At San Digital we frequently use Wardley Maps to discuss technology strategy with our clients, one of the key concepts is commoditisation, the journey that technology takes from innovative to ubiquitous.
“The movement of a market from differentiated to undifferentiated price competition and from monopolistic competition to perfect competition. Hence, the key effect of commoditisation is that the pricing power of the manufacturer or brand owner is weakened: when products become more similar from a buyer’s point of view, they will tend to buy the cheapest.”
To unpick this definition a little and apply some useful terminology, technologies move through four phases in their lifecycle: Genesis, Custom Built, Product, Commodity all technologies follow this path the time taken however is changeable.
“San Laboratories have a great idea for attaching things together, it has this corkscrew bit that I’m going to call a thread and a part that goes through things that I’ll call a bolt. The other bit I’m going to call a nut”
And the first nut and bolt were created and were unique.
In this computing world this could easily be The Manchester Baby.
“San Boutique Designers hand crafted nuts and bolts, a ready supply but you need to use the right nut for the right bolt”. These connectors are useful to build things but are still very bespoke.
The ENIAC was a custom build for each customer.
“San Metalworking Co have created a machine to produce thousands of nuts and bolts that work together with the patented San Low Friction Thread (TM)”. This is a product in the marketplace that is competing bases on a unique attribute, the low friction thread.
Mainframes or PCs, very much a product compatibility within a brand or machine type.
“San Industries sell 50mm M6 stainless steel screws cheaper than anyone else”. Standards tend to create commodities where the only difference is the price.
Cloud compute, an amount of computation for a price.
Understanding the journey that technologies take from innovation to commodity is vital to the strategic planning process. The tactics that can be effectively applied vary depending on where any technology is in its lifecycle.
Understanding the technologies in use by an organisation and where they are on the journey to a commodity can help define the approach taken to them. It’s clearly obvious that you shouldn’t build a power station because electricity is a commodity. It’s not always so obvious that a CRM should be utilised as a SaaS product and paid for monthly per user.
Authentication is also a commodity service and building one from scratch should be actively avoided not only because it’s not a core activity but also the level of risk associated. We recently released a video explaining the benefits of passwordless authentication in the user journey.
Technology Interception and Prediction
A particular technology becoming a commodity also spurs innovation in other areas, a good example of this is the “mobile phone dividend”. Volume production of mobile phones forced the commoditisation of batteries, sensors, and high efficiency processors. All these technologies being standardised, plentiful and cheap lead to the creation of a new technology Drones, which are now traveling down the same path towards themselves becoming a commodity, currently they are at the product stage of development.
In some industries, given sufficient influence, it is also possible to create a standard and thus force items to become commodities, The ATX motherboard standard created by Intel is a good example. It created a whole ecosystem of manufacturers competing to create the best product, that ultimately supported Intel’s core products.
Understanding the commoditisation journey for technology is a powerful strategic and tactical tool, we help companies to apply that understanding to focus on delivering value to their customers.