Digital tech not only shapes experience. It also reshapes business models.
Big data. The cloud. Mobile capability. The Internet of Things. It’s impossible to ignore how much digital technologies change how we interact with each other and with businesses we patronize.
Entire industries are facing upheaval. The balance of power between entrepreneurial challengers and the incumbents they seek to defeat is changing. Digital technologies have lowered barriers to entry, increased the bargaining power of the consumer, made new business ecosystems necessary, and thrown established industry rivalries into flux.
Less appreciated but no less important is how much new technologies are changing traditionally accepted strategic management models. Companies are internally struggling to build capabilities in order to compete.
Using the “force”
Michael Porter’s seminal work on competitive strategy, for example, and his model of the five forces shaping competition are more than three decades old. They are taught in the country’s top business schools, and they are firmly embedded in C-suites and boardroom decision making worldwide.
But how is the digital revolution creating a fault line in the bedrock built from traditional strategic management models like Porter’s? Do the innovations of digitally native companies like Amazon, Netflix, and Pandora and those of Apple with its continuously innovative iTunes service mean that competitive models like Porter’s no longer apply? Could there be another competitive force evolving within an organization that leverages the business ecosystem to tip the scales completely for new entrants?
A new business model for competitive strategy
What of new entrants into traditional markets, companies like Uber, Tesla, and Airbnb? If digital strategies are game-changing for an industry and barriers to entry are falling, don’t traditional models for competitive strategy need to be updated as well? Who will challenge Amazon in the future? Walmart?
I’m planning to tackle these questions in some mini case studies in the upcoming weeks here on our Digitally Cognizant blog. I’ll compare companies like Amazon, Apple, Google, and Netflix to some of their more traditional competitors to see what’s forcing this new strategic change.
Michael Porter continues to write and speak about competition and strategy today. I would like to revisit my copy of Porter’s Competitive Strategy and contribute to his next release of how the five-forces model might be updated for this digital era. Maybe you can join in on the discussion with me. Drop me a note.
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