Tag Archives: Five Forces

Users Revolted: Net Neutrality to Win

The world has turned upside down:
This column is dedicated to the top managers of American business whose policies and practices helped ensure Barack Obama’s victory. The mandate for change that sounded across this country is not limited to our new President and Congress. That bell also tolls for you. Obama’s triumph was ignited in part by your failure to understand and respect your own consumers, customers, employees, and end users. The despair that fueled America’s yearning for change and hope grew to maturity in your garden.

Millions of Americans heard President-elect Obama painfully recall his sense of frustration, powerlessness, and outrage when his mother’s health insurer refused to cover her cancer treatments. Worse still, every one of them knew exactly how he felt. That long-simmering indignation is by now the defining experience of every consumer of health care, mortgages, insurance, travel, and financial services—the list goes on.

Obama’s Victory: A Consumer-Citizen Revolt, The election confirms it’s time for sober reappraisal and reinvention within the business community. If you don’t do it, someone else will, By Shoshana Zuboff

She identifies Apple as one of the few companies that has actually gotten it about how to do business, with its iPod and iTunes. As we’ve previously seen, this is because Apple gets it that Porter’s Five Forces model of competition breaks when open distribution channels are introduced.

It appears that Mark Anderson, Odile Richards, and William Gibson were right: “See-bare-espace… it is everting.” Cyberspace just elected a president of the United States. And he knows it.

Obama has been publicly in favor of net neutrality for at least a year. And he has not backed off. He’s put Susan Crawford and Kevin Werbach in charge of reviewing the FCC. Now that’s cyberspace inverted indeed!

Porter’s Five Forces and Net Neutrality: What If Distribution Channels are Open?

brief.jpg Here’s a take on why telcos so adamantly oppose net neutrality:
The eager and almost rabid application of Porter’s “Five Forces” (Supplier Power, Customer Power, Threat of New Entrants, Threat of Substitute Products, Industry Rivalry) to technology products and services has bred an entire generation of MBAs in marketing positions dedicated to developing and maintaining closed systems and closed hardware platforms. This is particularly egregious in the case of business models that are effectively based on distribution channels. In conventional analysis there is nothing wrong with making your living on distribution channels. Remember, that in 1979, when Porter developed the Five Forces framework, distribution channels were highly expensive to create and maintain and, owing to these costs, constructing them effectively presented a significant barrier to entry. Your product didn’t even have to be particularly good, because the threat of substitutes was reduced via the difficulty and expense of the competition actually getting those substitutes (however good they might be) to your customers. Suppliers, if they wanted access to your customer base as a proxy to sell their raw materials, had to go through you. New entrants had to build an entirely new distribution channel. Customers were stuck. You owned the market. But you had to guard this distribution channel carefully. And you had to make sure you hadn’t forgotten something simple and critical. That’s not part of a conventional Porter analysis. But why would it be? Conventional distribution channels are quite physical, antique and boring.

— The Five Forces/Circles of Hell, a Private Equity Professional, Going Private, 27 April 2008

The article goes on to detail how Blockbuster used the old Porter model of closed distribution channels and Netflix used an existing open distribution channel: the U.S. Postal Service.

To spell out the telco connection:

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