{"id":11621,"date":"2022-09-01T07:18:20","date_gmt":"2022-09-01T12:18:20","guid":{"rendered":"https:\/\/flevy.com\/blog\/?p=11621"},"modified":"2022-08-29T09:19:56","modified_gmt":"2022-08-29T14:19:56","slug":"technology-commoditization","status":"publish","type":"post","link":"https:\/\/flevy.com\/blog\/technology-commoditization\/","title":{"rendered":"Technology Commoditization"},"content":{"rendered":"

\"\"Companies, especially technology related ones, used to spend a significant amount of time, effort, and capital to innovate and develop a Competitive Advantage<\/a> on the basis of their design and engineering.<\/p>\n

Development of high-tech production and design tools that integrate design and engineering knowledge has simplified the Innovation<\/a> and Production processes<\/a>.\u00a0 Consequently, it is now much easier for new entrants to leverage readily and cheaply available technical knowledge and tools to accelerate the development of their own technology-intensive products.\u00a0 We can call this phenomenon the Technology Commoditization.<\/a><\/p>\n

There are 3 primary reasons for this rise in Technology Commoditization:<\/p>\n

    \n
  1. Flagrant replication of Intellectual Property (IP).<\/li>\n
  2. Companies being compelled by governments to share technology in order to get permissions to do business.<\/li>\n
  3. Regular knowledge transfer due to employees relocating from multinationals to local companies.<\/li>\n<\/ol>\n

    In a few instances, these fresh, unknown companies are catching up with long-established companies and are turning out to be extremely tough competitors, all because of Technology Commoditization.<\/p>\n

    There are additional, less familiar factors at play as well, and they are accelerating commoditization and rendering product differentiation tougher to sustain.<\/p>\n

    On the bright side, Technology Commoditization has produced new worldwide competitors and has allowed for new alternatives for customers.\u00a0 At the same time it has also brought forth dire and possibly existential problems for established market leaders.<\/p>\n

    Market leaders now have to contemplate strategies to counter this existential challenge<\/a>.\u00a0 Incumbent companies can counter these pressures through the deployment of the following 4 strategies:<\/p>\n

      \n
    1. Instead of focusing on the commoditized portions of the Value Chain, emphasis should be on complex systems design and defendable areas.<\/strong><\/li>\n
    2. Differentiation should be based on pushing the design envelope and scaling rapidly in areas where embedded knowledge in tools is high.<\/strong><\/li>\n
    3. Noticeable IP should be the point of differentiation and should be uncompromisingly safeguarded.<\/strong><\/li>\n
    4. Process knowledge should be guarded in indiscernible areas.<\/strong><\/li>\n<\/ol>\n

      \"\"<\/a><\/p>\n

      Let us delve a little deeper into some of the strategies.<\/p>\n

      Instead of <\/strong>focusing on the commoditized portions of the Value Chain<\/a><\/strong>, emphasis should be on complex systems design and defendable areas.<\/strong><\/p>\n

      Numerous companies have assumed this approach, particularly in areas where the product can be distinguished into commoditized and proprietary components.<\/p>\n

      An example will be that of GE which acquires several of its components e.g., parts that are easily replicated for its commercial jet engines, from lower-cost geographical locations.<\/p>\n

      GE produces what it regards as vital parts, such as ceramic matrix composite blades and combustors, themselves, and executes concluding assembly in its own factories.<\/p>\n

      Differentiation should be based on pushing the design envelope and scaling rapidly in areas where embedded knowledge in tools is high.<\/strong><\/p>\n

      In case of reliance solely on high-tech tools, it seems rational to go beyond the tool capabilities in order to hold rivals at bay.<\/p>\n

      Leading chip-makers, for example, use this strategy by attempting to keep at the frontier of tool capabilities by driving improvements which utilize profound knowledge and expertise from various fields.<\/p>\n

      Noticeable IP should be the point of differentiation and should be uncompromisingly safeguarded.<\/strong><\/p>\n

      Such a strategy is logical only when handling Innovations where the<\/a> core invention is noticeable.<\/p>\n

      Companies can manufacture proprietary products that are difficult to make and then determinedly defend their patents.<\/p>\n

      Interested in learning more about Technology Commoditization?\u00a0 You\u00a0can download\u00a0an editable PowerPoint on Technology Commoditization<\/strong> here\u00a0<\/a>on the\u00a0Flevy documents marketplace<\/a>.<\/p>\n

      Do You Find Value in This Framework?<\/h2>\n

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      \u201cAs a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power. For us, it is an invaluable resource to increase our impact and value.\u201d<\/p>\n

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      \u2013 Roderick Cameron, Founding Partner at SGFE Ltd<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

      Companies, especially technology related ones, used to spend a significant amount of time, effort, and capital to innovate and develop a Competitive Advantage on the basis of their design and engineering. Development of high-tech production and design tools that integrate design and engineering knowledge has simplified the Innovation and Production processes.\u00a0 Consequently, it is now… Technology Commoditization<\/span><\/a><\/p>\n","protected":false},"author":110,"featured_media":11627,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"neve_meta_sidebar":"","neve_meta_container":"","neve_meta_enable_content_width":"","neve_meta_content_width":0,"neve_meta_title_alignment":"","neve_meta_author_avatar":"","neve_post_elements_order":"","neve_meta_disable_header":"","neve_meta_disable_footer":"","neve_meta_disable_title":"","footnotes":""},"categories":[84,82],"tags":[2993,122,2996,2995,232,2994],"class_list":["post-11621","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-information-technology","category-operations","tag-commoditization","tag-competitive-advantage","tag-intellectual-property","tag-system-design","tag-technology","tag-technology-commoditization"],"_links":{"self":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/11621","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/users\/110"}],"replies":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/comments?post=11621"}],"version-history":[{"count":8,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/11621\/revisions"}],"predecessor-version":[{"id":11695,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/11621\/revisions\/11695"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media\/11627"}],"wp:attachment":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media?parent=11621"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/categories?post=11621"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/tags?post=11621"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}