Regulation Is the Sixth Force: Why Compliance Now Shapes Industry Analysis

In 2024, the global insights industry—the business of market research, data analytics, and reporting—surpassed US$150 billion, according to ESOMAR's Global Market Research 2025 report. That number is not just a proof of scale; it is a reminder that every dollar is earned within a web of rules that shift from one jurisdiction to the next. As working practitioners, we have seen too many otherwise rigorous industry analyses treat regulation as an afterthought, a PESTLE checkbox item, when in fact it has become a force as decisive as rivalry or buyer power. This article argues that any credible industry analysis today must treat regulatory impact as a primary lens, not a footnote.

The Regulatory Blind Spot in Classic Frameworks

Michael Porter's Five Forces—the threat of new entrants, substitutes, supplier power, buyer power, and rivalry—remains the go-to lens for understanding profit potential within an industry. Porter himself updated the framework in 2008, and it still carries weight in boardrooms and business schools alike (Harvard Business School). Yet the framework has a structural gap: regulation is not one of the five forces. It is implicitly buried in entry barriers, such as "restrictive government policy," but that is a narrow view. In industries like financial services, healthcare, and even our own market research sector, regulation does not merely raise the bar for entry; it dictates what products can be sold, to whom, and at what price. A PESTLE analysis—which does list political and legal factors—is often done as a separate exercise, but the CFA Institute recommends using both Porter and PESTLE together, and in our experience, that is where the disconnect begins. Analysts check off the PESTLE boxes and then return to the five forces, as if the legal environment were a static backdrop.

Regulation as a Sixth Force

We propose a direct fix: treat regulation as a sixth force, on par with the other five. This is not a radical departure; the idea of adding a force has precedent. Brandenburger and Nalebuff argued for complements as a sixth force, noting that they are symmetric to substitutes and that including them makes the framework more logically complete (Brandenburger & Nalebuff, Yale SOM paper). We extend that logic to regulation. Regulation is not just a constraint; it is a force that can create or destroy profitability. Consider the Herfindahl-Hirschman Index (HHI), the US Department of Justice's measure of market concentration. Under the 2023 Merger Guidelines, a market with an HHI above 1,800 is "highly concentrated," and a merger that increases the HHI by more than 100 points is presumed unlawful (US DOJ Antitrust Division). Those thresholds are regulatory decisions that directly shape competitive dynamics. An industry analysis that ignores the antitrust regulator's appetite for enforcement is flying blind.

The Market Research Industry Itself Is a Case Study

Our own industry is a perfect example of regulatory impact. The global insights industry is not just about surveys and focus groups; it is a data business, and data is now one of the most regulated resources on earth. The ICC/ESOMAR International Code, first established in 1977 and updated since, sets global self-regulatory standards covering everything from transparency to personal data handling (ICC/ESOMAR International Code). It is mandatory for ESOMAR members and endorsed by over 60 associations in more than 50 countries. But self-regulation is only the floor. The EU's competition law, for instance, defines relevant markets based on demand-side substitutability, and in February 2024 the European Commission adopted its first update to its market definition notice in over 25 years (European Commission). That change may seem arcane, but it alters how we define our own market, which affects how we measure our market share, which in turn affects how we analyze our competitive position. Ignore the regulatory overlay, and you might think you are in a different industry than you actually are.

Counterpoint: Is Regulation Just a Barrier to Entry?

The strongest counter-argument to our thesis is that regulation is already captured in Porter's force of "threat of new entrants." After all, Porter lists "restrictive government policy" as one of his seven sources of entry barriers (Harvard Business Review, Porter 2008). So why do we need a separate force? Fair point, but it only holds if you believe the only impact of regulation is to keep new players out. In reality, regulation also affects existing rivals. It can raise the cost of doing business for everyone, shifting the basis of competition from innovation to compliance. It can empower buyers by mandating transparency, or it can empower suppliers by creating licensing hurdles. In the market research sector, for example, the US Bureau of Labor Statistics projects employment of market research analysts to grow 7% from 2024 to 2034, much faster than the average for all occupations (Bureau of Labor Statistics). That growth is partly driven by regulatory demands—someone has to measure compliance, track consumer sentiment, and analyze policy impact. Regulation does not just block entry; it changes the very structure of the industry. Treating it solely as an entry barrier is a category error.

How to Build a Regulatory-Impact Overlay

So, what do we do differently in practice? We add a regulatory-impact overlay to every industry analysis. It is a simple three-step process. First, map the regulatory environment using a PESTLE-style scan, but go beyond the generic list. Identify the specific regulators, laws, and self-regulatory codes that touch your industry. For market research, that means the ICC/ESOMAR Code, but also GDPR-type privacy laws, sector-specific rules like those from the FDA if you work with pharma clients, and antitrust rules that define your relevant market. Second, assess how each regulation affects the five forces. Does it raise switching costs? Does it create compliance-based economies of scale? Does it alter the bargaining power of buyers or suppliers? Third, make a judgment call: is the net effect of regulation a moat or a tax? In our industry, the ICC/ESOMAR Code's emphasis on researcher responsibility actually elevates the status of trusted firms, acting as a quality signal that can be a competitive advantage (ICC/ESOMAR International Code).

Here is a concrete example from the numbers. In 2023, the market research sector within the broader insights industry was worth about US$54 billion, while the research software sector was about US$56 billion (ESOMAR via Research World, GMR 2024). The software sector grew at 12.4% that year, outpacing the more mature market research sector's 4.6% (ESOMAR via Research World, GMR 2024). Why? Because software tools that help companies manage data privacy, automate compliance, and analyze regulatory text are in high demand. A practitioner analyzing the insights industry who ignores the regulatory tailwinds behind research software would misread the growth. We have seen firms allocate resources to traditional survey research while the real expansion was happening in compliance-adjacent analytics. That is the cost of a regulatory blind spot.

The Stakes Are Rising

Regulation is not shrinking; it is expanding. The US digital advertising market hit a record $258.6 billion in 2024, up 14.9% year over year (IAB/PwC). That growth is happening under the shadow of privacy regulation, data protection rules, and antitrust scrutiny. In the global insights industry, ESOMAR projects the market will surpass US$160 billion by the end of 2025 (ESOMAR via Research World, GMR 2025). That growth is not a given; it depends on how the industry navigates a regulatory landscape that is increasingly fragmented and assertive. The analysts who succeed will be those who treat regulation as a dynamic force, not a static constraint. They will use the Herfindahl-Hirschman Index to anticipate antitrust risks, they will watch the European Commission's market definition notices to understand how their market is being redrawn, and they will read the ICC/ESOMAR Code not as a compliance checklist but as a strategic document. That is the mindset of a modern industry analyst.

Quick tip: Before you finalize any industry analysis, ask one question: "If the regulator changed one rule tomorrow, how would my five-forces map shift?" If you cannot answer that, your analysis is incomplete.

Bottom Line

In an era where data is regulated, markets are redrawn by antitrust guidelines, and self-regulatory codes define professional standards, the best move is to embed a regulatory-impact overlay into every industry analysis. Treat regulation as the sixth force, and you will see opportunities your competitors miss.

Sources

• Harvard Business School - https://www.hbs.edu/faculty/Pages/item.aspx?lang=en&num=34522
• 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
• European Commission - https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:C_202401645
• ESOMAR via Research World - https://researchworld.com/articles/inside-the-153bn-insights-industry
• ICC/ESOMAR International Code - https://iccwbo.org/news-publications/business-solutions/iccesomar-international-code-market-opinion-social-research-data-analytics/