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Anything That Can Be Turned into a Commodity, Will Be

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The concept of outsourcing is not a new one. While it may have existed under different names, for as long as industry and services have been around, decision makers have relied on those outside of their realm to contribute to the ecosystem of bringing products to life.


Historically we haven't paid much attention to this practice. It was done outside of our backyards whether in a different country or by small non-threatening entities. But within the last decade, the web has facilitated the shift of many opportunities from outside to in. It's done this by utilizing the easy access to the crowds. factory-com-mpdaily-fix.jpg
Those crowds are not in some far off place anymore. They are among us and the opportunities they're being presented with are being displayed in front of us. Those who are being pushed out of taking advantage of theses opportunities continue to argue against this practice. Whether it's journalists, designers, or pretty much any "established" company that sells a product, the mindset of "the traditional way is still the best way" is still being fiercely promoted to would-be customers and the general public. But despite the heated debates and PR efforts, there is an important reality that needs to be acknowledged:
Anything that is legal, and that can somehow be leveraged by an entity to generate income, will be.
The arguments are not going to end, but there is going to come a point in time when organizations need to make one of the three choices.
1.
Ignore the situation and try riding it out in hopes your consumer will come back to you.
2.
Accept this now and begin to restructure to incorporate these types of functions.
3.
Offer a service that overcomes the efficiency of crowds with uniqueness (while retaining competitive margins).
Ignore: Roll the dice. Regardless of price or product, sometimes it all comes down to economics. Certain industries are losing market share to crowdsourced services but perhaps the trend won't be permanent. Something that is considered a commodity one day, might not be the next. There is a direct correlation between discretionary income and irrational spending. There is always the possibility the market will once again support this habit.
lego-com-mpfix.jpgAccept and Embrace: If a company provides (some) goods or services that may soon be turned into a commodity, then embracing that fact may be the first step in building a business model that thrives under the upcoming business climate. Agency BBH took a big risk by using design site Crowdspring to create its new logo. BBH is an organization full of creative individuals (some of whom threatened to quit if the agency went through with this partnership) yet chose to reach out to the global designer community to meet its needs. This angered a LOT of people, but if the trend of making (some types of) design work a commodity continues, then BBH's $1500 experiment may pay off big time.
We all got to see how this scenario played out outside of the company, but only the leaders of BBH got to see how this worked internally. They are the ones who now have the knowledge of how to adapt to this situation if it becomes increasingly common. They are also the ones who will know exactly which types of talent to grow in their company, and which they can slowly phase out. I'm not saying this isn't an unfortunate reality, but it is one that people need to understand is very possible. Those who are in a potentially doomed situation can use the time they have now to prepare themselves for the future before it's too late. (The newspaper industry had a significant head start but only now is starting to react).
Compete and Overcome: If accepting and embracing isn't an option for your company (or your pride), then the only other avenue is to offer a product or service that is so unique and valuable that price becomes less of a deciding factor for your client. This isn't impossible of course. If price were the only thing that mattered then everyone would shop at Walmart. But it's going to mean that those who survive the commoditization of their product are the ones who offer a "remarkable" version of it (to quote Seth Godin). The other reality is that those who survive this change in economics are going to notice that the population of their peers is much smaller than it used to be. Afterall, not everyone can be remarkable, and not all clients are going to want anything except a low cost (even if what they're buying is just "good").

Reality Check

The point of this post is not to debate write or wrong, or to question the ethics of certain sides. That is a pointless exercise because as I alluded to earlier, if money is involved, SOMEONE is going to take advantage. This post is meant to serve as a friendly reminder that the argument needs to stop all together. The energy that is being expended towards fighting a growing trend needs to be directed elsewhere. There are many routes organizations can take in effort to save themselves from potential extinction, the key is to start evolving as soon as possible. Take risks. Try something that is completely foreign. The more chances you get to experiment between now and your potential extinction, the more chances you'll have to discover something that proves more valuable than a simple commodity.


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Len Kendall is a Chicago native with a passion for technology, advertising, and film.

Len is a Digital Supervisor with GolinHarris within the Dialogue Group. The digital/social practice of the agency. His client work includes Mercedes-Benz, Allstate, McDonald's and Walmart. He is also the CoFounder of the3six5 project, a collective diary of 2010.

In Len's downtime he can be found blogging at www.constructivegrumpiness.com tweeting at twitter.com/lenkendall and sharing random thought nuggets at lenkendall.posterous.com

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Comments

  • by Paul Barsch Tue Apr 28, 2009 via blog

    Len, good topic you've tackled here. Every organization should be on the lookout for improvement opportunities and "more value for less" money. That may come as a result of crowd/out sourcing, or simply looking at a challenge in a new way. Status quo isn't an option for very long, there's just way too much competition.

  • by dominic Tue Apr 28, 2009 via blog

    Thanks for this great discussion. In the context of Newspapers and "maybe PR", I wonder whether what's at play is more desintermediation than outsourcing.

  • by Ross Kimbarovsky Tue Apr 28, 2009 via blog

    Len - I enjoyed the article. Thanks for mentioning crowdSPRING. I wonder how you define "commodity" and how you'd differentiate, based on that definition, traditional marketplaces - where designers bid based on pricing, from crowdSPRING, where buyers set their own price. Best, Ross Kimbarovsky co-Founder http://www.crowdspring.com

  • by Matthew T. Grant Wed Apr 29, 2009 via blog

    Len - I appreciate the realism of this perspective. Crowdsourcing, like outsourcing before it, is part of the landscape now and individuals as well as organizations need to adapt to it. As long as these practices are legal - and for all the talk of ethics, it's interesting to note that no one is advocating legislative action against them - as you point out, someone will use them. What people need to be asking themselves is either "do I have a use for these practices?" or "can I offer a reasonable, competitive alternative to them?"

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