Company Survival 101: Never Become a Commodity

One inevitable byproduct of advancing technology and every changing competitive landscape I talk about in part one of this article is commoditization. Someone makes an innovative breakthrough, and by doing so they stand out as unique in their field. However, because of the breakneck speed of technological advance, soon everyone else is offering those same features. A product feature that was special, unique, even astonishing, rapidly becomes a standard feature. This is why the reinvention imperative is about not occasional reinvention but continuous reinvention.

The fact is that every product or service has the potential to become a bland, vanilla, me-too commodity that competes on price alone. More important, any product or service can be taken in the opposite direction and made unique, and therefore far more valuable.

In the nineties, the idea of kaizen, continuous improvement, was all the rage. No more. The pace of transformation is too fast. What’s needed is continuous decommoditization. Decommoditization means going against the natural tide of entropy: The tendency for our products and services to settle into a watered-down version that seems safe and caters to the broadest marketplace (read lowest common denominator). The truth is that there is nothing safe about commoditizing.

Toshiba learned this lesson the hard way. In 1996, I happened to be consulting to Toshiba. “By the early 2000s,” I pointed out, “laptops will become the new desktop and people will use them largely to get on the Internet.” I suggested they outfit every laptop model with a built-in modem. In fact, here was the idea I floated: When the laptop first powers up, the startup screen says, “Welcome to Toshiba Mobile Customer Concierge … ” and then offers the users an array of online services to help them get the most use out of their laptop’s new features as a mobile worker.

There were some at Toshiba who liked the idea … and some who didn’t. As so often happens in big companies, there were two forces at work: one looking to the future and one clinging to the past. And as so often happens, the one clinging to the past won out. The Mobile Customer Concierge idea never happened; instead of investing in the laptop experience of the future, Toshiba put its resources into introducing an entire new line of desktop computers. After all, all the other PC manufacturers are doing it, they thought. We should, too.

They could not have made a worse move. Toshiba was known for its capacity to miniaturize. Creating a line of desktops was not only an investment in a disappearing past, it was also a commitment to a product category where they could not even use their particular strength. Their desktops were like all the others. With this move Toshiba effectively crippled their brand: they moved from their place at the head of the pack to being lost in the thick of it, becoming one more me-too product in a declining category.

Toshiba had the opportunity to take advantage of a future opportunity and solve their customers’ future problems: by anticipating the increasing mobile worker trend they could have done what Apple later did with iTunes and completely redefined an entire market segment, thereby making themselves the automatic market leader. But instead of decommoditizing, they turned themselves into a commodity — and in the process they lost their market lead. Thus far, they’ve never gotten it back.

This is not just about electronic gadgetry. Anything can be decommoditized, even things we take for granted. In the nineties Starbucks decommoditized coffee, Victoria’s Secret decommoditized underwear, and Herman Miller decommoditized the chair. Today, Glacéau Vitaminwater and a host of others are decommoditizing water (and making huge profits), Gdigital and others are decommoditizing electricity, and 1-800-GOT-JUNK has decommoditized junk removal.

In the midst of explosive and continuous transformation, one clear dependable strategy for staying ahead of the curve is to create in yourself and in your company or organization a habit of continuously decommoditizing. Anything and everything can become a commodity; and any product or service can be decommoditized. You can wrap a service around a product and decommoditize it, or you can wrap a service around a service and decommoditize it, or you can wrap a new product around an existing product. The combinations are limited only by your imagination.

You Can’t Afford to Wait
You may know the popular expression, “If we do what we’ve always done, we’ll get what we’ve always had.” What we’ve always done is wait until the manure hits the fan — and then start crisis managing.

When do we go out and buy security systems for our homes? After we’ve been robbed. When do we start exercising? When the doctor finishes our checkup and says, “Hey, you’re huge!” When do we start working on our relationship? As we’re walking up the steps to divorce court: “Should we talk?” Yet the dangers were all plainly there to see, and so were the opportunities — if we had been looking.

This has always been a habit of human nature, but today it has become a habit we critically need to change, because there is no longer any viable reaction time. We can’t afford to wait for the famine, for the crisis, for the breakdown.

Thus the question becomes, will we change from inside out, or outside in? Will we let ourselves see the opportunities and become motivated by foresight, or wait until we are seeing the crises happen before our eyes, and become motivated by hindsight?

It’s time to stop mourning the “good old days” and start reinventing the new ones.

# # #

DANIEL BURRUS is considered one of the world’s leading technology forecasters and business strategists, and is the founder and CEO of Burrus Research, a research and consulting firm that monitors global advancements in technology driven trends to help clients understand how technological, social and business forces are converging to create enormous untapped opportunities. He is the author of Flash Foresight.