Strategy and the Internet

M. E. Porter

Article | Harvard Business Review | March 2001

Strategy and the Internet

Abstract

Many of the pioneers of Internet business, both dot-coms and established companies, have competed in ways that violate nearly every precept of good strategy. Rather than focus on profits, they have chased customers indiscriminately through discounting, channel incentives, and advertising. Rather than concentrate on delivering value that earns an attractive price from customers, they have pursued indirect revenues such as advertising and click-through fees. Rather than make trade-offs, they have rushed to offer every conceivable product or service.

It did not have to be this way—and it does not have to be in the future. When it comes to reinforcing a distinctive strategy, Michael Porter argues, the Internet provides a better technological platform than previous generations of IT. Gaining competitive advantage does not require a radically new approach to business; it requires building on the proven principles of effective strategy.

Porter argues that, contrary to recent thought, the Internet is not disruptive to most existing industries and established companies. It rarely nullifies important sources of competitive advantage in an industry; it often makes them even more valuable. And as all companies embrace Internet technology, the Internet itself will be neutralized as a source of advantage. Robust competitive advantages will arise instead from traditional strengths such as unique products, proprietary content, and distinctive physical activities. Internet technology may be able to fortify those advantages, but it is unlikely to supplant them.

Porter debunks such Internet myths as first-mover advantage, the power of virtual companies, and the multiplying rewards of network effects. He disentangles the distorted signals from the marketplace, explains why the Internet complements rather than cannibalizes existing ways of doing business, and outlines strategic imperatives for dot-coms and traditional companies.

Keywords: Strategy; Online Technology;

Format: Print

Find at Harvard Purchase

Citation:

Porter, M. E. "Strategy and the Internet." Harvard Business Review 79, no. 3 (March 2001): 62–78.

Supplemental Information

2001 McKinsey Award

In 2006 Harvard Business School’s Michael E. Porter and Nitin Nohria launched a study tracking how large companies’ CEOs spent their time, 24/7, for 13 weeks: where they were, with whom, what they did, and what they were focusing on. To date, Porter and Nohria have gathered 60,000 hours' worth of data on 27 executives, interviewing them—and hundreds of other CEOs—about their schedules. This article presents the findings, offering insights not only into best time-management practices but into the CEO’s role itself. CEOs need to learn to simultaneously manage the seemingly contradictory dualities of the job: integrating direct decision-making with indirect levers like strategy and culture, balancing internal and external constituencies, proactively pursuing an agenda while reacting to unfolding events, exercising leverage while being mindful of constraints, focusing on the tangible impact of actions while recognizing their symbolic significance and combining formal power with legitimacy.

Medtronic is adapting its strategy to changes in health care competition and payments. It has decided to develop new relationships with payers, hospitals, and physicians to become more accountable for patient outcomes and total costs. The case describes new forms of partnerships for therapy optimization, management of acute care episodes, and management of chronic care patients.The case also illustrates how integrated practice units (IPUs) provide focused, comprehensive care for two high-volume and expensive medical conditions: type-1 diabetes and morbid obesity.

Case | HBS Case Collection | February 2009 (Revised May 2018)

Cleveland Clinic: Transformation and Growth 2015

Michael E. Porter and Elizabeth O. Teisberg

The Cleveland Clinic's health care services are internationally renowned for quality. In 2008, The Clinic began to restructure the organization into teams defined around patient needs, rather than traditional medical specialties. "Patients First!" takes shape as the teams measure and report outcomes, coordinate care, and develop to support improving value for patients. In addition to restructuring care delivery in the hospitals and throughout northeastern Ohio, The Clinic has investments, facilities, and staff in several other states in the U.S. as well as in Canada and Abu Dhabi. Now in 2015, as the Clinic's domestic and international footprint continues to expand, its leadership is also focused in maintaining the Cleveland Clinic brand and providing optimal clinical care. Students can explore strategy transformation, geographic expansion, the process of introducing new measurement approaches, alignment of activities with strategic goals, and issues in leading change both within a company and across an economic sector.

Keywords: health; health care operations; health care quality; health care; strategy and leadership; strategy development; Health Care and Treatment; Leading Change; Goals and Objectives; Growth and Development Strategy; Measurement and Metrics; Service Delivery; Organizational Change and Adaptation; Outcome or Result; Health Industry; Cleveland;

Citation:

Porter, Michael E., and Elizabeth O. Teisberg. "Cleveland Clinic: Transformation and Growth 2015." Harvard Business School Case 709-473, February 2009. (Revised May 2018.) View Details

Cite View Details Educators Purchase

Faculty & Research

Strategy and the Internet

Abstract

Citation:

Supplemental Information

About the Author

More from the Author