Saturday, May 10, 2008

what will be the next sector that becomes commodity?

When customer cares about cost more than brand name, the product becomes commodity. The commoditization of a market is usually the opportunity for new-comer to beat the incumbent.

Camera becomes commodity when Japanese optical shops became camera makers (Canon, Nikon, Olympus) in 1930s. Leica, Kodak eventually lose the market.

Copy machine becomes commodity when Xerox patents expired in the 1980s, and Canon, Epson, after eating the low-end market, eventually took the majority of the whole market.

PC has become commodity since Dell took the market (HP is now the leading competitor). Webstore has become commodity since eBay is around (Amazon marketplace is the leading competitor).
Ironically both HP and Amazon was the market leader when those two sector were still "hi-tech" instead of commodity.

Cloud computing is at the verge of transfroming from "hi-tech" to commodity (Amazon EC2, Google App engine, MS live mesh). Sun, who came up with the slogon "the Network is the Computer" about 9 years ago, has lagged behind. Their Grid Computing in 2006 failed because of compatibility, and lack of on-demand storage solution to bundle with. They recently launched "Hydrazine" to catch up in this area that they pioneered. IBM, who commercialized computing on-demand using their mainframe is trying to lower the cost by borrowing PC-based technology from Google. IBM survived largely because their strong foothold government and defense market.

Search is still considered "hi-tech", although the technology itself has been quite mature (scalability is the real entry-bar now).
OS is still considered "hi-tech", although "free" Linux has beaten MS in the server market. MS still owns enough desktop OS market to survive. 

That's a lot of jargons to swallow if you aren't following these things. But my gist is the following:
Innovators usually miss the trend when their own invention becomes commodity. Their technical advantage can't beat competition from the low-cost competitors. They sometimes were able to catch up in the low-cost war (e.g. Amazon and HP), sometimes not (e.g. Leica, Kodak, Xerox, Sun, IBM).

So what will become the next sector?
Is it mass media? (newspaper, TV replaced by online media) Or publishing?

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