How the world has changed, and why flooding the market with endless product variations no longer provides value.
Bold, Incredible, Invincible, Hero, Titan. These are words not to be ascribed lightly. Their weight and power lie in their exceptionalism – an exceptionalism defined by risk-taking, sacrifice, and numerous intangibles never to be possessed by the majority, after all we can’t all be bold, invincible, heroes, or titans, just as we can’t all be the 1%.
Capitalism bears a strange fruit – one of its many idiosyncrasies. When a new disruptive product catches fire, single-handedly forges new markets, cottage industries, and changes the world, it becomes the stuff of worship. I don’t think I even need to cite recent examples, suffice it to say I’m writing this article on a tablet that’s not an iPad. One of the pillars of Marx’s critique of capitalism is the concept of Commodity Fetishism or Commodification. It’s the idea that human-object relations are mystified and distorted by value as created and defined by the free market. Nowadays we call it fanboyism – the almost religious zeal with which some of us consume particular products. Commodification is every marketer’s ultimate goal.
This where things get interesting. Because ours is an economic system built of competition, other companies create facsimiles of our beloved, hoping for a slice of that sweet Commodified pie. But since they’re not first to market, they need to present some type of value-proposition: better, faster, more. One thing that is all but guaranteed is a lower price. The more players enter a market, the more prices dive – this goes all the way up through the supply chain. But the lower the prices drop, the thinner profit margins become. All of a sudden it’s a race to the bottom based on volume rather than quality. Like a hilarious joke that loses its force with each retelling, consumers are eventually flooded into a state of indifference. Where once there was an iPhone, now are hundreds and hundreds of “smartphones” – a mass of hyper-differentiated products varying by irrelevant degree, screaming to be heard with inanely hyperbolic and hollow names like Bold, Incredible, Invincible, Hero and Titan. When all are, none is.
Commodification transforms to Commoditization. Despite rolling off the same regions of the tongue and with the same syllabic rhythm, the two could not be further apart in meaning. Commoditization is the process by which goods and fetishes loose their differentiating flair and become commodities – think eggs or milk. Better yet, think vanilla (or combine the three into ice cream – but I digress). What once only graced the tongues of Aztec kings has now become cheap and readily available – a synonym for “plain”, or for the sake of this article: “boring.”
Paradoxically, in the spirit of making something better, the fetish becomes the commodity through hyper-differentiation. As if by Hegelian dialectic design, the fetish and the commodity – born of the same ilk – synthesize into a product-offering which more closely resembles socialist central planning: uninspired uniformity. This strange fruit is a product of the creative-destructive logic of the free market. Did you get all that?
During the capitalist-communist duality of the cold war, “more is better” was as much a self-justifying Western virtue as democracy itself. In the economic golden age of the1950s we taught our children that freedom of consumption was freedom of choice, was freedom of worship, was freedom of speech, etc. A free market is a free people – and there’s certainly truth to this, but I’ll save that for another piece. In order to combat communism, we produced more and more things, and grew our freedom until we literally and figuratively consumed the Soviet Union into oblivion. A duality no more.
Things have transformed greatly in the past generation. The free market caught a nasty, nearly fatal autoimmune disease. All of a sudden, less was being produced, and less was being purchased (per capita). Lacking the counterpoint of the Soviet Union, we also had less of a moral obligation to produce and consume. With less disposable income, we had to make smarter buying decisions. We began to question the “more is better” paradigm. Communism no longer seemed an existential threat to free market capitalism, as China demonstrated the validity and power of a centralized market economy – something that would’ve been utterly absurd to old Karl. We are now competing with several billion more people for the same resources, so we gotta make the most of ‘em.
Less is More
This new economic reality has shifted the paradigm from “more is better” to “less is more.” We see it everywhere. Apple has become the biggest company in the world by employing this philosophy. Instead of offering endless varieties and variations of products, they release one of two, while utilizing the same design and materials for extended periods. The current iPhone’s design will turn 2-years old in June, yet it’s still the best selling smartphone in the world. This model allows for more expensive materials and manufacturing processes to be used, which pay off in the long term through economies of scale compounded by high-volume component-buying power. Even Apple’s product names embody this minimalist brilliance, keeping away from constantly-changing impersonal numerics or hyperbolic fluff. On the other hand, competitors like HTC, Motorola, and LG are competing on volume with hyper-differentiation, in some cases releasing dozens of models every year.
As the smartphone market begins to mature, a temporal dilemma emerges, with some major perception and mindshare consequence. If the only way to sell smartphones at volume is through massive carrier subsidies that are bound by 2-year contracts, why do companies like HTC come out with new Android phones every few weeks? Now, I know there’s a mass of people constantly coming off contracts, ready to buy something new. But consider what happens when you buy a smartphone that you’re stuck with for 2 years, and something new comes out a few weeks later from the same manufacturer. This isn’t buyer’s remorse, this is buyers’ betrayal.
The volume at which new smartphones, namely Android’s are released vis a vis 2-year contracts is causing huge problems for manufactures, and yet because of this hyper-differentiation race to them bottom, they’re left with no choice but to keep up with the Joneses. With an iPhone, consumers know they have the newest and best Apple phone for at least a year, as opposed to less than a month with Commoditized alternative. Add to that the fact that cost of ownership is about the same for a Commodified iPhone, and you begin to see the problem with the commodity smartphone business model.
Want proof? Visit HTC’s website. They offer about 20 smartphones (HTC Velocity 4G, Sensation XL, Explorer, Rhyme, Sensation XE, Radar, Sensation, Evo 3D, ChaCha, Salsa, Incredible S, Desire S, Wildfire S, HD7, 7 Pro, Trophy, 7 Mozart, Desire Z, Desire HD, Aria) – that are all currently on the market! Want more proof? Here’s HTC UK’s chief Phil Robertson recently saying: “We ended 2011 with far more products than we started out with. We tried to do too much… We need to make sure we do not go so far down the line that we segment our products by launching lots of different SKUs.” Indictment. Similarly, here’s Motorola CEO Sanjay Jha speaking at last month’s CES: “A lot of products that are roughly the same doesn’t drive the market to a new place.” Indictment. After suffering a $1.2 billion Q3 loss, Sony is appointing PlayStation boss Kaz Hirai CEO – a vote of no confidence against Sir Howard Stringer’s failed something-for-everybody strategy. Indictment.
So what does this all mean? In today’s economy and world, hyper-differentiation does not work like it used to. More is not better. Rather, less is more. This is at the heart of green/conscious consumerism. It’s even changing the way we communicate. There’s no technological reason as to why Tweets have to be so short, and yet we love connecting in 140 characters or less. As the world shrinks, populations grow, and capitalism flows through every corner of the globe, we will have no choice but to make more with less. Gone will be the days of offering a million different varieties of everything. The future will require better use of resources, and more focused R&D. Companies will have to make better products rather than relying on superfluous names. But this is a good thing. After all, nothing says “capitalism” quite like efficiency.
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