Patricia
Hewitt seems to have got herself a good deal, paying Michael Porter a ‘mere’
£50,000 for his report on poor management. But who is the man behind the fee?
By Jane Lewis
In 1991, a Canadian financial commentator noted the country had been hit by
a highly contagious disease that seemed to afflict normally healthy chief
executives and politicians. The symptoms of ‘Porter Syndrome’ were
unmistakeable: "Victims rave on about competitiveness, strategy and
globalisation" and "show a trance-like compulsion" to hand over
millions of dollars to an owlish-looking Harvard professor called Michael
Porter.
Say what you like about Patricia Hewitt, but she certainly knows how to get
a good deal. While a host of other countries – including Thailand, India, New
Zealand and Portugal – have shelled out millions over the years to book the
professor, the Trade & Industry Secretary has managed to secure his input
on the weighty subject of the effect of poor management on productivity in
Britain for a mere £50,000. This is pocket money to a superstar of Porter’s
calibre, particularly since he is arguably the world’s leading authority on the
subject – at least in terms of scope. You’d be lucky to book him for less than
$200,000 (£124,500) a day on the conference circuit. And he earns millions more
each year from private consulting and book sales.
Porter first shot on to the scene in 1980, when he published his seminal
work Competitive Strategy – a groundbreaking redefinition of what strategy
should mean in business.
His trick was to combine the hitherto separate schools of management theory and
economics: he explained corporate strategy as a function of the marketplace and
showed how companies could use general economic rules to solve problems. You
only have to note the staying power of big ideas such as ‘competitive
advantage’ and ‘the value chain’ to see how formative his views became.
Porter swiftly emerged as an eighties management demi-god, along with Peter
Drucker and Tom Peters. Supporters claimed he was by far the most academically
rigorous of the three. Certainly his books were so stuffed with data tables,
rules and maths that, as someone once remarked, they made In Search of
Excellence read like a cheap romance.
In 1983 Porter, then just 35, was snapped up by the Reagan administration to
advise on industrial and economic policy. Some claim the resulting Reaganomics
could just have easily have been called ‘Porternomics’.
The 1990 publication of The Competitive Advantage of Nations, a detailed
study of eight of the world’s leading economies, marked a change of direction
for Porter, who emerged as a celebrated international guru, much in demand from
governments. The timing was fortuitous: within the narrower world of corporate
management theory, Porter’s star was waning as a new generation of strategists,
such as Gary Hamel and CK Prahalad sought to define a new ‘bottom up’ view of
strategy based on core competencies and intellectual capital.
The big idea
Porter later admitted he had fallen ‘off the radar screen’ in corporate
management. But the widespread take-up of his ideas about national
competitiveness more than made up for this. His big idea was the importance to
national economies of local ‘clusters’ of companies – often in the same
industry – competing against and servicing each other (Silicon Valley is the
obvious example of this). He argued that creating an environment where existing
firms can become clusters is the key to sustainable prosperity, because local
competition boosts innovation and therefore productivity – and this in turn
confers global advantage. Far from sapping local economies, therefore, the
process of globalisation actually boosted them.
Critics charge that Porter’s work is too schematic, and that his obsession
with developing ‘strategies’ can get in the way of common sense and pragmatism.
Some complain he is forever producing laundry lists of ‘forces’ and ‘factors’,
and passing them off as explanations. Others insist much of his work is hardly
original, and that he has a knack for stating the obvious.
Certainly his 1990 explanation of the UK’s economic woes – a gentlemanly
ruling class, lousy technical education and poor industrial relations – was
already a cliché. And sometimes he is just wrong: his early 1990s prediction
that the US would decline economically in the face of German and Japanese
dominance backfired spectacularly.
Unrivalled scope
But he still has plenty of fans. They claim that not only have his views on
the nature of competitive advantage stood the test of time, but that 25 years
at the corporate and international coalface have given him unrivalled scope.
"I have had extraordinary access to lots of data and I have this
extraordinary access to companies," said Porter. "I can ask pretty
much anything and they will give me the answer". It is this "broader,
holistic" view, which he claims gives him an edge. Certainly, few other
gurus would have the confidence or scope to compare the productivity of
managers in Catalonia, say, with those of South Africa.
Porter’s reputation as the international expert on productivity and
competition was cemented when he began chairing the annual Global
Competitiveness Report – a kind of hit parade of successful nations. In 1999 he
warned that Britain risked a further decline in productivity because of its
weakening "innovative capacity". This year, it seems a mighty
transformation has taken place. The 2002 report (published just a month after
Hewitt hired Porter to investigate Britain’s apparent productivity problems in
October) showed the UK making substantial headway.
Indeed, in Porter’s micro-economic competitive index, based on
"sophistication of company operations and strategy and the quality of the
national business environment", we leapt from seventh to third place.
Better still, the figures for company operations show that on a measure of
"reliance on professional management", the UK comes top out of 80
nations.
That kind of good news would be music to any government’s ear. Patricia
Hewitt may well be congratulating herself on £50,000 well spent.
Michael Porter’s CV
Background: Born in Ann Arbor,
Michigan, 55 year-old Porter is the son of a US army officer.
Education: Degree in
aeronautical engineering at Princeton; MBA Harvard Business School; doctorate
in economics Harvard University.
Career:
2002: Appointed to Harvard’s Bishop William Laurence
Professorship
2001: Co-formed Institute of Strategy & Competitiveness at
Harvard
1996: Relaunched his career as a corporate strategist
1990: Began career advising governments on national competition
issues
Mid-1980s: Co-formed the pioneering management consultancy,
Monitor
1983: Joined Reagan’s Commission on Industrial Competitiveness
1977: Promoted to associate professor at Harvard
He has also worked extensively on inner city initiatives.
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Publications: author of
countless books and articles on strategy. His classic, Competitive Strategy
(1988) is now in its 58th edition in 17 languages. Fans stretch across the
political spectrum: from Reagan to Clinton in the US; and from Peter Lilley and
John Redwood to Tony Blair and Gordon Brown in the UK.
Consultancy: Among others has
advised First Boston, AT&T, Procter & Gamble and Shell. Few countries
have escaped his attention.
