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

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

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)

Non Competitive Competitive

Non Core

Core

Spin off

Keep in house

Internal Cost and Capability Competitiveness

Stra

tegi

c Im

port

ance

Outsource

Out source or Join Venture

Bubble size represents revenue generated

Technology Positi

oning

Source: A.T Kearney

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”

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%)

What a DIG Does What a DIG Is NotScouts for new ideas and untapped potential

An R&D group dedicated to product and technological discovery

Scans the external environment for emerging technologies

A monopoly innovation function 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

P&G Distributed Innovation Group has increased the percentage of new product ideas from outside the company from 15% to 50%

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

How HP Perceived Itself How Microsoft Perceived HPCollaborative partnering mind-set – looks for the greater good

A non-player in services

Reinventing – trying to get more focused under new CEO’s leadership

Falling behind its competitors

Disciplined – takes a long-term, mature approach to evaluating market opportunities

Slow, bureaucratic – a laggard

Win-win partnering – actively seeks the other company’s wins

Unable to execute consistently and predictably

Flexible – looks for creative deals Conflicted sales strategies in the field

How Microsoft Perceived Itself How HP Perceived MicrosoftCompetitive, fast-moving, and entrepreneurial Excessively competitive and confrontational“Our products are changing the world in profoundly positive ways”

Controlling, paranoid and greedy

Center of the new economy “Win – don’t care” partnering mind-setFocuses on objectives and assumes others do the same

Focused only on the deal

Misunderstood: the world doesn’t realize what positive things the company does for everyone

Packaged software mentality – commoditize everything, even partnering

“The Eye of the Beholder”

Source: Harvard Business Review

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

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

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

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

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

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

Unique Products

Operational Efficiencies

Customer Services and Relationship

Access to information

Access to more suppliers

Greater freedom of choice

Competitor access to market information

Negative Impact on the Profitability

Reduced Profitability

The Positive aspect

• Fair competition

• Businesses would deliver what customers truly value

• Pressure to improve quality would increase

• Benefit to the customer would increase

‘Business fundamentals, indeed. Fundamentalism, no’

H u r r a H ’ s C r e a t i v i t y

H u r r a H ’ s C r e a t i v i t y

Credits

Sara ParveenUme KalsoomMariam MalikSadaf IwbalFahad SiddiquiAesha Shamshad Buttand Wardah Munir and all other subgroups.