Aluminum producer Alcoa first ascended to the Dow Jones Industrial Average in 1959. In 2002 it was valued at $32.5 billion. Its competitor, Australian BHP, was valued at $59 billion. In the intervening 5 years, BHP’s valuation has more than tripled to $185 billion while Alcoa’s has dropped to $26 billion. This is not the former industry giant’s only overwhelming competition: it stretches from Switzerland and Moscow to Rio De Janeiro. What happened?  As the WSJ’s Mark Berman puts it, “…rising commodity prices, geographic quirk and meddlesome home governments [have] made this American stalwart into a pipsqueak.” Is it more profitable to fight, succumb, or hang back to hope they fail on their own?

Dilemmas such as these, where a company such as Alcoa or Kodak continuing to do very well what it has done for years, is dramatically overtaken by oustide forces, are evidence of the strategic imperative. The imperative to not be satisfied simply with continuing to do even better than we do now, the imperative to explore the meaning of the marketplace and the broader context within which we do business. 

Taking a queue from the growing volatility of the global economy, Harvard’s famous strategy guru Michael Porter has issued an update of his Five Forces model reflecting on what he has learned over the last decades to enhance the model. The article is accompanied by an illuminating and relatively short video with HBR talking about the Five Forces and how one applies it in real life. 

If you’ve never heard of the model, or your memory is just a bit fuzzy on how to apply it to your own organization, go take a look. The trick is to act before your fortunes sink.