The commodity trap is a phenomenon that increasingly affects not only developing economies, but even the most advanced companies in a specific industry. As organizations realize it is almost impossible to successfully compete in a race to the bottom, it is important that they redesign their business model around services and experiences that align with customer demand.

Startups have achieved growth and scale at uprecedented levels because executives and investors are obsessed with validating ideas in the market. Established companies that approach their customers or desired customers and validate through an iterative, cheap, and quick process can leverage technological trends and stop fearing them.

As they release products around a service, companies should be able to prioritize parts of a service that customers want with the product and parts that can be sacrificed or automated to maintain economies of scale as the organization improves its ability to have economies of scope. Doing all these things is obviously not easy but it all starts with a mindset of leveraging internal and external technology to fulfill customers’ needs and an efficient go-to-market.

 

For more information, see Ch. 1 Open Services Innovation (pg 25) by Henry Chesbrough