to complete the process or deliver the product. Helps to identify the non-value added steps in a process.
  • Flow Diagram: Show show a team interacts with each other and what each team member should be doing and when it should be done in comparison to other tasks.
  • Time Charting: Helps identify “valueless” time or waste in a process.

Why Do We Care?

A process map makes it easy for the project lead and team to communicate what aspect of the challenge they are working as well as visually communicate the steps in the process to members not on the team.

Each type of process map may deliver different value, and it is up to you to determine which tool to deploy to best map your problem. But don’t get too anxious, these take very little investment to create and will only increase your understanding of the problem.

Helpful Tips

  • In Lean, you’re encouraged to “Go to the Gemba”, or where the action is happening. Don’t just create a process map from memory, go to where the process is taking place and write down EVERYTHING.
  • Start with the end customer first. Determine: what they need, why they need it, what they do with it, who they get it from, and how they get it. (May also be useful to ask how they prefer to get it). Do this with each step in the process from end to the beginning and log the answers to each of these questions
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