It’s easier to be strategic than you think
Use this shortcut
👋 Hi, it's Greg and Taylor. Welcome to our newsletter on everything you wish your CEO told you about how to get ahead.
In 30 years, I’ve never seen the rate of change that’s happening today with AI.
AI is like a super-lubricant for movement across industries, inside of companies, and for careers. Customers are finding substitutes to their current vendors and suppliers are turning into competitors. And the old, tried and true business models – particularly in SaaS – are under extreme pressure, as AI challenges how products are built and priced.
In this environment, the pressure is on to act fast. I feel it too – every story about a startup getting to $10M overnight gives me FOMO.
But right now, what you actually need is clarity of thought. You need to sit down and think hard about your business, and the pressures being exerted on it by this rate of change.
This might sound intimidating - but it’s easier than you think, if you use a framework.
This week, I had my leadership team spend two hours at our bi-annual offsite using Porter’s Five Forces, an “oldie but goodie” strategy framework that’s built for this kind of moment. Here’s why it’s important, and how to use it.
– Greg
Why strategy frameworks still matter
I talk a lot about wanting my executives to think and work “high-low,” meaning be strategic with longer time horizons and then be very tactical and get shit done. And I want executives that can do both in the same day - or hour.
All my executives struggle with going high - especially quickly. It takes practice. And even then, most people don’t really know what it means to “be strategic.”
That’s where strategy frameworks come in. They are templates or shortcuts you can use to think strategically, get your reps in, and articulate and engage with “high” conversations.
So I love frameworks like SWOT, Porter’s Five Forces, OAT (okay, that’s our framework - Optimize, Accelerate, Transform with AI), JTBD, Blue Ocean, and more.
How to think strategically about AI
In the age of AI, shifting market dynamics make Porter’s Five Forces more relevant than ever before. It’s a framework that helps you think through five key forces of competitive pressure – particularly helpful right now, when AI has lowered the barriers to entry in nearly every category and your competition might be something you’ve never considered before.
I strongly recommend you use Porter’s Five Forces this month to think more strategically about AI. Here’s how to think about each of the five forces.
1. Threat of new entrants.
This means new competitors who are poised to enter your space and mount a serious challenge to your franchise. Don't just think about direct competitors - especially given how AI has lowered barriers to entry.
A two-person startup with GPT-4o and Bolt can now build software that would have required a 10+person team three years ago. A smart leader can become a credible consultant backed by AI as a thought partner. Ask: What barriers to entry are weakening? What kind of company, with AI, could now be a credible alternative to my customers?
2. Bargaining power of suppliers.
This is about the influence your suppliers have on pricing and availability of inputs (data, raw materials, people), etc.). In the AI era, this often means cloud providers, AI model providers, or data sources. If you're dependent on OpenAI's API, how much power does that give them over your business model? If AWS raises prices, how quickly could you migrate? What would happen if your data provider added an application layer (with AI) and sold it to your customers?
3. Bargaining power of buyers.
This is about the power your buyers have over your pricing and product. Are your customers becoming more sophisticated about AI? Or will AI help them become more sophisticated in their purchasing decisions? Can they easily switch to alternatives (or will AI create more alternatives fast)? Customer power increases when they have more options or when your product becomes commoditized.
4. Threat of substitutes.
This force is about other products or services – not necessarily in the same category – that can satisfy the same needs as yours. AI is creating entirely new ways to solve customer problems. Tax software isn't just competing with other tax software; it's competing with AI assistants that can do your taxes.
5. Competitive rivalry.
This force is about the intensity of rivalry in your space – and AI is amping up that intensity across industries. How is AI changing the number of competitors or speed of growth in your industry? If everyone can add AI features, what becomes the new differentiator?
Free your mind to new ideas
When leadership references these frameworks or runs sessions using them, the most valuable contributors bring external perspective and future-focused thinking.
Ask questions like: “When we talk about new entrants, are we considering AI-native companies or traditional players adding AI?” or “How do we think about substitute threats when AI might change how customers approach this problem entirely?”
Avoid getting stuck in current constraints. The whole point is to think beyond today's limitations.
Our advice
Take 60 minutes and do Porter’s Five Forces for your firm next week. Use this playbook - so you leverage AI, but don’t outsource your thinking to it.
Ask AI to explain Five Forces to you - so spend 15 minutes having a conversation about Five Forces and how it works. Ask AI to give you the questions you should ask yourself about each force and your business - and be careful, because AI will try to answer those questions for you.
Spend 20 minutes doing a V1 on your own (no AI) and answer the questions that AI suggested.
Work with AI again. Cut and paste your answers into AI and ask AI to improve or critique your version - and to point out what you might have missed
As the final, most important step, spend 10 minutes thinking ahead. What could be true about any of these forces in the next 2-3 years? Remember: AI models are trained on the past - they can’t do this thinking for you. Use your judgement and creativity to think about what might happen in the future - the risks and opportunities for you and your firm.
Put in the 60 minutes – if you do, at any point in the next six months you’ll be ready to participate in any strategic AI conversation. And if you don’t yet get invited to those conversations, find a way to drop some of these insights to your team/boss - via email, Slack, or Zoom.
Have a great week,
Greg & Taylor