Porter's Four Corners

Michael Porter, a professor at Harvard Business School, published his theories on how competitive forces shape strategy in the Harvard Business Review of 1979 and subsequently in his book, Competitive Strategy (1980) in which he described the Four Corners  model.

The model identifies four elements that give insights into what motivates competitors to take certain actions. In the north-west corner sit the “drivers”. These are the things that motivate a competitor to act in a certain way. In the south-west corner are the “managerial biases and beliefs” of a competitor. In the north-east corner are the “strategies” of the competitor. In the south-east corner are the “capabilities” of the competitor including all its resources. These four corners come together to result in predicted actions competitors will take given certain pressures.

Competitive intelligence is vital when carrying out a Four Corners analysis.

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In applying Porter's Four Corners it could be helpful to think of how a soccer team assesses their position against the competition. The manager of the team would want to understand the drivers that are motivating competing clubs – how hungry are they to win, what are their goals? They would also want to figure out the assumptions that the competing clubs have about their competition. Are they arrogant in believing that they are the best or do they have a realistic view of their strengths and weaknesses?

And then the manager of a soccer club should look at how other clubs are behaving. They would need to assess competitor teams' strategies and look at their expenditure on players and stadia. They would analyse in detail their successes and failures in recent games they have played. They would also look at the financial strengths of competing clubs and their ability to spot and recruit new talent.

It is no different in business. A company needs to understand what is driving competitors and what the culture of the leadership team within those competitors. A company needs to understand the behaviour of competitors and their capabilities. It is this deep understanding of the competition that results in a winning formula.

There are many visible clues in the marketplace as to what motivates the competition. The behaviour of a company is a good indication of its motivations. Is it chopping and changing all the time or is it settled in a strategic direction? Behaviour is a more solid indication of a company's direction than any words that it (or journalists) may spout.

Some things to think about:

• How deep is your knowledge of the competition? In particular, how much do you understand about what motivates your competitors and their goals?

  
  

• What mechanisms do you have in place that track the behaviour of your competitors? What are you learning from these behaviours?

  
  

• What are the strengths and weaknesses of the competition? Remember it is easier to take advantage of competitors' weaknesses than it is to fight them on their strengths.