The case for open services innovation: The commodity trap

Disruptive economic forces are creating a phenomenon that I call the commodity trap, which more product-focused companies are finding hard to break out of or avoid.1 The commodity trap is made up of the following business realities: Manufacturing and business process knowledge and insights are widely distributed. It is getting harder for companies to differentiate their products and sustain that differentiation over time. Products are fighting the tendency to become commoditized (commodities are products that are sold on the basis of their cost, not their value). Commoditization is largely the result of success in an industry or the product sector in general. The knowledge and insights that have been developed from work on design and manufacturing processes like Six Sigma, Total Quality Management, supply chain management, and customer relationship management have led to much higher-quality products. However, these methods and frameworks are now well understood around the world and have been encoded into software that is also widely available around the world. When the same approaches and the same tools are available to everyone, anyone can build a good product. No wonder it is getting harder to remain competitive.