Showing posts with label Michael Porter. Show all posts
Showing posts with label Michael Porter. Show all posts

February 26, 2008

Microsoft Reveals Secrets and Enterprise Architecture

This week Microsoft said they had a big announcement, and that it wasn’t about Yahoo! It turns out that Microsoft decided to reveal some of their technical documents for Microsoft Vista, Office, and other applications.

Why would a company like Microsoft reveal their technical secrets to partners and rivals alike? How is this decision a good architecture move, especially by the master architect himself, Bill Gates?

We all know that companies strive to achieve strategic competitive advantage and that one major way to do this is by product differentiation. The goal is to develop a unique product offering that customers want and need and then build market share. In some case, this results in a situation like Microsoft’s virtual monopoly status in desktop operating systems and productivity suites.

So why give up the keys to the Microsoft kingdom?

Well they are not giving up the keys, maybe just giving a peek inside. And an article in The Wall Street Journal, 22 February 2008 tells us why Microsoft is doing this:

  1. Internet Revolution—“For 30 years, Microsoft has…tightly held onto the technical details of how its software works… [and] it become one of the most lucrative franchises in business history. But Microsoft traditional products aren’t designed to evolve via add-ons or tweaks of thousands of non-Microsoft programmers. Nor can they be easily mixed or matched with other software and services not controlled by Microsoft or its partners. Now the Internet is making that kind of evolution possible, and transforming the way software is made and distributed.” As Ray Ozzie, chief software architect of Microsoft states: “The world really has changed.”
  2. Do or die—Microsoft’s prior business model was leading it down a path of eventual extinction. “The more people use these applications [free technologies and shareware], the less they need they have for Microsoft’s applications.” Microsoft is hoping to maintain their relevance.
  3. Antitrust ruling—“Last September, an appeals court in Luxembourg ruled against Microsoft in a long-running European case that forced Microsoft to announce a month later that it would drop its appeals and take steps to license information to competitors.”
  4. Interoperability—“Microsoft announced in July 2006 [its “Windows Principles”]…such as a commitment to providing rival developers with access to interfaces that let their products talk with Windows.” The key here is customer requirements for systems interoperability and Microsoft is begrudgingly going along.

Is this fifth such announcement on sharing by Microsoft the charm? I suppose it all hinges on how much marketplace and legal pressure Microsoft is feeling to divulge its secrets.

So it this the right User-centric EA decision?

If Microsoft is listening to their users, then they will comply and share technical details of their products, so that new technology products in the market can develop that add on to Microsoft’s and are fully interoperable. The longer Microsoft fights the customer, the more harm they are doing to their brand.

At the same time, no one can expect Microsoft to do anything that will hurt their own pocketbook, so as long as they can successfully maintain their monopoly, they will. Not that Microsoft is going away, but they are holding onto a fleeting business model. In the information age, Microsoft will have to play ball and show some goodwill to their users.


December 14, 2007

Porter's Five Forces Model and Enterprise Architecture

“Porter's 5 forces analysis is a framework for industry analysis and business strategy development developed by Michael E. Porter in 1979 of Harvard Business School….It uses…5 forces to determine the competitive intensity and therefore attractiveness of a market…They consist of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally requires a company to re-assess the marketplace…Strategy consultants use Porter's five forces framework when making a qualitative evaluation of a firm's strategic position..”

Porter's Five Forces include the following:

Three forces from 'horizontal' competition -

  1. threat of substitute products
  2. the threat of established rivals
  3. the threat of new entrants

and two forces from 'vertical' competition -

  1. the bargaining power of suppliers
  2. bargaining power of customers

(Adapted from Wikipedia)

“The definition of your industry and competition is not a ‘mechanical task’, but requires objectivity and imagination. Strategic planning is not only about today’s customer needs and today’s competitors, but also about future needs and future competitors.”

Porter’s Five Forces Model helps identify industry forces and market attractiveness. Combining the Five Forces (“microenvironmental factors”) with other factors like technological change, growth and volatility of the market, and government and regulatory intervention (“macroenvironmental factors”) is a powerful tool for market analysis and strategy development.

(Adapted from American Management Association)

The Five Forces Model is a terrific tool to understand your industry and decide whether you have a competitive advantage (cost, technological…) that will enable you to serve your customers and do it profitably.Analyzing the Five Forces helps EA practitioners to understand their organization’s competition—and decide whether the enterprise can deliver their value proposition more effectively than their competitors and successfully defend against them. EA is not only about technology differentiation, but also about general planning and governing for the organization's success and longevity.

Furthermore, the competitive environment is constantly changing. So the enterprise can never feel “fat and happy” and ignore micro- and macroeconomic factors. The successful strategy in today’s marketplace may be a failing strategy in tomorrow’s. Therefore, EA must constantly monitor the environment and adapt its strategy accordingly.


September 19, 2007

Competitive Advantage and Enterprise Architecture

Competitive Advantage—“When a firm sustains profits that exceed the average for its industry, the firm is said to posses a competitive advantage over its rivals. The goal of much of business strategy is to achieve a sustainable competitive advantage.”

“Michael Porter identified two basic types of competitive advantage:

  • Cost advantage
  • Differentiation advantage”

“A competitive advantage exists when the firm is able to deliver the same benefits as competitors but at a lower cost (cost advantage), or deliver benefits that exceed those of competing products (differentiating advantage). Thus, a competitive advantage enables the firm to create superior value for its customers and superior profits for itself.”

Cost and differentiation advantages are known as positional advantages since they describe the firm’s position in the industry as a leader in either cost or differentiation.” (

In User-centric EA, the target state and transition plan in a for-profit, private sector company should be one that develops competitive advantage for the organization and thereby superior profitability. This is done either through business process reengineering/improvement or through technological differentiation. In technological differentiation, information technology solutions are adopted that align to business needs and help it to create either cost or differentiation advantage. IT is used to create cost efficiencies through automation or to developing differentiation advantage through the development of products that are more technologically advanced than its competitors. In essence, the organization employs cutting-edge technology to leap over its competitors in terms of cost or product.

In not-for-profit organizations or government, EA target state and transition plan does not set the stage for competitive advantage in terms of delivering superior profits, but rather in terms of delivering superior value to its stakeholders. Again, either business process or technology enhancements can help the enterprise develop the superior value. Additionally, there is not the same notion (if any) of competition (i.e. so ‘competitive advantage’ should really be more just ‘advantage’—to the enterprise and stakeholders—without the ‘competitive’ in it).

In any case, competitive advantage in terms of continuous improvement vis-a-vis efficiency and effectiveness of mission execution, and performing better, faster, and cheaper on behalf of stakeholders is the end game.