From ownership to membership
In the past few years we have seen several examples of industries that have changed the way consumers search, buy and use products or services. In this blog I will short look at some influences on IT in the consumer market, but also the B2B-market.
Around the 1950’s, mass production came up and led to more efficiency, lower prices and higher wages. As a result, the average household gained acces to expensive products that, for decades long, were only available to the elite.
These days, the Internet has made the access to all kind of services much simpler: a small investment is enough to use a certain service, and a big investment to own a product is nog longer needed (think of the Sharing Economy). This applies, for example, to cars, but also in relatively low-cost products such as CD’s and DVD’s. Spotify and Netflix have changed the way people consume their media. Why should you buy a DVD if you want to watch the film only once?
We thus see a shift in the consumer market from the ownership-model to the subscription-model. This also applies in the B2B-market. IT-infrastructure therefore has to change quickly as a result of this new reality, but, in practice, this is often a gradual process. This is because of the fact that companies have spent much, and long time, on developing their IT-infrastructure to meet business needs. They are therefore unable to respond flexibly to changing market conditions (subscription-model).
The changing market conditions has an impact on IT:
- From procurement perspective: a flexible subscription-based contract with a software supplier gives the IT-department the power to use services that can be deployed rapidly. User licenses are scalable, responding to the need. Through the cloud, companies can expand their infrastructure an applications, with new business processes, more insights, creating more value.
- The demand of 24/4 availability. IT-systems therefore always have to be online, to offer the promised services. This asks for an investment in the infrastructure that guarantees high availability and security.
- Companies that deliver products or services based on subscription or membership, are using a different way of (financial) administration. Customers don’t invest in the product or service at the beginning, but are paying a fixed payment per month. From the business perspective, this provides more opportunities for customer retention, loyalty and upselling. Also, when analyzing the customer behavior it is much easier to offer customized products or services.
It is certain that the digital revolution will bring further dramatic changes in the future. Forward looking firms are seeing the changing technologies as opportunities rather than threats. They can benefit from these disruptive technologies by standing in front by using or delivering them.
Belk, R. (2013) ‘You are what you can access: Sharing and collaborative consumption online’, Journal of Business Research, 67, pp. 1595-1600.