You are “free”: the threat of business commoditization and the role of customer lock-in

From Wikipedia:

A commodity is some good for which there is demand, but which is supplied without qualitative differentiation across a market.

2008 and 2009 have been the years of the commoditization. Many things that used to be profitable for their vendors have been and are still threatened by serious possibilities of getting a free commodity: let’s focus on some examples.

The evolution of the OS technologies is gradually outdating things like antivirus programs or desktop management solutions. The OS itself is strongly looking at commoditization as a distribution channel: think to Android, Symbian, Google Chrome OS and Windows 7 Starter Edition (with fluctating results).

Thanks to a highly competitive service market also mobile networks are threatened of commoditization and operators fear of things like Google Voice.

We’re getting used to Open Source business model gradually commoditizing the whole Enterprise IT sofware market since years. More and more is happening at application and process layer with players like Alfresco and Intalio eroding market shares to formerly existing market leaders such as Documentum, Filenet or TIBCO.

As you know, latest Gmap mobile release has also turn by turn navigation in Android 2.0:  isn’t it a try to commoditize core business for TomTom or Garmin?

In product design and management the intrinsic value of the idea is getting less important, is the value that the product can deliver in the short\mid time always makes the difference.

An evergreen answer to products & services commoditization has always been customer lock in. And again Google has been piooneering the new frontiers of this way of doing this business.

Despite very few experiments, Google has always focused on services instead of products. Few exceptions (getting more and more rare) like Google Earth for example has born as a commoditized products “free for all” or in other cases embracing the foss model (Chrome).

In the wast majority of cases Google has been focusing on something that cannot be commoditized in few minutes.

If you think about mail, despite having many competitors, Gmail has been the first mail service promoting an “all you can receive” approach seriously and this actually led to a highly locked customer base with gigs of mails lost in Big G servers with any potential of moving out.

And, to be true, in many cases this approach also showed up as a strategic one: it’s hard to see  BigG being a follower, there are few outstanding cases in which they’re pointing totally new directions (like the unstoppable GVoice or Chrome OS).

This is why, if i know Google a bit, despite many believe in it, I don’t feel the rumored Google phone coming in 2010.

If your product doesn’t provide a specific, unbeaten and unique value that can’t be replicated in few weeks (very difficult in the build and play era) it’s customer and customer data lock in doing the difference at today: they can transform short term customer engagement in a mid long term service\product usage.

But at this stage, what are, from a vendor perspective, the substantial strategies to follow to face a commoditization threat? What to do when your business gets a commodity or simply gets outdated in a day?

  • forget easy money forever, from this point in time you’ll need to deserve all
  • focus on the essentials and increase delivered value
  • transform a product into a customer centric service
  • elaborate an effective customer lock in strategy based on the quality and value  you deliver
  • start, as soon as you’re still profitable, new service lines, created in line with today’s landscape
  • be realistic

About meedabyte

Strategist, Consultant and Collaborative Pathfinder

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