The as-a-Service Economy

photo © ipopba/Adobe StockPhoto © ipopba/stock.adobe.com

We’ve been in it for quite some time. But do we realize how much it has changed us? And how different it turned out compared to expectations?

The difference between owning and renting is profound. And ‘renting’ is the foundation of the service economy. Whether it’s Music-as-a-Service (Spotify), Manufacturing-as-a-Service, Food-as-a-Service, Car-as-a-Service, Software-as-a-Service or hundreds of others, the basic concept is the same: Renting instead of buying, pay as you go. Short-term, long-term – each segment has its own profile.

The shift from products to services drives a new mindset – as Kevin Kelly points out in The Inevitable:

“Products encourage ownership, but services discourage ownership because the kind of exclusivity, control and responsibility that comes with ownership privileges are missing from services.”

Kevin Kelly/The Inevitable

Most of us will recognize the feeling Kelly describes from when we rent and return cars, motorcycles, city bikes, e-scooters etc. But there is more to it than this. Short-term rent is but a very small part of the services market. The major part – and the fastest growing – is subscription services. And Kelly continues:

“The switch from ‘ownership that you purchase’ to ‘access that you subscribe to’ overturns many conventions. Ownership is casual, fickle. If something better comes along, grab it. A subscription on the other hand, gushes a never ending stream of updates, issues, and versions that force a constant interaction between the producer and the consumer. It’s not a onetime event; it’s an ongoing relationship.”

This statement should trigger some lifted eyebrows. Isn’t this the exact opposite of what many of us have been thinking? That purchase is binding, renting is not? It most definitely is, and Kelly’s description is not a fit-all. More importantly though, there is a ‘magic’ term in here: Subscription. And that’s the new service economy. 

Subscription. A commitment to use a service for some time. Usually long enough for the service provider to ensure your renewal by getting to know you, adapt to or even predict your requirements. 

Continuing the quote from Kelly:

“The longer you are with the service, the better it gets to know you; and the better it knows you, the harder it is to leave and start over again.”

Again I’m sure you recognize the scenario, which comes in many shapes and sizes in our personal lives and in business. I’m sharing a personal experience with music streaming services in Why Spotify Wins this week, the key point being the importance of understanding how dependencies are created and maintained. 

Such understanding becomes vital when it’s time to part ways – in particular in professional relations. In short – you need an exit strategy, akin to a prenup, which must be created when the relationship starts and maintained along the way. Otherwise breaking up is going to be very painful, very expensive and very time-consuming, the key ingredient being data.

If the term exit strategy is foreign to you, stay tuned to this channel. I’m going to revisit the term and concept later this year.

One takeaway from the discussion above is that the value of understanding cannot be overestimated. Still, as we enter a digital world, understanding is lacking at all levels and all settings. 

Not that everyone needs to understand the technicalities and the technology, but there are basics that must be understood in order to make sound decisions, in our personal lives and professionally. 

In the post Life at the Edge I approach this challenge from a rather unusual perspective: Using technology to create understanding. The connection is simple: Using everyday situations familiar to everyone – and that same everyone immediately understand what you’re talking about.

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