Porter’s Five Forces (and the news for CIOs)

There’s a model that’s common within the MBA world that describes the different sorts of competitive forces to which an organisation may find itself subjected. Defined by Harvard Business School’s Michael Porter in 1979, his “Five Forces” are, in simple terms:

– market rivalry (simple competition from others doing what you do);
– client power in bargaining;
– supplier power in bargaining;
– new entrants into your market;
– and the threat of substitution – people finding alternatives to your products or services

There’s more of a description here.

For years, CIO’s would have looked at the Porter model and thought “Hmm. Interesting. Wonder if that’s how my business regards the market that it’s in? Now,let’s get on with managing a monopoly.” This kind of MBA stuff was of general interest, but of no consequence in terms of the practicalities of running an IT function.

Now, however, the provision of internet to an organisation has moved the IT department from being in an isolated island of calm into a maelstrom of competition:

– our (internal) clients are asking why, if I can do so-and-so easily at home on broadband, why can’t I at work?
– our software suppliers are increasingly challenging us to move to subscription models because that’s what they want us to do
– new entrants are coming to market, challenging the monopoly (Salesforce, heavily marketing the “no software” (read “no IT department”) benefits to sales and marketing teams
– and substitution is happening… business being done not via email, but by Facebook, DropBox, YouSendIt, the list goes on…

Tie that to the competition that has been around for ten years from outsourcing and offshoring models, and all of a sudden IT departments are caught in a perfect storm.

Now if our house were in order, we could just compete back. However, and here is the rub, the history of corporate IT is of constant and sustained mediocrity (the monotonous depressing news from Standish year after year).

So, we’re under competition and most of our history is in delivering poor (if not complete failure) projects.

My contention is that the cause of the failure is getting bogged down in the technology – so IT teams should reposition themselves as facilitators of business change by ditching their involvement in the technology part (and not just by rebranding as “business partners” whilst continuing to try to build boxes and code).

Here lies the transformational benefit of SaaS. If someone’s doing the tech for you in a commoditised way, projects are less likely to fail because of people buggering around with technology. And if IT departments focus on becoming experts in how their organisation uses technology, then you have a unique competitive advantage that sustains your reason for existence.

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