Every business is a commodity

That is until your customers can easily distinguish your business from the rest of the market and experience for themselves some added value. If your customers can not detect any distinguishing features from your business and the rest of the market, they are left to themselves to differentiate your product on something we all understand – price. Then you truly are a commodity (unless you are Wal-mart. Their distinguishing feature is price!).

You might think that coffee and web hosting are commodities. However, I know of at least two companies that think otherwise:

Starbucks doesn’t just sell coffee. Starbucks thinks of their local stores as a “third place” (besides home and work) where people can go to build a sense of community. This focus on people and the customer experience is what lead Howard Schultz, the CEO of Starbucks, to say, “we’re not in the coffee business serving people, we’re in the people business serving coffee”.

Rackspace is a web hosting company. However, they do not see themselves as just a web hosting company. They see themselves as a world class service company that just so happens to be in the managed web hosting industry. Rackspace’s distinguishing feature they call “Fanatical Service.” In a nutshell they describe it as, “our drive to do more than what our Contracts, Service Level Agreements and guarantees say we will. It’s our need to make a difference every day to you and every customer.”

If we learn from Starbucks and Rackspace, the best way to get out of being in the commodity business is to never put yourself in it. In other words, make your product stand out. Just because your product may be purchased elsewhere does not mean that your potential is limited by the inflexible boundaries of a commodity. For the most part, commodities are built from the mind set from within a company. If you think you are a commodity, you probably are!

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One Response

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