Porter's five forces

A framework for judging how profitable an industry can be, based on the bargaining power of suppliers and of buyers, the threat of substitutes and of new entrants, and the intensity of rivalry.

The insight the framework carries is that industry structure sets the ceiling on returns, and a good company in a bad industry usually loses to a mediocre company in a good one. Airlines have had brilliant operators and terrible returns for eighty years because every force runs against them: aircraft makers and airports have power, customers buy on price alone, capital keeps arriving, and the product cannot be stored. Software has had mediocre operators earn extraordinary returns because most of the forces run the other way.

Applied badly it becomes a five-box template filled with adjectives. Applied well it becomes a set of measurements: supplier concentration, customer switching costs, entry capital, and the history of new capacity.

Score each force with a number you can defend.