Luxury Products Confirm the Commoditization Force

Ferrari, Hermès, and Rolex are not exceptions to the commoditization force. They are the strongest evidence for it.

Luxury Products Confirm the Commoditization Force The Wall Street Journal recently called Ferrari "unlike any other luxury brand." A new post on the Ofmos Blog argues the opposite: luxury products do not defy commoditization. They are the strongest evidence for it, because they show the force acting where it is least expected. Ferrari is doing the same work as Hermès and Rolex: running continuously against the commoditization force (the structural erosion of perceived value that acts on every offering in every market). The visible stillness — the unchanged Birkin, the steady Rolex premium, the capped Ferrari production — is the surface effect of continuous, deliberate work underneath. Stop the work, and the stillness collapses. Pierre Cardin in the 1980s and Burberry in the early 2000s demonstrated this directly. Ferrari itself nearly collapsed under Fiat's management before Luca di Montezemolo rebuilt the brand by cutting production in half and restoring the conditions that make scarcity meaningful. The post also identifies two forms of product innovation, beyond traditional engineering, that luxury strategists use to regenerate perceived value without changing the offering itself: product innovation through adoption and product innovation through discovery. Neither mechanism changes the product. Both reshape and reposition the signature of the experienced product to counteract the commoditization force. Read the full post "Luxury Products: Running Up the Downward Escalator" READ AND PASS ON. The Theory You Can Hold The analysis in "Luxury Products: Running Up the Downward Escalator" rests on a single foundational idea: the One-Need Theory of Behavior. Every individual pursues the single, subjective overarching need “successful existence,” which through a process of aggregation-disaggregation forms a hierarchy of needs. (Needs and goals are interchangeable in this understanding of the world.) As customers learn, broader needs are created above the original need, pushing it lower in their respective hierarchies. When the learning of many customers accumulates across a business space over time, it produces the commoditization force: the sustained structural erosion of an offering's perceived value. A generic unit of the hierarchy can be represented physically as a block of needs with a time dimension. The Lego version can be built in minutes with pieces you probably already have. The paper model — A Simple Block of Needs™ — is available as a free download. Both capture the same structure: a single overarching need disaggregated into subordinate needs that drive action. Download the paper model "A Simple Block of Needs" (PDF) BE OUR PARTNER. The Orrery of Business Makes These Dynamics Intuitive and Interactive On the OFMOS® Essential board, commoditization is the most immediately rewarding action available. Move a product down one position, collect the profit, move on. No investment required. Every other action costs something: product innovation requires forgoing the immediate profit for future gain, market innovation demands spending now. The incentive structure pulls toward commoditization on every turn: it is the only action that pays immediately with no upfront cost. But the player who keeps following that pull discovers what Pierre Cardin discovered: products move toward lower returns with every step down, until the only remaining move is retirement. The player who resists, invests in innovation, and builds synergies across adjacent offerings discovers what Ferrari and Hermès know: holding position costs more, but the portfolio stays alive and the returns compound. This is what makes OFMOS® Essential an orrery rather than a simulation. It does not replicate specific industries. It reproduces the structural relationships that govern how value is created and eroded in any market: the commoditization force as the path of least resistance, innovation as the effortful counteraction, competitive elimination as the ever-present second pressure, and synergies as the portfolio-level reward for strategic coordination. The six actions available to every player on the board are the same six actions available to every individual strategizing for success, at every level of complexity in which the real world naturally organizes itself — from the individual decision to the economy. (These levels of complexity are identified by the Five Business Big Pictures, a strategy framework and model of human agency.) The Kickstarter campaign runs through May 31. (Educators and professionals typically cover the cost through professional development or learning-and-development budgets.) Pre-order OFMOS® Essential THINK BIG & GOOD LUCK! Ofmos Newsletter | Ofmos Blog Copyright © 2026 Ofmos Universe, All rights reserved. This is an update from the Ofmos Universe team. Our mailing address is: Ofmos Universe PO Box 475732 San Francisco, CA 94147 Add us to your address book Want to change how you receive these emails? You can update your preferences or unsubscribe from this list.