Why I Now Tell Clients to Map Their Value Chain Before Five Forces

I'm going to say something that will get me uninvited from a few strategy conferences: most industry analyses are out of touch with how value is actually created. We've been told for decades to begin with Porter's Five Forces, and I've dutifully taught that framework, but the more I work with real companies, the more I believe the supply chain is where the action is—and the Five Forces, as useful as they are, can blind you to the real threats and opportunities hiding in your value chain.

Supply Chain Is the New Battleground

Consider the global insights industry, where I spend much of my time. ESOMAR's Global Market Research 2024 report valued the whole thing at over US$140 billion in 2023, and by the end of 2024 it was expected to surpass US$150 billion (ESOMAR via Research World). That's a huge pie, but what's striking is how it's sliced: in 2024, the traditional market research sector was only about US$56 billion, while the research software sector was US$62 billion and the reporting sector US$35 billion (ESOMAR via Research World (GMR 2025)). The software piece is growing at 11.5%, the reporting piece at 8%, and the mature research sector at just 4.8% (ESOMAR via Research World (GMR 2025)).

Now, if you ran a Five Forces analysis on the market research industry, you might conclude that supplier power is low—there are plenty of survey platforms, data sources, and panel providers. But look at the supply chain: the software layer is capturing the growth and the margins. The researchers who are being squeezed are the ones who sit in the middle, assembling reports from data they don't own, using tools they don't control. That's a supply chain problem, not a competitive rivalry problem. And it's why I've started my analyses with a value chain map, not a force diagram.

Why Value Chain Analysis Reveals What Five Forces Misses

Michael Porter introduced the value chain in his 1985 book, and it's still the most underused tool in strategy (IBM Think). The idea is simple: break your firm into primary activities—inbound logistics, operations, outbound logistics, marketing and sales, service—and support activities like procurement and technology development (IBM Think). The point is that competitive advantage isn't some abstract market position; it's built by performing these activities more efficiently or differently than rivals.

When you map your value chain, you start to see where the bottlenecks are. In the insights industry, the bottleneck is data access. If you're a full-service research firm, your inbound logistics is literally the data you purchase or collect. If a handful of platforms control the distribution of that data, you're at their mercy. That's supplier power, yes, but it's a specific kind that shows up on a value chain map as a dependency, and it's easier to see how to break it—perhaps by building proprietary data assets or by partnering with a complementor.

The Sixth Force: Complements Are the Hidden Hand

Brandenburger and Nalebuff have long argued that complements deserve equal footing with substitutes, and they propose a sixth force (Brandenburger & Nalebuff (Yale SOM paper)). I used to dismiss that as academic hair-splitting. Now I think it's essential. In the insights industry, the research software sector is a complement to the research services sector: better software makes researchers more productive, and more researchers create demand for better software. But if the software becomes so good that clients can do the analysis themselves, the complement flips into a substitute (ESOMAR via Research World (GMR 2025)).

Here's a concrete scenario: a mid-sized market research firm in the US, serving consumer goods clients, generates about 65% of its revenue from full-service projects (ESOMAR via Research World). Its clients are increasingly using self-serve platforms that cost a fraction of a custom study. The firm's Five Forces analysis would show high buyer power and high threat of substitutes. But a value chain analysis would show that its real value lies in the interpretation and recommendations—the service activity. If it can codify that expertise into a proprietary tool, it shifts from being a commodity supplier to a complementor. That's the kind of insight you only get when you trace the flow of value from raw data to decision.

Concentration Matters: HHI in the Supply Chain

I'm not saying Five Forces is useless. It's a brilliant lens for understanding the competitive structure. But it doesn't tell you where in the chain the power is concentrated. For that, I turn to the Herfindahl-Hirschman Index (HHI), which the US Department of Justice uses to measure market concentration (US DOJ Antitrust Division). The HHI is the sum of the squares of market shares, approaching zero in fragmented markets and 10,000 in a monopoly (US DOJ Antitrust Division).

Now, apply that to your supply chain. If you're a small research firm, your upstream suppliers—data providers, panel companies, software platforms—might have an HHI that's off the charts. The US digital advertising market, for instance, hit $258.6 billion in 2024, up 14.9% year over year (IAB/PwC). That's a lot of money flowing through a few ad tech platforms. If you're in the business of consumer insights, you're probably buying some of that data, and you're paying whatever those platforms charge. A Five Forces analysis would say supplier power is high, but it wouldn't tell you that the HHI in that upstream market is over 1,800, which the DOJ presumes is highly concentrated (US DOJ Antitrust Division). That's a red flag for your margins.

Counterargument: Five Forces Is Still the Gold Standard—Sort Of

I know what the Porter loyalists will say: the Five Forces framework, as Porter himself argued, already captures supplier and buyer power, and complements affect profitability only through the five forces (Harvard Business Review (Porter 2008)). That's true in theory. But in practice, I've seen too many analysts check the box on supplier power and move on without ever identifying who the critical suppliers are or how to reduce that power. The framework is a snapshot of an industry at a moment, but supply chains are dynamic. The 2023 EU market definition update, the first in over 25 years, didn't change the basic idea that the relevant market is about substitutability (European Commission), but it reflects that markets shift. A value chain analysis forces you to look at the actual flow of goods and services, and that's where the dynamic threats live.

What I'd Actually Do

So here's my recommendation: stop starting with the Five Forces. Start with a value chain map of the industry you're analyzing. Identify the primary and support activities, then locate where the value is being created and where it's being captured. Use the HHI to measure concentration at each stage, and pay special attention to complements—they can be your best friend or your worst enemy. Then, and only then, run the Five Forces to understand the competitive dynamics that remain.

For a concrete example, imagine you're a consultant advising a traditional market research firm that's losing share to software platforms. A value chain analysis would show that your client's outbound logistics—how it delivers insights—is inefficient. Instead of fighting the software wave, help them become a complementor by building an interface that plugs into the dominant platforms. The research software sector is growing at 11.5% and is already the largest slice of the insights industry (ESOMAR via Research World (GMR 2025)). That's where the money is. If you're stuck in the middle, as Porter would say, you're doomed (University of Central Florida Pressbooks). But if you reposition yourself as an essential component of the new supply chain, you're not stuck—you're essential.

I'm not saying abandon Porter. I'm saying use the right tool for the job. If you want to understand why an industry is profitable, Five Forces is fine. If you want to know how to make money in it, you need to understand the supply chain.

Sources

• ESOMAR via Research World (GMR 2025) - https://researchworld.com/articles/inside-the-153bn-insights-industry
• 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
• IBM Think - https://www.ibm.com/think/topics/value-chain-analysis
• US DOJ Antitrust Division - https://www.justice.gov/atr/herfindahl-hirschman-index
• Harvard Business Review (Porter 2008) - https://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy
• European Commission - https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:C_202401645