I realize I’m about to induce headaches, but it’s critical you stay with me. I’m losing sleep, because every day I’m seeing really good businesses throw themselves into the middle of the commoditization trap. Once there, your future is best described as quicksand – either do nothing and sink slowly and fight like mad and sink more quickly.
The fatal error can best be described as taking what you do and selling it. If you think what you do is what you sell, YOU ARE A COMMODITY, AND YOU WILL BE RIGHTFULLY COMMODITIZED. If that’s the case, then you must play the commoditization game to have any chance of success. (That game, by the way, is won by growing volume and cutting prices faster than anyone else. It is a race to the bottom.)
I created the following SlideShare presentation to illustrate my point. If you’re new to the blog, you can read these posts about pricing and value creation.