The document discusses Porter's stance on business strategy and the internet from 2000. Porter believed that companies should: 1) Vertically integrate and develop competencies internally instead of shifting strategies for the internet. 2) Use the internet as a complementary tool only and not as an emerging infrastructure for economic activity. 3) The internet would eventually lose its importance as a source of competitive advantage as all companies adopt it. However, the document argues that Porter was wrong and that the internet enables new innovative business models, operational efficiencies, and improved customer relationships and services that provide long-term competitive advantages.

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© Copyrights Saad Munir. smsulari@gmail.com Click to see credits.

2. Porter’s Stance
•Highlighted in HBS article ‘ Strategy and Internet’; 2000
•Major Premise: Stick to the traditional ways of doing business
• Vertically integrate
• Use Internet as a complementary tool only
• Internet usage can only help connect PCs
• Networking can cause profitability to suffer
• There is no thing as a business model
• Internet would eventually cease being a source of competitive
advantage

3. Vertically Integrate
• Develop competencies internally
• The organizational goals haven’t changed, why should the ways
to achieve them change either
• Tried and proven ways to do things( if the company was
profitable before internet, why shift to internet)

4. Bubble size represents revenue generated
Core Out source or Join Venture Keep in house
Strategic Importance
Non Core Outsource Spin off
Non Competitive Competitive
Source: A.T Kearney Internal Cost and Capability Competitiveness

5. Unilever Outsources to Accenture
“The outsourcing programme is part of the
company’s 'One Unilever' initiatives to increase
leverage of its scale, improve its marketplace
competitiveness, deliver functional excellence, and
create a more competitive cost-structure allowing it
to focus on its consumers and customers”

6. Partnering
• Resources that are not owned can be used
• Co-create with customers and other outside sources
• Suppliers and distributors can contribute to cheaper
disruptive innovation
• Risk and cost reduction ( Revenue of top 5 contract
manufacturers aggregated $ 50 B, ROIC > 25%)

7. P&G Distributed Innovation Group has increased the percentage of new
product ideas from outside the company from 15% to 50%
What a DIG Does What a DIG Is Not
Scouts for new ideas and untapped An R&D group dedicated to product
potential and technological discovery
Scans the external environment for A monopoly innovation function
emerging technologies charged with enacting all stages of
the innovation process
Facilitates participation in idea forums A systems-development or
corporate-venturing unit
Acts as a centre of innovation expertise An office-bound centralized staff unit
that sets policy and monitors
performance
Publicizes promising innovations
Funds and serves as an incubator for
promising innovations
Source: Harvard Business Review

8. Why Partner ?
• Corporate alliances increases by 25% a year
• Alliances account for 33% of the company revenues
Revenue
from
Alliances
33%
Source: Harvard Business Review

9. “The Eye of the Beholder”
How HP Perceived Itself How Microsoft Perceived HP
Collaborative partnering mind-set – looks for the A non-player in services
greater good
Reinventing – trying to get more focused under new Falling behind its competitors
CEO’s leadership
Disciplined – takes a long-term, mature approach to Slow, bureaucratic – a laggard
evaluating market opportunities
Win-win partnering – actively seeks the other Unable to execute consistently and predictably
company’s wins
Flexible – looks for creative deals Conflicted sales strategies in the field
How Microsoft Perceived Itself How HP Perceived Microsoft
Competitive, fast-moving, and entrepreneurial Excessively competitive and confrontational
“Our products are changing the world in profoundly Controlling, paranoid and greedy
positive ways”
Center of the new economy “Win – don’t care” partnering mind-set
Focuses on objectives and assumes others do the Focused only on the deal
same
Misunderstood: the world doesn’t realize what Packaged software mentality – commoditize
positive things the company does for everyone everything, even partnering
Source: Harvard Business Review

10. The value of Internet
• Only a complementary tool
‘ Latest stage in the ongoing evolution of information
technology’
• Not and emerging infrastructure for economic activity
• Network for connecting desktop PCs

11. The TRUE value of Internet
• A complete infrastructure and architecture
• More effective than earlier communication media
• Used for transactions
• Market Research
• Recruiting
• Brings the company closer to the market [ better CRM, greater
customer insight]
• Allows for better governance

12. There is no such thing as Business Model
• The meaning of ‘business model’ has been misunderstood
• The term "Business model” is used more or less synonymously
with “business strategy”
• Historically strategist have not been concerned about business
models because each industry had a standard model

13. Internet based Business Models
• The core architecture of the firm
• how deploy relevant resources
• How to create differentiated value for its customers
• The business world is more customer driven these days which
necessitates the companies to have continuous interaction with them
• Internet allows for development of newer, more innovative types of
business models
• Allows greater speed of execution

14. Internet would eventually lose its importance
• All companies come to embrace internet, and the internet itself
neutralize as the source of competitive advantage.
• The competitive advantage increases from traditional strengths

15. Competitive advantage of Internet
• “As the current technological revolution continues to change the face
of the world market, only the businesses that are the fastest to
anticipate change and to participate in the revolution will prosper”
Southwick ; keynote speaker at the New Jersey Software Forum 2000
• Once the second generation of eMarkets gets going, the cost of entry
will go up“; Bill Van Emburg, director of Quadrix Solutions
• Internet must not be considered only with reference to its present
existence [ nobody had imagined any thing such as the internet and
so cannot anticipate any future advancements]
• Internet would provide a basis for continuous innovation
• Unique Products
• operational efficiencies
• customer services and relationships

16. Unique Products

17. Operational Efficiencies

18. Customer Services and Relationship

19. Negative Impact on the Profitability
Access to Access to more Greater freedom Competitor access to
information suppliers of choice market information
Reduced Profitability

20. The Positive aspect
• Fair competition
• Businesses would deliver what customers truly value
• Pressure to improve quality would increase
• Benefit to the customer would increase

21. ‘Business fundamentals, indeed. Fundamentalism, no’
HurraH’s Creativity

22. Credits
Sara Parveen
Ume Kalsoom
Mariam Malik
Sadaf Iwbal
Fahad Siddiqui
Aesha Shamshad Butt
and Wardah Munir and all other subgroups.
HurraH’s Creativity