Strategy and Internet

Topics: Internet, Electronic commerce, Barriers to entry Pages: 55 (13171 words) Published: December 24, 2012
Strategy and the Internet
by Michael E. Porter

Reprint r0103d

March 2001

HBR Case Study
Mommy-Track Backlash


Alden M. Hayashi

First Person
The Job No CEO Should Delegate


Larry Bossidy

HBR at Large
The Nut Island Effect:
When Good Teams Go Wrong


Paul F Levy

Strategy and the Internet


Michael E. Porter

Building the Emotional Intelligence
of Groups


Vanessa Urch Druskat and Steven B. Wolff

Not All M&As Are Alike – and That Matters


Joseph L. Bower

Introducing T-Shaped Managers:
Knowledge Management’s Next Generation


Morten T. Hansen and Bolko von Oetinger

HBR Interview
Tom Siebel of Siebel Systems:
High Tech the Old-Fashioned Way


Bronwyn Fryer

Best Practice
Unleash Innovation in Foreign Subsidiaries


Julian Birkinshaw and Neil Hood

Tool Kit
Making the Most of On-Line Recruiting


Peter Cappelli

Books in Review
Playing Around with Brainstorming
Michael Schrage



Copyright © 2001 by Harvard Business School Publishing Corporation. All rights reserved.

Many have argued that the Internet renders strategy obsolete. In reality, the opposite is true. Because the Internet tends to weaken industry profitability without providing proprietary operational advantages, it is more important than ever for companies to

distinguish themselves through strategy. The winners will be those that view the Internet as a complement to, not a cannibal of, traditional ways of competing.




by Michael E. Porter

march 2001


he Internet is an extremely important new
technology, and it is no surprise that it has
received so much attention from entrepreneurs,
executives, investors, and business observers.
Caught up in the general fervor, many have assumed that the Internet changes everything, rendering all the old rules about companies and competition obsolete. That may be a natural reaction, but it is a dangerous one. It has led many companies, dot-coms and incumbents alike, to make bad decisions – decisions that have eroded the attractiveness of their industries and undermined their own competitive advantages. Some companies, for

example, have used Internet technology to shift
the basis of competition away from quality, features, and service and toward price, making it harder for anyone in their industries to turn a
profit. Others have forfeited important proprietary
advantages by rushing into misguided partnerships


S t rat e g y a n d t h e I n t e r n e t

and outsourcing relationships. Until recently, the negative
effects of these actions have been obscured by distorted
signals from the marketplace. Now, however, the consequences are becoming evident. The time has come to take a clearer view of the Internet. We need to move away from the rhetoric about “Internet industries,” “e-business strategies,” and a “new economy” and see the Internet for what it is: an enabling

technology – a powerful set of tools that can be used,
wisely or unwisely, in almost any industry and as part of
almost any strategy. We need to ask fundamental questions: Who will capture the economic benefits that the Internet creates? Will all the value end up going to customers, or will companies be able to reap a share of it? What will be the Internet’s impact on industry structure?

Will it expand or shrink the pool of profits? And what will be its impact on strategy? Will the Internet bolster or
erode the ability of companies to gain sustainable advantages over their competitors? In addressing these questions, much of what we find is
unsettling. I believe that the experiences companies have
had with the Internet thus far must be largely discounted
and that many of the lessons learned must be forgotten.
When seen with fresh eyes, it becomes clear that the Internet is not necessarily a...
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