Who needs innovation in a commodity market
My friend, John Barrett pointed to this Newsweek article by Steven Levy (Feb 21 issue): Steamrollered by the Dell Machine. It talks about Dell's success in the US market for PC's and contrasts that with HP and others. The telling quote:
Dell finds it hilarious that companies like IBM, HP and Sony fund researchers to come up with ideas that break the mold. PCs, says Dell spokesperson T. R. Reid, have reached a period of "standardization." They aren't the glamorous gizmos they were in the industry's early days. They are commodities, largely undifferentiated devices loaded with the chips made by Intel, running the software made by Bill Gates's minions. Dell doesn't like the term commoditization—it makes PCs sound cheesy. But the company nonetheless owes its success to it, because commoditization eliminates differences between its products and those of its competitors. That means it competes on cost, service and business model.
If PC's are simply commodities, then Dell is going to remain the winner. And if we are to believe the idea of creative destruction, then the next innovation in the PC world will probably come from somewhere completely out of the PC ballpark. We probably won't even call them PC's at that point. Then Dell either goes down with the PC market, or it shifts to a new set of commodities. I like to believe that the companies who are investing in new technologies will at least have the chance to participate when the Next Big Thing comes along for the personal computing marketplace, since they might see it coming.
Previous entry: What would you teach about KM?
Next entry: This would be a great business if