Technology commoditisation makes it a great time to be a consumer, but it’s harder for manufactures. Technology manufacturers are now able to duplicate the latest technology used in cutting-edge products much more quickly and cheaply. The reason? Manufacturing and design tools are being developed that have more knowledge baked into them, meaning manufactures don’t have to develop as much custom technology. Distilled specialised knowledge and critical know-how is embedded in tools by their makers, which is available to all users of the tools. Consequently, use of these tools generally can’t provide an enduring competitive advantage.
This is happening in flat-panel TV, LED lightbulb and solar panel manufacturing industries, for example.
High-volume, high-tech hardware products where the production process involves more automation and less labour are vulnerable, especially anything incorporating electronics.
Companies that use tools with this kind of high embodiment of know-how need to add value in other ways, for example with differentiating software or wrap-around services, or move upstream to more complex systems or push the frontiers of what’s doable.
One solution to this issue is to add significant additional value through hard-to-replicate expertise or experience that can’t be bought off the shelf.
Apple has taken an interesting approach to this issue. They formerly were heavy users of commodity products, often made by competitors. But they shifted to designing more and more of their own microprocessors and ancillary silicon chips as well as unique, hard to replicate hardware. Apple recognised the commoditisation and the dangers of being strictly assemblers of commodity parts.
Supersmart manufacturing tools are lowering prices on TVs, bulbs, and solar panels, Harvard Business School Working Knowledge, Harvard Business School 2018.