Digital Business impact on Porter’s Five Forces

Photo by Werner Du plessis on Unsplash

Porter’s Five Forces

In 1980 Michael Porter identified five forces that impact the competitiveness in, and therefore the attractiveness of, an industry or market.

These were:

  • Threat of new entrants
  • Threat of substitutes
  • Bargaining power of customers
  • Bargaining power of suppliers
  • Industry rivalry

They can best be described in this diagram from Mindtools

 

What effect will Digital Business have on this?

In the excellent book Master Digital Business, Nicholas Evans provides a summary of how the new digital threat is impacting the traditional forces along with the rationale for how and why digital is making such a transformational impact:

The table (by Nicholas D. Evans) provides a listing of the traditional five forces together with a summary of how Digital Business is impacting these traditional forces – creating both threats and opportunities – and the rationale for how and why digital is making such a transformational impact.

Nicholas D. Evans, Mastering Digital Business – New digital threats impacting the Five Forces Model p11

Success or Failure

As you can see, Digital Business is going to have a real impact on the success or failure of companies.

Businesses are combinations of products, processes and services. And many companies are digital in one of these areas. But becoming digital in just one of these areas is not enough. To be able to offer real value to customers, digitization needs to be applied to all three areas. And that’s where it’s tricky. With “becoming digital” comes a whole new business model. One that will require new business strategies and tactics.

Digital Transformation Strategy

Currently, I am following the “Digital Transformation Strategy” course from Boston University.

This is run by Venkat Venkatraman the author of The Digital Matrix: New Rules for Business Transformation through Technology

I’m excited to be on this learning journey at the moment and will, most likely, be keen to share more along the way.

Check this out:
Why this government is implementing a Digital Continuity Strategy

 

Want to learn more?

I’ve selected a few books that I feel are relevant to what was covered in this blog post and will provide more in-depth information. (Important Disclosure).