Analyze your Industry to Assess Full Impact of CRM Investments

Analyzing your industry using a rigorous framework helps in grasping the full impact CRM investments can have, in meeting the challenges you and your industry at large are facing. The customers you serve have choices from your traditional and non-traditional competitors and thus dictate the attractiveness of the industry for you.

While reading up on a life insurance client, we stumbled on a telling quote from the CEO in an interview. When asked what keeps him up at night, his reply? … Amazon would enter his industry! Competitors are no longer the traditional ones you have battled with. Technology is changing the possibilities rapidly, and whom you call a competitor is changing before you connect the dots yourself. The customer is already being served by these players from outside the current boundaries of your industry. Worse for you, if your service and the customer experience is not at par with these players who you haven’t until now considered your competitors, you run the risk of displeasing the customer.

There are a number of tools and techniques for analyzing your industry.

This article covers one of such techniques – Porter’s Five Forces of Industry. We use it with a few objectives in mind:

a. To understand which forces have the greatest influence on the profitability in our client’s industry
b. To see how our client can influence the forces back

The five forces that Porter listed being:

a. Threat of New Entrants
b. Threat of Substitute Products or Services
c. Bargaining Power of Buyers
d. Bargaining Power of Suppliers
e. Rivalry among existing competitor firms

Our Life Insurance client described the Threat of New Entrants from the above framework.

If you consider the watch industry or the camera industry, the threat of a substitute product comes from the cell phone. These industries have become less attractive today. Greater the threat of substitute products and services, the greater the rivalry, less attractive is the industry.

If the bargaining power of the buyers (customers) is high, your industry will have intense price wars to please the buyer.

If the bargaining power of suppliers is high, the profitability of the industry declines.

CRM initiatives may have an impact on each of the 5 forces in the equation above. Looking across these forces prompts you for ideas on the impact your investments in CRM and related areas can have for you.

Here is your reference for reading up on Porter’s Five Forces Framework:

Competitive Strategy: Techniques for Analyzing Industries and Competitors by Michael E Porter

Ramana Metlapalli
Ramana Metlapalli
Ramana is a Managing Principal at Varasi. Ramana is a lifelong learner and eternally curious about what goes into making some individuals and organizations, high performance ones. He writes about Business Analysis, Salesforce best practices and the world of Consulting.