Microsoft Implements a Highly Competitive Strategy to Gain Dominant Position in the Cloud Data Storage Markets

On June 23, 2014, Microsoft® announced lower consumer costs for OneDrive (https://blog NULL.onedrive NULL.com/new-onedrive-storage-plans/), its cloud, IaaS offer. The same press release also announced substantially more storage for consumers either opting for the free version of OneDrive, or for anyone with a valid subscription plan to Office 365.

These activities are consistent with Michael Porter’s notion of “competition to be the best”. In a book titled ‘Understanding Michael Porter’, by Joan Magretta (published 2010, Harvard Business Review Press), Michael Porter is presented as holding an opinion this strategy is ‘absolutely the wrong way to think about competition’. Why? As Porter sees it, this strategy transforms competition into a zero sum conflict for a mirage-like market, which doesn’t really exist.

Rather, Porter thinks markets actually have a much broader depth than they appear to have in a “competition to be the best” view. Successful competitors for these real markets will present consumers with differentiated product offers, built solely to deliver one of the two prizes Porter really thinks matters — either lower costs (and, therefore, greater profits), or premium prices — and nothing more. The mistake, as Porter sees it, is to sacrifice one, or both of these objectives, to win market share from supposed competitors for the same customer.

So why would Microsoft opt for this type of strategy? We have little indication, at least as of yet, as to a correct answer to this question. But perhaps this announcement is another example of the type of effort Microsoft is making via other lines of communication with its markets to hasten the pace at which enterprise business customers (the core of Microsoft’s customer base, and its most profitable segment) are moving to Microsoft cloud IaaS offers like OneDrive and Office 365.

This writer recently attended a trade show for a Microsoft product, which was attended by representatives of a cross section of corporate customers. A number of representatives remarked on the intensity of Microsoft’s efforts to prod them along to Office 365, Azure and OneDrive. There was also mention of some incentives offered to ease the transition from on premise computing to cloud offers. Bottom line: there is now an urgency about the need to move customers onto the cloud path.

Readers following Microsoft may want to maintain some attention to the results of all of these campaigns, as they come in. Michael Porter’s theories of competition are not to be discounted. If the cost of these efforts either start to degrade Microsoft’s profitability, or detract from its ability to charge premium prices for its products and services, they will be more of a burden than anything else.

Ira Michael Blonder (https://plus NULL.google NULL.com/108970003169613491972/posts?tab=XX?rel=author)

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


Pharmaceutical Product Managers Could Still Use a Dose of Michael Porter’s Five Forces Competition Theory

We read a blog post by Dr. Jim Anderson, Product Managers Could Learn to Love Lipitor (http://www NULL.theaccidentalpm NULL.com/marketing/product-managers-could-learn-to-love-lipitor). We were interested to learn the steps that Pfizer has publicized that it will take to protect market share once its patent for Lipitor® expires. According to Dr. Anderson, these steps include:

  1. offering cards directly to current retail customers that will not expire when Pfizer’s patent expires. These cards lower out of pocket co payment expenses for these customers to $4.00 per month
  2. Directly delivering the product to retail customers. In addition, Pfizer will notify retail customers who choose to participate in the program when prescriptions need to be refilled
  3. Negotiating with Health Benefit plans to ensure that the cost of Pfizer’s drug is completely aligned with the cost of generic alternatives

The common theme that runs through each of these three steps, as we see it, is an effort to lower cost for retail customers (only) and improve access (for retail customers only) to this medication. The third step, negotiating with benefit plans, could end up benefiting Pfizer at the expense of benefit plans.

If, in fact, Pfizer has taken these three steps as Dr. Anderson contends, we think they could have done a much better job had they paid some serious attention to Dr. Michael Porter’s Five forces (http://hbr NULL.org/2008/01/the-five-competitive-forces-that-shape-strategy/ar/1). As long as Pfizer has demonstrated that their production costs are lower for Lipitor than is the case for their competitors and, further, that they can retain profit margin despite keeping retail customer out of pocket costs at no more than $4.00 per month, then the card program works. Ditto for the notification program.

Nevertheless, we think they should have attempted to identify customers using their drug for unexpected conditions with an eye towards identifying higher margin markets which, if developed skillfully, would permit Pfizer to retain present pricing levels despite a pending onslaught of generic competition.

Further, we hope that Pfizer thoroughly briefed its benefit plan partners about its planned three steps well in advance of notifying the public of its plans. All three steps could end up benefiting Pfizer at the expense of its benefit plan partners — not a skillful tactic over the long run. We think that methods of defending Pfizer’s market position could be formulated that would benefit benefit plans as well as Pfizer. These latter methods deserve study in that we don’t think that Pfizer should hastily burn its bridges with benefit plans. After all, benefit plans provide very high volume conduits into the marketplace.

If you are interest in product management approaches and are grappling with products in commodity markets, then we would like to hear from you. Please contact Ira Michael Blonder at +1 631-673-2929 to further a discussion. You may also email Mike at imblonder@imbenterprises.com.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved