The business model in manufacturing and distribution has long been own it, sell it, get paid for it. For most of those companies, it still is.
But our world is changing. The concept of ownership has a very different place in our thinking, as does the concept of value. The potential enabled by rapidly advancing technology is integral in changing thinking about optimal business models.
When I worked for Perdue Farms in the late 1970s, my first major assignment was to build and implement a feed formulation system that would meet nutrient requirements for the chickens at the lowest cost given potential ingredient inventories and market prices.
Computers then weren’t what they are now, but those calculations were easy to perform once the program was written and the inventory, nutrient, and market data for all potential ingredients were available to the model. Updating that information took time, time that is virtually zero now. Advanced technology didn’t eliminate the need for the analysis, but made it much faster.
That use of data was focused internally toward cost reduction. But the thinking can easily be turned externally to identify information incredibly valuable to the market.
You’ve likely heard that airlines are not committed to owning jet engines; what they really want is reliable, fuel-efficient thrust on each of their planes. That means predictive maintenance, well-designed engines and valuable real-time analytics of data converted to information used in flight. And in the design of better engines in the future.
Data from a single engine on a specific plane, from a type of engine on a number of planes, from a type of engine on a variety of types of planes, and more, is changing both current and future operations of the air travel industry. Do you care who owns the engines on the plane you’re flying on today?
We see personal and shared ownership of cars, no ownership of cars (Uber, taxis,), mass transportation, bicycles, walking, and more. The “best” business model depends on value as perceived by the target market, and on the providers ability to actually deliver that value.
If instead of selling your products to customers, you will focus on the amazing value those products can provide, comprehension of real value is the crucial first step. Most of us are not close enough to our markets and do not listen well enough to truly understand that. And most of us struggle to eliminate the assumptions inherent in our thinking — like “it’s all about the product.”
To consider shifting to a subscription business model, your organization must have the awareness and thinking to understand value at every level. That model will not work for you or your customers unless it improves the value proposition for both. That value proposition must not be just a cute quote but a better business result for both for the long term.
What promise could you make to your market that would entice it to shift to you? And equally important, what promise could you think and evolve quickly enough to keep all the time and forever?
It’s much easier to just make something and sell it, but only today. Tomorrow requires much more.