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Near the end of “Understanding Michael Porter”, there is a Q&A with him that touches on this subject:

Q: “How do you do a five forces analysis if you’re an entrepreneur starting a new business in a completely new market space? Is strategy even relevant when there’s no existing industry or when conditions are still so fluid that there is no discernible industry structure and no direct competitors?”

Porter: “Strategy is relevant for any organization at any point in its trajectory. How to develop and sustain a competitive advantage is the core question that every organization has to answer if it’s to be successful and to prosper. In emerging industries there’s a lot of experimentation. What will the product ultimately look like? What will the distribution system look like? Will the product or service scope produce a stand-alone industry, or will this new idea become part of a larger or existing industry? There’s more uncertainty about the shape of things, but the five forces exercise is fundamentally the same with one big exception: instead of analyzing what already exists, you’re forecasting. And you probably know quite a lot about all of the five forces but one. You know the customers you’re targeting. Are they likely to be price sensitive? You know who your suppliers are or who they are likely to be. How powerful will they become? You know the substitutes and can identify the likely entry barriers. What you don’t have yet are actual rivals. That’s where you need to think through who those might be. Will the rivals most likely come from adjacent industries? Or from companies that already exist in other countries? Or will the likely rivals be new start-ups? How would each of these rivals be likely to compete? So even when you’re inventing new market market space, you probably already know more about the five forces than you realize. Doing such analysis is important because if you’re creating something that’s truly valuable, don’t kid yourself that no one will follow you. There is no such thing as a market where competition is irrelevant, as nice as that might sound. The idea that innovation allows you to ignore competition is a fairy tale. So you have to have a hypothesis for how the industry might take shape once there is an industry. Early on, there are many paths the evolution can take, many choices you can make that will have an important impact on how attractive the industry will become. Decisions you and others make over time will begin to lock in the basic economics, making industry structure less fluid. So it’s crucial to see different paths for how the industry might evolve, and to ask the basic questions about the five forces, so that you can make choices that will put the industry on the best possible path.“