Consumerism = low innovation

I am a regular visitor at forums on the digital camera site DPReview; and particularily because I own a Pentax *ist DS SLR camera. I paid approximately $1000 CDN for it last year. Since then Pentax has discontinued the model and come out with lower cost and lower specified SLRs. (Now, it is more than likely they will produce a pro model in the future, but that's not the point.

Likewise, I bought an Apple iPod 3 years ago - a 15gb model, known by iPod users as the 3rd generation. Back in 2003, iPods still weren't huge - they were just beginning to enjoy the market domination they have today.

My 15gb 3G iPod came with the following accessories in the box: case, remote control, earphones, power supply, dock & firewire cable. And I paid 200 (British) pounds for it.

Today's 30gb 5G iPod comes with the following: earphones & USB cable. It's price is still 200 pounds. All the additional accessories however, are about 20 pounds each if you desire them.

So onto the theory...

First Pentax. Pentax, like many other traditional companies that produced film cameras for decades, is struggling to survive in a marketplace that is no longer dominated or differentiated by quality. Digital cameras at this present point in technology, are all very similar in the technologies they employ, and as such, are all very competively priced the same. Unfortunately this results in low margins of profit, razor thin magins - and this leads us to formulate camera manufacturers that cannot survive on low profits - are simply going to be forced out of business. The scenario you are left with is that only the big players (like Canon, Nikon, Sony) that have massive marketing budgets propping up strong brand names, and are diversified into other other areas; are the only ones that will, can, survive this long march.

I think perhaps alot of people think that technology at some point, stops growing exponentially, and hits a plateau or a low slope linear curve. Personally I don't think it is science that is limiting technological growth, but the effects of low prices destroying competition.

Microsoft is a classic example. Once they eliminate or marginalise the competition in a market area, innovation almost completely falls off. All you need to do is look at Internet Explorer vs. Netscape. Once you monopolise a market, you can proceed at your own pace (or lack of pace) of development because you are no longer under the threat of competition. Microsoft acheived low cost of their product by bundling it with every Windows PC sold. Zero effort, and zero cost, required by the consumer to use it.

Likewise, Apple today is approaching monopolisation of the digital audio player market. So far, though, they are still innovating, perhaps because there is still sufficient competition out there. However, this competition will only benefit companies with large economies of scale, and those that have sufficient differentiation (either by price or technology). Well diffentiation is low, and prices are similar. Already Apple has claimed a half-dozen victims in the digital audio marketplace. But competing with price with other manufacturers has had an effect on Apple as well. Recall the example above; Apple's current 5G iPod comes with less accessories than their 3G iPod. Was it a decision by Apple to remove these accessories because they weren't being utilised by consumers, or was it to increase profit margins? I think the answer is pretty clear to that. They've now got a healthy profit margin on the iPod, and everyone knows that accessories have huge markups.

And that's where the consumer comes in. At the point where differentiation between products ceases (both in quality and features), it is only cost that remains. Given todays disposable society, most people are not looking for new technology (many aren't even looking at quality). They're looking for low-cost products to save pennies. It is this same market of consumers who will drive smaller companies out of business, prop up monopolies, and resultingly ... stop innovation.