Commoditization of Processes – Next in Digitization

So, how does the world perceive the next big thing technologies like artificial intelligence, IoT, immersive technologies (VR, AR) etc. in information technology? Is it how they improve process quality, reduce costs, overall process visibility, provide better decision-making insights. The question that’s rarely asked is “why they are the next big thing”. The common thread underlying all these emerging technologies is to understand if and how they might be as transformative as previous “next big things” like internet, mobile, cloud or big data.

The real trend emerging for the digital revolution is the commoditization of processes and technologies that had previously been available only to big corporations.

The internet was the commoditization of networking and communications. Mobile was the commoditization of end-user computing. Cloud is the same for storage and processing power. And big data is the next step in the process, commoditizing high-volume information.

The emergence of blockchain, AI and service automation represent a new phase in this digital evolution. They are the examples of commoditizing processes.

Blockchain promises to make the process of financial transactions and contractual interactions into a commodity. Transactions that were once only possible for huge, international organizations could, with blockchain, be open to startups and individuals.

Service automation will make customer engagement processes a commodity – allowing companies to offer customer services previously only available to those who could afford access to a large call center, for example. AI further commoditizes access to knowledge processes.

But for IT leaders looking to utilize these next big things that will benefit their business, understanding the underlying commoditization of technologies and processes, gives them a valuable indicator of when and how to invest.

The path to commoditization often start with products and services offering differentiating features that allow for premium pricing.

The standardization and commoditization of processes will also require changes in strategies. As an increasing number of processes become common within and across industries, executives will need to revisit the basis for competition in their businesses. They’ll have to decide which of their processes need to be distinctive in order to make their strategies succeed and which can be performed in a relatively generic and low-cost fashion.

Even in today’s environment, most executives have yet to decide on what processes are core and noncore which will definitely be much more critical in the future.

Once process capabilities become commoditized, providers of process outsourcing services will have to find other sources of differentiation. For example, IT companies may begin to highlight not only their efficient execution of business processes but also ideas, insights, and innovations on how to perform them better. Creating shared services and processes across companies offer scaled efficiencies.

For example, when Apple introduced the iPhone in 2007, the differentiating features included a touch screen interface and multitasking feature that allow owners to surf the web while on a phone call. While all these features were later commoditized, iPhone differentiated itself from every other mobile phone on the market through its Siri, the voice-activated digital assistant.

Due to declining prices and narrow profit margin from products and processes with no distinguishable features, one of the primary challenge for businesses is delaying commoditization. Apple’s constant innovations with each new iteration of the iPhone is one such example of delaying commoditization.

Bundling commoditized products or services with related offerings can also provide identifiable differences. For example, cable companies bundle highly commoditized landline phones with internet and television services.
Process standardization may also mean that it’s possible to combine certain processes with their competitors’, if these processes offer no competitive advantage.

Commoditized processes benefit consumers with increased access and lower prices. Consumers can now compare services based on price only, with the assurance that the service with the lowest cost is the equivalent of higher-priced versions. As companies compete to sell commoditized processes, consumers also benefit by being able to choose among the different offerings that are put forth to differentiate products from competitors.
Process standards lead to commoditization across industries leading to more competitors, and lower prices for the process services that companies offer. If your processes are world-class, GAVS Technologies will help you create an opportunity to begin providing the service to others through its Digital Solutions including GAVel, Analytics, Zero Incident Framework™ etc.