just block that guy and the play will work

June 23, 2008 at 4:56 pm | Posted in Business | 2 Comments
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Sounds simple enough. Just block him and the play will work. Problem is, the guy is a 6’6″ 340 pound beast who happens to be pretty dang good. So “just block him and the play will work” is certainly a valid theory, but getting there is a bit more challenging than the “simple” statement implies. That’s how I feel about a recent post from Seth Godwin on commoditized pricing.

Basically he says that you don’t need to lower your price, just increase your value. Here’s a quote:

You need to increase your value. If people don’t want to pay, it’s because you’re not delivering enough value for the money you’re charging. You’re not selling a commodity unless you want to.

Talk about your platitudes. Of course, he’s right. Value and pricing are typically inextricably linked. The real question is: Does a market ever reach a point where there is no more value to be added that would allow you to move the pricing needle? A friend of mine says, “No.” I brought up the example of nails, and he has set out to prove me wrong there. He also muttered something about $100 toilet bowl brushes (not sold to the government, he claims!), but if he wishes to expand on that one, I’ll let him do so in the comments section.

I tend to think that in theory Seth may be right; but in practice, it seems loaded with some really major challenges that can be dangerous. How long do you pursue that fleeting “value” with more and more resources before calling the market a commodity and reacting accordingly?

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  1. To be true to Seth’s point means you have to be really driving innovation into your products ahead of your competitors time after time. And this can be hard to do unless you have a good strategy. Companies such as Microsoft can’t do this consistently (Word, IE, Windows have had low levels of clear innovative value in years). So while you are in an “innovation rut”, your competitors catch up and you will start to lose market share because you are being undercut (unless you have other means to ward off competition other than innovation). At this point your product has become a commodity, and if that is what you are left with you need to treat it as such to continue to compete.

    My point is I think almost every product is on the path to commoditization but innovation breaks commoditization (or at least starts a new path). The length of time between such impacting levels of innovation varies greatly between industries (oil, gas, coal, rice etc the innovation cycle is very, very long) much less so things like IT hardware (processors, memory, disks) and again much less so for software.

    What forms a “real world” product strategy for an organization is probably a combination of innovation in areas where you are strong and the forcing of commoditization in other areas where you’re not so strong (or lagging) but want to build a presence.

    How you achieve this innovation leads back to your earlier points around development/acquisition.

    Can you have a successful product strategy in which you don’t innovate but instead just force the commoditization of your competitor’s products? Probably, but who wants to be there?

  2. […] | Tags: Business, commoditize, commodity, innovation, mysql, software, sun, Technology Trends Yesterday I talked about Seth Godin’s comments regarding that you are only a commodity by […]

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