Porter’s Five Forces In The Internet Age

I’ve been a reader of author Michael Porter’s strategic thinking output since his noted article in the Harvard Business Review in 1979 (pdf: How Competitive Forces Shape Strategy). Since that time, Porter has penned numerous seminal articles and books on strategic thinking.

I’ve wondered how his pre-Web thinking would stand up in a world where business strategy has been monumentally affected by the Internet. He answers that question in this Harvard Business Review interview on YouTube:

Porter maintains that the Web is not one of the Five Forces in and of itself (see diagram below). However, the Web has dramatically accelerated and deepened the five forces which has meant strategy now takes places in a much more dynamic environment than in 1979 when he developed his ideas.

Each of these forces has been strongly enabled by the Web. The bargaining power of buyers and suppliers has been exponentially increased by making pricing transparent. The barriers to entry in many businesses have been substantially lowered as firms can now compete in a virtual environment. Substitute products can now be found with ubiquity all made possible by the extensive search functions of the Web.

However, even with all the changes the Internet has brought, the beauty of Porter’s thinking is that it is still as wonderfully useful today as a planning framework as it was almost three decades ago.