It’s not a secret that we’re entering an era where the measure of success no longer lies in the things we own – but it may not be having the effect on businesses that you think. After baffling a range of companies around the world, today’s consumer behavior, where owning things is becoming less and less of a priority, has been attributed to a variety of influences including a generational mindset evolution, a downtrodden economy, an increase in market competition and more. The reality is, though: it’s all of the above, and the common thread between each of these influencing factors is technology.
Technology is Changing Businesses’ Perception
Technology has historically impacted consumer behavior. From the eradication of the Yellow Pages thanks to social media and Google, to a dramatic drop in brick and mortar shopping thanks to ecommerce and Amazon, technology impacts today’s world more than ever before. But this isn’t simply because of a millennial takeover; it’s because technology is changing businesses’ perception of what’s possible.
Take the news for example: are we living in a world with more news stories to report, or is our media coverage just getting faster and more technologically advanced? Odds are it’s the latter, and the same concept goes for business: companies have always been evolving; technology is merely making those evolving ideas more accessible and readily available to larger audiences than was ever possible in the past.
Thanks to that accessibility, the subscription economy is constantly growing, causing the need to purchase and own products to slowly go by the wayside. In fact, according to the results of an international survey of twelve countries on changing consumer preferences in the subscription economy by The Harris Poll (on behalf of Zuora, an enterprise software company that creates and provides software for businesses to launch and manage their subscription-based services) 74% of adults believe that in the near future, people will subscribe to more services and own fewer physical goods.
74% of adults believe that in the near future, people will subscribe to more services and own fewer physical goods. – “The End of Ownership,” Zuora.com
The End of Ownership and The Rise of Usership
“We’re witnessing the end of ownership and the rise of usership,” says Tien Tzuo, CEO and Founder of Zuora. “People are subscribing to more because they’re getting the outcome and experience they’re looking for, without the burden of owning it.” And, as concepts of value and personal success are rapidly moving away from ownership in favor of access, consumers around the world are increasingly demanding flexible services over static products.
But what does all of this mean for manufacturers? Since the rise of industrial production, original equipment manufacturers (OEMs) have operated under a straight-forward asset transfer model: build and sell products. Once a successful product was created, OEMs could then spread fixed costs over as many units as possible, competing on the margin. The problem? This product-based model is predicated on planned obsolescence, and it leaves little to no room for growth, sustainability or efficiency. But thankfully, this dominant economic model of the last century is coming to an end, making way for servitization – the transition from selling products to selling the output or value that products deliver.
Product-based models are predicated on planned obsolescence, and leave little to no room for growth, sustainability or efficiency.
This shift to servitization has many OEMs panicking, though, leaving them thinking, “How will my business survive such a significant drop in product sales?” But, a drop in ownership doesn’t necessarily mean a drop in usership – just a change in usership. Stay tuned later this week as we dive deeper into this change and the impact it’s having on OEMs business models. In the forthcoming post, we’ll uncover how OEMs can to embrace technology in order to remain competitive and make the shift toward servitization successfully.