I started this entry a couple of weeks ago shortly after I submitted my assignment. At the time I had some specific ideas to post but, of course, they are gone. Instead of deleting this entry altogether, I will post my summary as submitted.

I just finished reading over Michael Porter’s "Strategy and the Internet" as an assignment for one of my courses. Part of the assignment included a brief summary of our thoughts about the role that strategy play in today’s Internet environment and if we agreed with Porter.

Initially I had a hard time getting into the proper frame of reference while reading Porter’s article. I was approaching his words from a customer point of view and missed the value of his opinions. It was not until I switched my thinking reference to a decision-making individual within the enterprise, that I was able to look into Porter’s insight. Something to keep in mind as well is the time frame at which this article was printed. In 2001, the markets where recovering from the dot-com era where economic approaches were not quite sound. Of course, looking at that era now brings there mistakes more obvious but it can be said the signs were there all along. I should also note that even though the article was penned in 2001, the principles introduced by Porter would still hold true today. Technology has always had a place in the enterprise, however with the Internet, IT has been moved into the forefront of any successful company. IT is not the path to success and profitability, but it is a cornerstone for the foundation need to reach profitability and provide value to the share holders.

Porter’s position on the role of the Internet is that of an enabling tool of “traditional proven principles and effective strategy” and not a competitive advantage that will provide unrivaled profits within an industry. I can certainly agree with this point of view and one industry that comes to mind is the online distribution of music. The music industry has been changing in the last few years, since the popular rise of the Internet, the industry structure has been changing as well. However, the Internet itself has not provided one company a leading edge. Porter mentions the need of customer service, product differentiation, and proprietary content/assets as some of the keys to corporate financial success. While on the topic of music distribution, I would make a note of Apple was being the only company that capitalized on these principles. Apple was the first company to bring the concept of the online music store with the introduction of its iTunes web store. The launch came at the same time that Apple introduced the iPod to the masses. Apple’s products were different and provided a unique service to its customers, in the form of legal music ownership and a great product in the form of the iPod.

To this day, the success of the iPod and iTunes in Apples’ music strategy can be be said is completely based on price, instead it is based on the value provided by their products. Apple has kept their iPod and iTunes products as proprietary platforms and not easily imitated by competitors. In addition, switching from Apple’s platform to a competing offering is not quite as easy to do. The iPod as a portable player can only be used with Apple’s iTunes online store. Switching away from Apple’s iTunes is not hard to do from a technology point of view. However, from a user point of view, the iTunes store continues to be a favorite due to its user friendliness and feature set. This combination makes it hard for users to make the move away from this platform. All together, Apple has been able to capitalize on all of these fundamental concepts to create profits and provide value to the company’s shareholders.

Another company which comes to mind while reading Porter’s essay, is Red Hat. Red Hat Inc. has become a lead player in enabling its customers with enterprise level open source applications. Specifically the importance of following sound and proven corporate principles. In 2003, Red Hat launched a new strategy which targeted its customer’s needs. According to Red Hat’s press release, the primary goal of the strategy, is to provide a complete infrastructure to enable their customers create web applications geared toward commercial applications. Red Hat utilizes the well known open source model where price of software approaches zero. Similarly to Apple, Red Hat approaches its industry with a specific focus toward its customers and a proven commitment to the technologies that it supports. By their very nature, open source tools provide a common infrastructure to the community. It is Red Hat’s commitment to its value proposition that has provided a greater value to its members. Red Hat has created a support infrastructure around a “freely” available product (the linux kernel), thus enabling its customers to succeed.

Has the Internet created a new economy? A new way of doing things? A fundamental change to our decision making process? I would say yes and no, some new markets have been created by customer needs that could be best satisfied by the convenience provide by the web. Some corporate actions can be optimized thanks in part to the deployment of open internet standards among a corporation, its suppliers, partners and customers. However, I would agree with Porter on the importance of strategy when considering long term success of a company. More importantly, it is the introduction of internet technologies as supporting and enabling characteristics for the core corporate strategies — those strategic plans that provide a company with the greatest economic value.