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Ask HN: What are the signs a piece of technology will become commoditized?

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31–40 of 54 posts

Re: Ask HN: What are the signs a piece of technology will become commoditized?

#31
post #14

I don't mean this quite in the 'derogatory' way it's going to sound like, but offshoring is a serious sign of trouble when it comes to commoditization. If what you're doing as a business can be done for a fifth of the cost in the Philippines, India, etc, then you have a serious clock on your business model before the 'quality, quality, quality!!' argument runs out. Seen it with a few things now. The biggest flaw that…

"The biggest flaw that businesses do in this situation is believe in that the quality of the product will continue to outweigh the cost difference. It won't. ;/" Do you count the loss in sales as cost? Or time to rework something? Sometimes it's hard to figure out if there's going to be a correlation before you do it. About 10 years ago, we tried to do most of our work offshore. Company said they could hire 5 enginee…

Sounds like a very familiar story to ours.

Point being, commoditization is not a binary. It's not on or off, there's varying degrees of just how bad it is. At some point during that scale, the quality argument tends to fall down a little bit and I've seen it happen a few times.

Interesting to hear you still offshore though, despite obvious troubles.

Re: Ask HN: What are the signs a piece of technology will become commoditized?

#32
post #18

- When there is a bunch of people on the internet discussing it. - When you can buy the components on Alibaba for a fraction of the publicy known price Example: electric powertrain for cars. You could convert your car in a pure electric one for less than 4000USD by buying the motor & controller on the internet. And 22kWh worth of batteries (18650) for less than 6000USD. Very interesting stuff!

>for less than 4000USD I'm assuming this isn't including paid labor and you're doing the engine/tranny swap yourself? Do you have any links to people doing this?

Here's my favorite:

https://endless-sphere.com/

Re: Ask HN: What are the signs a piece of technology will become commoditized?

#33
post #32

Earlier quoted context omitted.

>for less than 4000USD I'm assuming this isn't including paid labor and you're doing the engine/tranny swap yourself? Do you have any links to people doing this?

Here's my favorite: https://endless-sphere.com/

Thanks!

Re: Ask HN: What are the signs a piece of technology will become commoditized?

#34
It seems like people are assuming that all products are commoditisable from a market point of view, and from an industry point of view, which isn't true.

E.g. Just because watches are commoditisable from an industry point of view, in the sense that they can be manufactured en-masse for next to nothing, the buying behaviour by consumers for watches indicates that they can not be commoditised, because brand equity is a factor in purchasing, features of the watch are a factor for purchasing, etc, and therefore product differentiation stops them being a commodity.

On the other side, just because consumers would accept commoditised, mass produced, cutting edge CPUs, does not mean that industry can provide this. The barriers to entry for this industry prevent them from being commoditised (R&D costs, human resources, capital costs and so on)

So to look at what technologies may soon become commoditised, you need to analyse current and future demand, and current and future supply. You'd also need to analyse both the markets for the product, and industry groupings within the supply chain for that product. Some simple analyses might give you an idea, e.g. a proper Porters Forces analysis, consumer indices, technology trends, etc.

An interesting current example for me are 3d printers. Because the barrier to entry for designing and creating and selling a rudimentary 3d printer is so small, it has the potential to be commoditised. But from a marketing point of view, it probably can't, because it's a new technology and so brand differentiation might affect buying behaviour. From a consumer perspective, not enough people want or care about 3d printers, so in turn, suppliers wont churn them out. From an industrial point of view, it would be hard to create barriers to entry for new entrants to the market because it's not complicated to create a rudimentary one, so it's probably not a profitable venture for incumbents, and so on.

Another example would be the resurgence of VR. That's an interesting one because you can witness companies doing their best to create barriers to entry for new competitors, to avoid it being a more commoditised product, despite also being easy to create a rudimentary version (emphasis on 'rudimentary'!)

From a marketing fundamentals point of view though, commoditised products tend to be ones that are cheap to make, are consumed in some manner, and which consumers don't have a brand preference for, therefore buying the cheapest product available. E.g. screws, staples, but not, say, certain breakfast cereals (because people exhibit preferences for different brands of cereal and don't just buy the cheapest possible). Most new technologies can't fall within these parameters.

Re: Ask HN: What are the signs a piece of technology will become commoditized?

#35
post #25

payment processors

To some extent.

You can write a nice layer over the top but fundamentally underneath payment processors are controlled via Visa and Mastercard.

That's one of the reason payment processors are so damn careful to descend like the wrath of an angry god when someone does/sells something Visa or Mastercard wouldn't like.

Re: Ask HN: What are the signs a piece of technology will become commoditized?

#36
Many products/techologies follow the S-curve. Slow start, exponential growth, plateau (mature product, 3-5% growth per year) - and then slow death. From my perspective, we have a broad set of capabilities. Let's take transportation. There are performance attributes like time, speed, work, power, mechanical efficiency, etc. The wheel was a technology that was surpassed by the horse and buggy and then eventually the automobile. The capability is needed but the technology or family of products eventually becomes obsolete.

Commodity products are on the plateau. The technology has been proven and there is broad market acceptance. The unit cost has been brought down substantially from the point of market entry. Tesla's electric vehicles are pushing in this direction but it will still take some time.

Re: Ask HN: What are the signs a piece of technology will become commoditized?

#37
post #5

Earlier quoted context omitted.

Nuclear power. Most things military. Many things aerospace.

You could make an argument that those things aren't bought and sold in a free market. Passenger planes and general aviation planes are at least semi-commoditized, but fighters, bombers, spy planes, missiles are all built for basically one buyer, the US DoD. The DoD decides which firms succeed and which fail, essentially. The "market" for nuclear power plants is so regulated as to prevent it from being "free" except t…

I wouldn't call the market for general aviation semi commoditized. Even the state of is working hard to create a decent competitor.

Re: Ask HN: What are the signs a piece of technology will become commoditized?

#38
post #31

Earlier quoted context omitted.

"The biggest flaw that businesses do in this situation is believe in that the quality of the product will continue to outweigh the cost difference. It won't. ;/" Do you count the loss in sales as cost? Or time to rework something? Sometimes it's hard to figure out if there's going to be a correlation before you do it. About 10 years ago, we tried to do most of our work offshore. Company said they could hire 5 enginee…

Sounds like a very familiar story to ours. Point being, commoditization is not a binary. It's not on or off, there's varying degrees of just how bad it is. At some point during that scale, the quality argument tends to fall down a little bit and I've seen it happen a few times. Interesting to hear you still offshore though, despite obvious troubles.

We had offshoring before. But the push 10 years ago was to do the bulk of work offshore. Like to have the lead here working with 5 developers there.

I can still see it working though. 5 to 1 is hard to ignore (although I think it's like 3 to 1 now). It comes down to implementation. Like everything else.

Re: Ask HN: What are the signs a piece of technology will become commoditized?

#39
If a technology is useful, I think it's guaranteed that it will eventually become commoditized. But as to the process, check out Simon Wardley's work, including Wardley Maps:

http://blog.gardeviance.org/2015/02/an-introduction-to-wardl...

Re: Ask HN: What are the signs a piece of technology will become commoditized?

#40
post #25

payment processors

To some extent. You can write a nice layer over the top but fundamentally underneath payment processors are controlled via Visa and Mastercard. That's one of the reason payment processors are so damn careful to descend like the wrath of an angry god when someone does/sells something Visa or Mastercard wouldn't like.

Exactly. But now we have Bitcoin. There's non-zero probability that banks will switch to it under the hood[0] and there's especially high incentive for small ones that want to do international transfers[1]. Once we have common protocol, you can use whatever payment processor you want, and unlike now, you can create one in your garage.

It's not hard to see that I'm biased towards Bitcoin, but even assuming it doesn't exist, sooner or later banking system as we know it today must change (dramatically). I would assume this will make companies like Visa and Mastercard much less relevant.

[0] - http://www.coindesk.com/bank-of-america-cryptocurrency-wire-...

[1] - https://www.reddit.com/r/Bitcoin/comments/3ncat3/why_bitcoin...

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