Complexity Leads to Commoditization

I get into a lot of conversations about the increasing Complexity in our customers environments and how that rolls down hill to us. All of our worlds are getting more complex as competitive environments intensify, access to information continues to expand and expectations continue to rise. What is the impact on your customers?

I believe that as our customers’ world gets more Complex that it actually leads to the Commoditization of your goods and services. You are likely feeling margin pressures on your deals. The theory that I am putting forward is one of the reasons you may feel commoditized has do with your customers challenge in being able to make decisions. There are several factors at play here.

Your customers have access to more information and potentially conflicting information, then they could ever imagine. As they self-educate, it will be natural that they are overwhelmed by information and the options available to solve their problem. As more people become part of the Buying Process on the customers’ side, that again creates more complexity, as every new person arrives with their own perspectives, biases and experiences. The only thing they may be able to agree upon is either DO NOTHING or to find a solution that is “GOOD ENOUGH” and then grind the best price.

Complexity makes decision making harder. As we become more risk averse, but see the benefit of change, we need to find the lowest common denominator. All solutions begin to look the same and if procurement is involved, they will definitely try and make solutions look the same. This allows the customer to move forward and to simplify the surrounding complexity. The side benefit for them through commoditization is driving a better price.

The danger for us [or the opportunity] on the sell side of the equation is being commoditized or losing to the “good enough” solution. You may be the vendor that offers the good enough product or service and you can actually use complexity to get the customer focused on the risk of change and then sell the “Theory of Good Enough”.

The encouragement here is not to underestimate the complexity in your customers’ environment and the impact it has on how they acquire goods and services. More than half the time they will do nothing and if they do make a decision, the complexity involved may lead to a decision that you do not want them to make. These factors will impact your choice to participate [or not] and you strategic choices of how to differentiate.