Thursday, July 20, 2006

A driving force for change

For the last ten years, I've been talking about 3D printing and how it will commoditise manufacturing.

For about the same amount of time I've also been talking about commoditisation of IT (and later on such concepts as worth based development) and been actively doing something about it.

So what's with my obsession on commoditisation?

In the world of business, most things break into three basic categories - competitive advantage, cost of doing business and the "in-between" or transitional state.

Competitive advantage is something which is novel, new and brings a real return or benefit to your business. It differentiates you and your competitors.

Novel and New? Well if your competitors are already doing it, it's not going to bring you any advantage over them and it's more likely to be a cost of doing business. Of course if it is novel and new then it is also untried and therefore risky.

Real return or benefit? Well if it doesn't then it is unlikely to be an advantage.

Most businesses live in this world of competitors who will always try and level the playing field by implementing similar measures. Hence any competitive advantage tends to be generally short lived, of course I'm talking here about a functioning fluid free market rather than any monopoly like situation.

As your once "competitive advantage" spreads throughout your industry, it becomes a cost of doing business. You need to do this to compete - try setting up a freight service without a modern transport system.

The characteristics of "cost of doing business" are necessity (i.e. you need to do this to compete), it brings no value (i.e. it does not distinguish you from your competitors, you just need to do this in order to compete), it's long term and because everyone else is doing it then most of the lessons have been learnt and so it tends to be lower risk.

Roughly speaking,

Competitive Advantage (CA) - novel, new, high risk, short lived and high return,
Cost of doing business (CODB) - necessity, known, low risk, long term and no return.

A debate I often get into is funding of software projects. If the project has the characteristics of competitive advantage then ideally it should be driven by principles of worth based development - a venture capital approach to development where both parties share in the risk and returns. This also has the advantages that both parties focus on the results and create agreed measurements for the results of the project rather than the usual client / supplier focus on the specification and who changed what. (Given that the project is novel and new, then the project itself is principally an R&D exercise and the specification will be fluid - however that's another debate on project management methods and the difference between dynamic and static processes).

If the project is CODB, then "cheap as chips" is the order of the day. Ideally you want an off the shelf product or even better a utility service.

The basic order goes roughly like this.

1. Company A thinks of some new thing called Y which brings a potential CA, they build it.

2. Y is a success.

3. Company B and others create equivalent their own Y's to level the playing field (a consultancy field is created).

4. Company C and others create standard products to do Y (a product marketplace is created, and Y is now becoming a CODB).

5. Company D and others create utility services to do Y (it has now become a commodity which businesses use and take for granted).

This is the bit where normally argument start. However, I'll say my piece.

Most software is following this process. Furthermore most activities are following this process as well.

By activities I mean things like :-

Trading - which has been commoditsed by money and has utility services known as banks.

Energy - which has been commoditised by utility services such as electricity providers.

Communication - which has previously been through this route and is now being further commoditised by the internet.

Data processing - already gone through the standard products (silicon chips - ICs, servers) and entering the utility stage (HaaS).

Software - impact of internet, web services, HaaS and other enhancements is leading to utility provision of (SaaS) and also utility development of (i.e my company's own product Zimki is an example of this)

This in my view is an important process. Many of today's industry depends upon reliable utility provision of energy, currency and communication and so forth, as well as massive provision of computing power - they couldn't exist without it.

Tomorrow's industry will have utility provision of energy, currency, communication, data processing and information technology etc. They will depend upon it in much the same way, it will just be seen as a cost of doing business.

Commoditisation is linked with what many would loosely call "progress", it's a process of where that which was novel, new and of benefit becomes commonplace, ubiquitous and almost taken for granted.

That's why 3D printing has always interested me. At the heart of this is the commoditisation of the manufacturing process itself, where "factories" no longer have novel characteristics but instead a general, commonplace and everywhere (the shop, your home place etc).

Today you can already for example "inkjet" print physical 3D structures in a variety of materials as well as "inkjet" print working electronic systems ( transistors etc) and even displays. Many of these processes are being commercialised today.

The progress has been remarkable in the last ten years, and it is not unreasonable to conclude that in the next ten years entire functional systems will be printed as such new & novel methods bring real advantages in terms of cost, freedom, and conservation of materials & energy over the existing methods.

As such it will first be used for CA, and then become CODB, eventually commonplace and commoditised by which point tomorrow's industry will be built upon reliable utility provision of energy, currency, communication, manufacturing and so forth.

At that future time, we will all look back at the days of companies with their own factories, in much the same way as we look back today at companies in the past with their own electricity generators or own servers - a sign of how society has progressed and changed.

Of course, by then we will all be busy commoditising the next big thing - whatever that is.

--- Update 4th July 2014

Unsurprisingly, things are progressing nicely as expected. No big shocks or major changes.