founders paras chopra, chapter by chapter
18. Commoditize Your Value Chain Before It Commoditizes You
Profits collect around the irreplaceable layer of a value chain.
Every participant in a value chain competes for a share of the customer’s payment. Companies with exclusive intellectual property or a direct, hard-to-replace customer relationship can squeeze interchangeable suppliers and distributors; competition removes margins from everyone whose contribution looks like a commodity.
Map who controls demand, proprietary capability, and alternatives on both sides of your company. Make your layer difficult to replace while keeping multiple options for inputs and distribution. Opinion does not prove differentiation—sustained pricing power and healthy margins do.
Original sketch and model by Paras Chopra. Read the source chapter.