Pricing power and substitution

I just finished reading an updated version of Michael Porter’s classic paper The Five Competitive Forces that Shape Strategy. (Unfortunately at the end of last month, HBR moved it to behind their paywall. They did, however, retain public access to a video of Professor Porter discussing the five forces. You can read a summary of five forces analysis at

I was thinking about this in the context of wifi at Starbucks. Now I love Starbucks coffee, and in fact, I prefer it to pretty much any other substitute. It’s a premium product at a premium price, and I accept that. What I can’t accept is their use of T-Mobile, which requires you to pay $30/month to use their wifi  while drinking their coffee. The less-costly substitutes (free wifi at Panera, for instance), are so plentiful that it just seems silly to pay to use wifi at Starbucks.

Now I know that some locations (NY and Chicago) need to have a pay policy to keep students from loafing around there all day and driving away paying customers … but I live in Tampa, and the stores aren’t that crowded. So what’s a good solution? Would $10/month be tolerable? How about $1/hr?

Howard Schultz has just re-taken the top job at the java vendor; perhaps he’d be open to creative suggestions.  A thirty dollar per month recurring charge just seems way too steep.

The perfect is not the enemy of the good

I was just listening to a CFR Podcast on Preventing Nuclear Terrorism in which the speaker said that one of the problems with our current strategy is that it focuses on very expensive exhaustive test measures (100% inspection of all cargo ships), rather than smaller measures across a broader spectrum of vulnerabilities.  Isn’t it interesting that the meme “anything less than perfect is useless” affects military planning as well as business.