Work has changed.
Once upon a time, in a land far, far away, career paths and employee education were safe, predictable, and worry-free. In exchange for loyalty and lifelong employment, the deal was that you surrendered autonomy. Thus, being an employee meant that you followed the rules, came in, did your job, and let the big wigs at the top of the hierarchy make the decisions and set the direction. What to do, how to do it, and when to do it would all be prescribed for you. If and when you became the boss, then you’d get to tell others what to do and how to do it.
When it came to employee development, the company also told you what to learn and what skills you needed to maintain. To facilitate this, the expenses were paid for, and the training took place on company time. So long as you joined a large organization, your career progression, development, and education would all be taken care of by someone else. As many industries used to be heavily regulated and safe from foreign competition, most business models stayed consistent and resilient from upheaval. Training classes, conferences, professional memberships, and advanced degrees were all par for the course over a long, long career. There was less to learn and more resources and time available to learn it in a simpler time.
However, things have changed over the last few decades-a lot.
The world has seen a sharp increase in the pace and scale of emerging global competition and, at the same time, a drastic acceleration in technology. To first survive, then thrive, incumbent organizations have adapted to become flatter, faster, and, as a result, more turbulent than ever before. The change in business models saw the old social contract between organizations and employees began to erode when downsizing became a way of life, and costs and headcounts were slashed to survive. These changes have meant that a job is no longer guaranteed for life AND no longer were employees seen as an investment or as value to be maximized but rather a cost to be minimized.
When previously, employees would stay with one organization for most of their career, it made sense for the employer to invest heavily in employee education and development- there would be a return on the investment. The company would invest in an employee and expect a return over several years of improved performance. Simultaneously, the employee would not expect an immediate pay increase but may receive closer consideration for promotions. However, with the new structure, employee training became another discretionary expense where management’s attitude has become, “Why invest in them if they’re just going to leave?” The puzzle, though, is that while companies have become more reluctant to pay for employee training, professional work has also become more specialized, and skills require constant upkeep. To illustrate the scope of the challenge, in a survey of executives by PWC this year (2020), eighty percent of CEOs now believe the need for new skills is their most significant business challenge.
On the one hand, automation and new competition are threatening many existing jobs- A study published by the Organization for Economic Co-operation and Development in 2018 estimated that 46 percent of all jobs have at least a 50 percent chance of being lost or considerably changed. Many older, long-established employees are discovering their skills, and jobs are becoming obsolete. At the same time, many young graduating from college find themselves unemployed and unemployable as college programs are disconnected from in-demand job skills. The industrialized world faces a severe skills crisis as there is a severe shortage of qualified talent for the new digital economy. In short, companies are looking for employees who have the talent, skills, and training to get shit done.
This research reflects the bright side to the skills dilemma- the risk/reward scale has shifted in favor of employees. In today’s environment, employees who take learning and their skills seriously can see an immediate and ongoing increase in salary and career progression. Demand for highly-skilled employees has increased, and competition (supply) has decreased since staying relevant now requires more effort and attention than it did before. The rewards are immense for those who can get learning right and make it part of their value offering.
So, what is one to do? How can we identify where the opportunities and pitfalls lay? How do we assess our unique value and contributions in the marketplace?
The one tool that all professionals should use to assess their career is Porter’s Five Forces.
Porter’s Five Forces is a tool that was created by Harvard Business School professor Michael Porter, to analyze an industry’s attractiveness and likely profitability. Since its publication in 1979, it has become one of the most popular and highly regarded business strategy tools.
Porter recognized that organizations likely keep a close watch on their rivals. Still, he encouraged them to look beyond the actions of their competitors and examine what other factors could impact the business environment. He identified five forces that make up the competitive environment and which can erode your profitability.
Although the tool was initially developed for organizations, it is just as useful for the professional in assessing their career. We are all entrepreneurs at heart.
While we hope that careers are guided by loyalty, the hard truth is that you must continuously assess and reassess to ensure that you have the skills, capabilities, and relationships that people will pay you for.
Work has become more service-oriented. It’s about the unique value you can offer, not how many widgets you can produce in a standardized assembly line. It is not enough to be good at what you do but to do it in an environment where market forces work in your favor.
Understanding Porter’s Five Forces and how they apply to your career can enable you to adjust your career strategy to make better use of your time/energy/resources to generate higher earnings and personal satisfaction.
The essence of career strategy is choosing to perform activities differently from rivals to achieve higher income/profits.
Porter’s 5 Forces
Figure 1 — Porter’s Five Forces- From “How Competitive Forces Shape Strategy” by Michael E. Porter, March 1979. Copyright © 1979 by the Harvard Business School Publishing Corporation.
1. Competitive Rivalry
The first of the five forces refers to the quantity and strength of competitors and their ability to take market share. The more significant the number of competitors, along with the number of equivalent products and services they offer, the lesser the company’s power. Suppliers and buyers seek out a company’s competition to offer a better deal or lower prices. Conversely, when competitive rivalry is low, a company has greater power to charge higher prices and set deals to achieve higher sales and profits. In markets with lots of rivals, suppliers and buyers can go elsewhere if they feel they’re not getting a good deal. Where competitive rivalry is minimal, and no one else is doing what you do, then you’ll likely have a strong position and healthy profits.
From the lens of the professional:
To determine the degree of competition:
· Do you compete with lots of other people with similar levels of education, experience, and achievement?
· Does your industry/role offer the potential for differentiation?
· Are there many job-seekers compared to available roles in the industry?
· Are there high barriers to leaving? (few jobs where skills can be transferred)
How to improve the competitive rivalry in your favor:
· Differentiate your skills and knowledge from others. Create a unique value proposition that is not easily copied.
· Change your location or industry so that you have fewer rivals. Instead of the big city, consider overlooked markets.
· Demonstrate leadership in identifying and solving problems that others live with.
· If differentiation isn’t possible, identify career paths where most of your skills and experiences can transfer.
2. Supplier Power
Supplier power is the ease and ability of suppliers to increase their prices. It is affected by the number of suppliers of key inputs of a good or service, how unique these inputs are, and how much it would cost a company to switch to another supplier. The fewer suppliers to an industry, the more a company would depend on a supplier. As a result, the supplier has more power and can drive up input costs and push for other trade advantages. When there are many suppliers or low switching costs between rival suppliers, a company can lower its input costs and enhance its profits. The more choices an organization has, the easier it will be to switch to a cheaper alternative.
From the lens of the professional:
To determine the degree of supplier power:
· Assess how crowded and non-differentiated your role is. Is your work commoditized and standardized? Are you easily replaceable with minimal business disruption?
· Can and do employers shop around for talent at the lowest price? Is high turnover accepted?
· Are there many job-seekers compared to roles in the industry?
How to increase supplier power in your favor:
· Differentiate your skills and knowledge from others. Create a unique value proposition that is not easily copied. Take on challenges that others can’t or won’t approach.
· Change your location or industry so that you have fewer rivals.
· Demonstrate leadership in identifying and solving problems that others live with.
· Document your achievements and the value that you add. Bring this information to career discussions with management.
3. Buyer Power
Buyer Power is the ability of customers to drive prices lower, or their level of power is one of the five forces. It is affected by how many buyers or customers a company has, how significant each customer is, and how much it would cost a company to find new customers or markets for its output. A smaller and more powerful client base means that each customer has more power to negotiate for lower prices and better deals. Ask yourself how easy it is for buyers to drive your prices down.
From the lens of the professional:
To determine the degree of buyer power:
· Assess how many employers there are and how many similar professionals they hire.
· Assess who determines price (salary and benefits). Are employees strong enough to dictate terms?
· Assess if employers have high switching costs between employees.
How to decrease buyer power in your favor:
· Emphasize rarity in skills, ability, and relationships.
· Explain how you will decrease the buyer’s hiring costs and risks.
· Look for opportunities where you are uniquely qualified and are the only viable choice.
· Let the employer make the first offer in terms of salary/benefits to gauge buyer power. Research to understand each end of the range and where you fall.
4. Threat of Substitution
The threat of substitution occurs when Substitute goods or services that can be used in place of a company’s products or services pose a threat. Companies that produce goods or services for which there are no close substitutes will have more power to increase prices and lock in favorable terms. When close substitutes are available, customers will have the option to forgo buying a company’s product, and a company’s power can be weakened. The threat of substitution is a likelihood when your customers identify a better way of doing what you do. If a substitution is easy and cheap, it will weaken your position and threaten your profitability.
From the lens of the professional:
To determine the degree of substitution:
· Is the work you do subject to automation through RPA and other automation tools?
· Can the work you do be improved/automated through tools that you don’t use, like Power Query/Power BI.
· Is the work you do easily outsourced? Can someone do an equally good job somewhere else for a much lower price?
How to decrease the threat of substitution in your favor:
· Get ahead of the technology curve and be the one who introduces automation/analytical tools and volunteers to implement them. Otherwise, you may be collateral damage when someone else identifies and implements these tools, and your role is redesigned, eliminated, or transferred.
· Seek to rise in the value chain. Do highly valuable work, which requires a mix of skillsets earned over time through formal education and experience and is not standardized.
· Create a unique brand. Do what others aren’t to emphasize your value. Be easy to find on Google and showcase your work, writing samples, and videos demonstrating your passion for your career.
5. Threat of New Entry
The threat of a new entry exists when an organization’s power is affected by the force of new entrants into its market. When new entrants charge less money and require less time to offer a similar product/service than established competitors, the new entrant can take market share. An industry with strong barriers to entry is ideal for existing companies within that industry since the company would be able to charge higher prices and negotiate better terms. If it takes little money and effort to enter your market and compete effectively, or if you have little protection for your key technologies, then rivals can quickly enter your market and weaken your position. If you have strong and durable barriers to entry, you can preserve a favorable position and take fair advantage.
From the lens of the professional:
To determine the degree of substitution:
· New graduates will always be there. Assess the quantity and skill level of new graduates entering the market. Assess how easy it is to get a foothold in your industry or role. If they can do what you do, but better, faster, and cheaper, you’re in trouble.
· Assess the importance of permits, licenses, and other certifications to advancing or gaining employment in the industry.
How to decrease the threat of new entrants in your favor:
· Demonstrate mastery in your career with a combination of skills, experiences, and relationships that will require a newcomer an equal amount of time to draw parity to.
· Exhibit maturity and leadership.
· Offer to coach and guide recent graduates to demonstrate the power dynamics and learn from your new competition. Understand what tools and technologies they value; then learn them.
· Pursue credentials and licenses that require years of experience and difficult exams to obtain.
In Summary, use Porter’s 5 Forces to identify strengths/weakness:
· Develop skills and position yourself to develop a competitive advantage.
· Strengthen your skills/value proposition mix by continuously investing in yourself.
· Understand and improve on your weaknesses. Don’t become complacent.
Like what you see here? Check out my blog for more great content: https://benjaminwann.com/blog
Originally published at https://www.linkedin.com.
