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.
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.