Is Porter’s Five Forces Model Still Enough?

Imagine you're a strategist at a mid-sized software firm. You've just run a Porter's Five Forces analysis on your industry, and the results are grim: high rivalry, powerful buyers, and a credible threat of substitutes. The model tells you profitability is under pressure. But something feels off. Your product is thriving, not because of the five forces, but because a complementary hardware device has made your software more valuable. The model didn't capture that. You're not alone. As market trends shift toward ecosystems and platforms, many practitioners are questioning whether the classic framework still captures the full competitive picture.

We believe it doesn't. For a working analyst, the question isn't whether to use Porter—it's whether to stop at five. The answer, we argue, is no. The five forces remain essential, but they are incomplete without a sixth: complements. This isn't just academic; it's a practical tool for making better strategic decisions in markets where value increasingly depends on what others build around your product.

Why the Five Forces Still Matter

Porter's Five Forces, introduced in his 1979 Harvard Business Review article and refined in 2008, is the bedrock of industry analysis (Harvard Business School). It tells you how the economic value an industry creates gets divided: rivalry among existing competitors can drain it, suppliers and buyers can bargain it away, and the threat of new entrants or substitutes can constrain it (Harvard Business Review (Porter 2008)). The stronger these forces, the lower the industry's profit potential (CFA Institute).

That's a powerful lens. It's why we still teach it and why it still guides many investment decisions. The 2008 update added nuance, identifying seven sources of entry barriers, from supply-side economies of scale to restrictive government policy (Harvard Business Review (Porter 2008)). It also clarified that substitutes perform the same function by a different means—videoconferencing is a substitute for travel (Harvard Business Review (Porter 2008)). These insights are as relevant today as they were decades ago.

Consider the US digital advertising market, which hit $258.6 billion in 2024, up 14.9% year over year (IAB/PwC Internet Advertising Revenue Report). A five-forces analysis would flag intense rivalry among platforms and the threat of ad-free substitutes. That's true. But it would miss the complementary role of data providers and measurement tools that make digital ads more valuable. That's the gap.

The Case for a Sixth Force

Porter himself argued that complements are not a sixth force; their effect runs through the five forces (Harvard Business Review (Porter 2008)). But Brandenburger and Nalebuff, in their Yale working paper, make a compelling counterargument: substitution and complementarity are symmetric 'up to a sign change,' so complements should be treated on the same footing as substitutes (Brandenburger & Nalebuff (Yale SOM paper)). They conclude that including complements as a sixth force makes the framework more logically complete and more valuable (Brandenburger & Nalebuff (Yale SOM paper)).

We side with them. Here's why: complements can raise customers' willingness to pay, effectively increasing the size of the pie. A hardware industry needs a software industry to flourish, and vice versa (Brandenburger & Nalebuff (Yale SOM paper)). When you ignore complements, you miss how value is co-created. In the software example above, the complementary hardware didn't just reduce buyer power—it made the product more attractive, shifting the competitive balance in your favor.

The co-opetition view—that business interactions combine competition and cooperation—fits the reality of many markets better than the exclusively competitive framing of five-forces analysis (Brandenburger & Nalebuff (Yale SOM paper)). As a practitioner, you need to see both sides. A six-force model gives you that.

Applying the Sixth Force in Practice

How do you actually use this? Start by mapping your complements. Ask: who makes products or services that, when used with mine, increase its value? Then assess their power. If you're a hardware maker, your software complementor might be essential; if they're scarce, they hold power over you. Conversely, if you're a platform, your complementors might be numerous and replaceable, giving you the upper hand.

Let's ground this in a concrete example. The global insights industry—the market research business—was estimated at over $150 billion in 2024 (ESOMAR via Research World (GMR 2025)). Within it, the research software sector grew about 11.5% in 2024, while the mature market research sector grew only 4.8% (ESOMAR via Research World (GMR 2025)). A five-forces analysis of the research sector might focus on rivalry among full-service firms and client bargaining power. But the real story is the complementarity between software tools and traditional research services. The software doesn't just substitute for some tasks; it enhances the value of human analysis. Firms that recognize this—and partner with software providers—are better positioned than those that see only competition.

Another example: the consumer non-durables sector, which accounts for a significant chunk of market research spending (ESOMAR via Research World (client trends)). A brand manager analyzing the beverage industry would look at rivalry and buyer power. But the rise of health-tracking apps—a complement to beverage consumption? Probably not. But consider the complementarity between a beverage brand and a fitness app that tracks calorie intake. The app can drive brand awareness and loyalty. A six-force analysis would surface that opportunity.

What This Means for Your Next Analysis

So, should you abandon Five Forces? No. But you should expand it. We recommend a practical hybrid: run the five forces as usual, then add a sixth column for complements. Ask how each complement affects the other five. Does a strong complementor increase switching costs? Does it create network effects? Does it lower entry barriers for new players? This forces you to think dynamically, not just statically.

The CFA Institute itself recommends using both Porter's Five Forces and PESTLE to understand the competitive and external environment (CFA Institute). That's a good start. But we'd add: don't stop at five. The sixth force isn't just a theoretical nicety; it's a practical tool for spotting opportunities and threats that the classic model misses.

In a world where market trends increasingly point to ecosystems—think app stores, smart home platforms, and connected devices—the ability to see complements is a competitive advantage. As Brandenburger and Nalebuff argue, complements are essential to a logically complete framework (Brandenburger & Nalebuff (Yale SOM paper)). We agree. So the next time you're about to conclude that your industry is unattractive because the five forces are strong, pause. Look for the complements that might be changing the game. They could be the reason your industry is more profitable than the model suggests—or the reason it's about to become less so.

Sources

• Harvard Business Review (Porter 2008) - https://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy
• Brandenburger & Nalebuff (Yale SOM paper) - https://som.yale.edu/sites/default/files/2024-12/1-SYMMETRY-AND-THE-SIXTH-FORCE-THE-ESSENTIAL-ROLE-OF-COMPLEMENTS-Adam-Brandenburger-Barry-Nalebuff%202.pdf
• ESOMAR via Research World (GMR 2025) - https://researchworld.com/articles/inside-the-153bn-insights-industry
• IAB/PwC Internet Advertising Revenue Report - https://www.iab.com/research/iab-pwc-internet-advertising-revenue-report-full-year-2024/