Scaling Down the Big Ideas: Rethinking Porter's Five Forces

Porter’s Five Forces were built for billion-dollar behemoths. This piece shows how Operators, Founders and Entrepreneurs/Soloprenuers can actually use them.

Most business books are written about companies you don’t run. And they’re written for executives in roles you may never hold.

But what if we scaled these big ideas down to the needs of early-stage founders, operators of 20-person teams, entrepreneurs, or solopreneurs trying to grow from $500,000 to $5,000,000?

That’s the purpose of this series: Scaling Down the Big Ideas. We want to make the best business writing usable, actionable. We want to translate strategic frameworks into tools for builders where they currently sit. This isn’t about how Amazon defends market share, it’s about how you protect your margin next quarter.

“The essence of strategy is choosing what not to do.” – Michael Porter

Michael Porter's On Competition remains one of the most referenced books in business strategy. Yet for many Operators, its central framework, the Five Forces, often feels more like a classroom diagram than a tool for real-world decision-making. This article revisits Porter not as a Harvard Business School icon, but as a guide to structural diagnosis. When wielded with nuance, the Five Forces still offer a way to understand where profit is leaking and what to do about it.

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Seeing Competition Differently

Porter's core argument is deceptively simple: competition isn't just about outperforming rivals. It's about understanding the broader structure that determines profitability in an industry. His Five Forces framework maps out five external pressures that shape that structure:

• Industry Rivalry

• Threat of New Entrants

• Bargaining Power of Suppliers

• Bargaining Power of Buyers

• Threat of Substitutes

Rather than chasing the idea of being "the best," Porter urges companies to focus on being unique. That means knowing which external forces are pulling down your margins and crafting a position that lets you hold on to value.

The Five Forces are not about competition with rivals, they're about pressure from all directions.

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The Five Forces in Today’s Markets

Each force applies, though the context has evolved. Here’s how they show up for modern operators:

• Industry Rivalry: Saturated markets, low product differentiation, and high customer churn create relentless price competition. Think streaming services or DTC apparel.

• Threat of New Entrants: Technology and capital access have lowered barriers. New players in software, AI, or e-commerce can appear overnight.

• Bargaining Power of Suppliers: When key inputs are scarce or specialized, like semiconductors or logistics capacity, suppliers can dictate terms.

• Bargaining Power of Buyers: Platforms like Amazon, Yelp, and G2 have empowered customers. One bad review, one cheaper alternative, and they move.

• Threat of Substitutes: AI replacing consultants, automation replacing labor, SaaS replacing services, substitutes creep in from unexpected corners of the market.

Small companies are deeply affected by these shifts. What varies is which force dominates, and how quickly the ground shifts beneath them, or how quickly the price the customer needs/expects has wiped out the profit dollars entirely.

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Where Porter Falls Short

The Five Forces model captures structure, but not motion. And motion is where modern strategy lives.

• Static Lens: Porter offers a snapshot. But today’s operators navigate constant change. New tech, new laws, new customer habits, these reshape industries faster than any static analysis allows.

• Neglect of Internal Strengths: Strategy doesn’t just live in markets. It lives in your execution, systems, and team. Internal capability often matters more than industry conditions.

• Blurry Boundaries: Are you a logistics company or a tech platform? A service or a product? Modern businesses defy tidy categories.

• No Framework for Co-opetition: Porter saw strategy as inherently about conflict and battles to be won. Today, smart businesses partner with competitors, integrate across ecosystems, and win by growing the pie.

• Equal Force Weighting: Porter never prioritized which force matters most. But real-world strategy is asymmetric. One force is usually the killer. That’s where focus should go.

Strategy isn’t static. And your strategic tools shouldn’t be either.

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Applying Porter in Practice

Let’s ground this further in business history.

Applied Well: Coca-Cola vs. Pepsi
Despite intense rivalry, both Coca-Cola and Pepsi have maintained strong margins by managing the other forces with precision. They’ve limited the bargaining power of buyers through brand loyalty, diversified against substitutes with bottled water and tea brands, and kept suppliers in check through global contracts and scale.

They succeeded not by avoiding competition, but by neutralizing the other forces that erode profitability.

Misapplied: Blockbuster
Blockbuster focused too narrowly on its rivalry with Hollywood Video. It failed to recognize that the real threat was substitution, streaming services like Netflix. By the time Blockbuster reacted, the substitute had become the standard. Blockbuster faced a classic Innovator’s Dilemma and lost sight of what was strategically required to win.

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Where Is Your Profit Leaking?

Everything up to this point has explored how the Five Forces show up in today’s business landscape and why they still matter. But frameworks alone don’t produce results. Operators need to turn theory into pattern recognition and then actionable execution. That starts with asking a grounded question: where, exactly, is your profit leaking? This section reframes the Five Forces into something more usable.

• Are your margins getting squeezed by suppliers?
  ✅ What critical inputs could you renegotiate, internalize, or diversify?
  ✅ Where are you overly reliant on one vendor or category?

  ✅What critical inputs could you renegotiate, internalize, or diversify?

• Are you constantly undercut by newer, cheaper entrants?
  ✅ What switching costs, loyalty hooks, or brand trust can you introduce?
  ✅ Where are you vulnerable to price-based disruption?

  ✅ What barriers or switching costs could you build that they can’t match?

• Are your customers shopping around with no loyalty?
  ✅ What specific value or outcomes do you consistently deliver that no one else does?
  ✅ What systems can you build to reinforce retention and trust?

  ✅ What are you doing to deepen trust, increase retention, or differentiate meaningfully?

• Are alternatives delivering similar value with less effort?
  ✅ Where can your offer be faster, simpler, or more aligned to current buyer preferences?
  ✅ Are you regularly scanning for new substitute models outside your category? ✅ Where can you improve your offer, experience, or delivery model to compete?

  Once diagnosed, take action:

  ✅ Have you mapped the source of pressure for each force in your business?
  ✅ Are you tracking changes quarterly to see where and how your greatest risks are shifting?

  ✅ Adjust pricing and contracts if buyers hold too much power

  ✅ Negotiate volume deals or explore vertical integration if suppliers are squeezing margins

  ✅ Strengthen switching costs and customer experience if new entrants threaten ✅ Specialize or reposition if substitutes are encroaching

Porter gives you a lens. It’s up to you to decide what to focus it on.

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How Consultants Use (See & Modify) Porter

Porter’s Five Forces are still taught in nearly every strategy curriculum, but they rarely appear in their pure form in high-stakes consulting work. Firms like McKinsey, Bain, and BCG use them as starting points, not end points.

In practice, strategy isn’t about checking boxes, it’s about creating leverage.

Consultants often pair Porter with tools like McKinsey’s 7S Framework or the BCG Matrix. They blend external analysis with internal readiness, portfolio thinking, and change capacity. Strategy doesn’t lives in actionable execution and must be able to adapt to quickly changing nature of all the market our companies inhabit.

Structure alone doesn’t win. Execution wins. Capability wins. Change management wins.

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Strategy Needs More Than One Lens

Porter gave us structure. But operators need additional layers:

• Resource-Based View: what makes you strong internally

• Dynamic Capabilities: how quickly you can evolve

• Platform Strategy & Co-opetition: how you grow with others

Each complements Porter. Together, they form a modern playbook.

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Beyond the Battlefield: The Blue Ocean Question

Porter believed in analyzing the structure of competition. But what if the most powerful strategy isn’t found in the structure at all, but in walking away from it entirely?

That’s the question posed by W. Chan Kim and Renée Mauborgne in Blue Ocean Strategy, a direct and deliberate challenge to Porter’s worldview. Where Porter teaches you to win in existing markets, Blue Ocean teaches you to build new ones.

Don’t fight for a bigger slice of the pie. Bake a new one.

They argue that lasting success comes not from beating the competition, but from making it irrelevant, through innovation, reframing customer value, and reshaping boundaries.

Next week, we’ll explore how to leave the red oceans behind—and sail where no one else is.

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Here’s how to apply what you’ve just read to your business and operation:

Five Key Operator Takeaways

1. Use the Five Forces to Analyze Your Margin Leaks

✅ Map each force and identify where your margin is under threat
✅ Quantify impact: which force is costing you the most?
✅ Design an action plan to plug that leak

2. Stop Obsessing Over Competitors

✅ Shift focus to customer power, supplier leverage, and substitutes
✅ Rebuild pricing and value strategy around those forces
✅ Only track direct competitors when product overlap is high

3. Don’t Treat Strategy as Static

✅ Re-run your Five Forces analysis quarterly
✅ Add a column for how each force has changed in the last 6 months
✅ Build “optionality” into your ops plan (don’t over-commit)

4. Start With What You Do Best

✅ Map internal capabilities using the VRIN framework
✅ Align key hires and investments to strengthen these
✅ Use this to escape low-margin price wars

5. Look for Leverage Through Networks and Partnerships

✅ List your current collaborators and evaluate their strategic value
✅ Identify one new partner per quarter (distribution, tech, supply)
✅ Redesign your org chart or tech stack to reduce dependency on strong suppliers or buyers

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Next up: Scaling Down Blue Ocean Strategy

→ Forward this to a fellow operator, founder or builder who could be helped.

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John Brewton documents the history and future of operating companies at Operating by John Brewton. After selling his family’s B2B industrial distribution company in 2021, he has been helping business owners, founders and investors optimize their operations ever since. He is the founder of 6A East Partners, a research and advisory firm asking the question: What is the future of companies? He still cringes at his early LinkedIn posts and loves making content each and everyday, despite the protestations of his beloved wife, Fabiola, at times.