Commodity or Commodity Trap?

  • February 28, 2011
  • Scott

Dave Brakoniecki’s post on Nokia, Apple, and the Commodity Trap takes issue with Henry Chesbrough’s argument that Nokia had fallen into a commodity trap – essentially that it was not thinking about its business as a service business.

But Dave argues that actually, the problem is that Nokia’s market has been commoditized at the low end by contract manufacturers around the world, and at the high end, by Apple and Android, which commoditized the app business:

While it was asleep, contract manufacturers made the fabrication of complex and high-quality products a commodity business.  As Chesbrough correctly notes this trend has eroded Nokia’s competitive advantage and their position in the market.  […]

Ironically, at the other end of the market, Apple and Android have also commoditized the market, just a different market.

Yes, they are selling premium hardware but the handset market has always been heavily subsidized by telecom providers in exchange for long-term contracts.  […]  First, Apple and then Android essentially commoditized application development in a way Nokia never managed.  Apple and Android have made the mobile data services market explode.

By including a usable browser and making app installation plug-and-play, suddenly anyone could build a data service.  There really isn’t that much the iPhone does that you couldn’t achieve on the Nokia N95 but the amount of effort and development pain involved simply made it pointless.  The pain outweighed the utility until Apple made it easier.

Put another way – Apple has commoditized its complements – application development, for example – more effectively than Nokia has.  And if you can commoditize your complements, then commoditizing is a good thing.

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