Customization

Software has enabled a very low cost for product variability. Unlike hardware, different configurations of software product doesn’t mean different production lines, bill of materials etc.

From a customer point of view, this can be seen in two ways. Giving them more options makes them feel that they are in control. They are actively taking part in the buying process. Instead of being skeptic based on what a sales person would tell you. On the other hand, giving them fewer options reduces the friction to the buying experience. One of the first things that Steve Jobs did after returning to Apple was to clean out the product line. Even though Apple’s current product line up is scattered all over the place, they have stuck to a smaller number of product categories.

From a business point-of-view this makes it easier to offer customers multiple products with low additional cost. These custom products can be sold in a modular way and customers can pick and choose to create the final product. The App Store works in a similar way. No two iPhones end up being similar. They can have the same hardware, but each person personalizes by installing apps to their taste.