I found this comment by MIT’s Arnoldo C. Hax on commodities very insightful:
“A final comment about a very important trap that many managers fall into: the dangers of commoditization. At the beginning of my work on the Delta Model, I coined a silly statement, thinking it was a joke: “Commodities only exist in the minds of the inept.” It turns out it isn’t a joke. Obviously a product could be a commodity. Take copper. The product cannot be differentiated, which makes it a commodity. I cannot say that the Chilean copper is superior to the American copper. But copper as a business — the way that Siemens uses copper in their power plants, the way that GM uses copper in their cars, the way Carrier uses copper in their air conditioning units – is completely different.
Therefore, commodities don’t really exist. The customers are all different, and if you do not understand that, you are commoditizing something — and believe it, there is so much of that happening in business in America. Typically, when I’m teaching these concepts, I ask the group of executives I teach, “Tell me, among all of you present, how many of you think that a significant percentage of your business comes from commodities?” And invariably, 100 percent of the hands come up, and I know then that they have come to the right place — because they are not thinking correctly.”