Free, perfect and now: Part 1

What happens when “functionality” becomes free, perfect and now? It’s the inevitable and logical conclusion of cheaper, better and faster.

Take long distance communication as a functionality. With the combination of computer-to-computer phone, messenger, email, the functionality is free, it’s good enough to be called perfect and it’s instantaneous (“now”). Maybe it’s not available to everyone, but it’s a strong trend.

So what happens when “functionality” becomes free, perfect and now? What do you charge money for? How do you build your brand?

It can be argued that the world can be divided into the world of bits and the world of atoms. In the world of bits, this hypothesis looks plausible. But what about the world of atoms? Will a car become free (the functionality of moving from point a to a reasonably distant point B)? What about razors? What about tables and chairs? The world of atoms has to recover its marginal cost of production.

There are 2 forces at play in the world of atoms. One is the steady reduction in the marginal cost of production due to globalization. The second is the relentless pursuit of technology that will overturn our current concepts and make many things, those we take for granted today, obsolete tomorrow. An example is nano-technology. It creates self cleaning clothes. Goodbye detergents.

So if functionality is free, what will companies charge for? And what will consumers be willing to pay for?

I believe there are 3 things that companies of the future will have to focus on.

The first is to provide “cool experiences” to their customers. An example is the cellular ring tone. The cost of talk time is going steadily down, but ring tones are expensive. In India, people have customized ring tones for different people who call them. And these are expensive. Yet, people change their ring tones on a regular basis. You don’t really need it as a functionality, but it’s a cool experience.

The problem with a cool experience is that it gets stale. So, you have to continuously refresh them. Which means that companies have to innovate on a regular basis, otherwise the next cool experience will be provided by your competitor. It’s very much like the fashion industry and every industry must study the fashion industry to figure out how they make customers pay money for things they don’t really need. Apple definitely does so.

Will write about the other 2 areas of focus in another blog entry.