The end of ownership is approaching! Are you optimally prepared?
Once upon a time: "My house, my company car, my boat, ..."
But the time when we defined ourselves and our work exclusively in terms of material possessions seems to be over. For the younger generation of well-educated millennials in particular, status symbols are becoming less and less important. It's clear that anyone who grew up with Netflix, Amazon Prime Video and Spotify, or was at least an early adopter, can't imagine why they should buy CDs, DVDs and Blue Rays for expensive money, even though they are hardly ever used anyway.
And talk of the "end of ownership" is already doing the rounds. No wonder, experts see disruptive changes coming to almost all industries. The sharing economy, service-dominated logic or simply "using instead of owning" are the magic words. Call it what you will - the enormous growth of on-demand models shows where the journey is heading.
This is also confirmed by figures from management consultants PricewaterhouseCoopers (PwC), which forecast further growth in the share economy market volume of 5.3% to EUR 24.1 billion for 2018.
The trend is clearly moving towards the subscription model
Ever since the latest Apple keynote, it has been clear that one of the world's most valuable companies has not only recognized the sharing trend, but is also helping to fuel it. "But we have also developed world-class services - and that's what it's all about today." So said CEO Tim Cook, finally heralding the transition from "product company" to "service company".
This step is only logical and consistent. After all, what consumers want today is to consume and not to own.
Over the past 10 - 15 years, Apple has created a service universe in which hardware is no longer the core product, but merely the means to an end. At the same time, subscriptions to services such as the recently introduced Apple TV+, the News+ newspaper flat rate and the Apple Arcade video game service give consumers the opportunity to satisfy their needs flexibly and cost-effectively.
The success of video-on-demand platforms such as Netflix, Amazon Prime Video and others is also evidence of the growth of the subscription economy. Between 2012 and the end of 2018, Netflix alone recorded an increase in user numbers from around 25 million to a good 145 million.
Only those who rethink survive
Incidentally, even automotive companies such as Volkswagen, which are among the stolid dinosaurs of the German economy, have recognized this. As Tienz Tzou emphasizes, Volkswagen is well aware that it will no longer be selling cars in ten years' time. After all, a large proportion of turnover already comes from leasing contracts. Furthermore, they are already testing Pay-As-You-Go concepts, which allow the use of VW vehicles for 3, 6 or 12 months.
Quite expensive fun when you consider that an average vehicle costs its owner 5,000 - 6,000 euros per year. A low-cost car-sharing model is therefore more logical for most users who have a need for mobility.
Or another example: Do you have a garden shredder, a high-quality hammer drill or something similar? Hand on heart: Do you use these devices on a weekly basis so that the purchase price of several hundred euros is worthwhile? You can see what it boils down to ...
Digitalization makes it possible to share products via new service models and thus satisfy needs at low cost. In addition, the younger generation is practising a special form of selective minimalism based on the bestselling author Marie Kondo. Ownership is limited to those things that are really important or have a high emotional significance. Class instead of mass.
What drives change
The biggest driver behind this change is digitalization, without which subscription models would hardly be attractive to this extent. In his new book "The Subscription Age", subscription economy expert Tienz Tzou argues that digitalization will trigger a renaissance of the subscription age. According to Tzou, this will not be limited to easily digitized goods, but will also spread to other sectors such as automotive engineering.
Consuming instead of owning. Many millennials in particular have precisely this need. And this minimalism, renting or leasing things only when needed instead of buying them, is also completely rational. This is particularly true of expensive goods that are not used regularly to an extent that would make buying them worthwhile. Private vehicles, for example, spend an average of 92 - 95 percent of the day standing around unused in parking lots.
However, companies not only have new market opportunities, but can also participate in the sharing economy themselves and thus benefit from cost advantages. While the leasing of company cars is already commonplace, the principle can easily be extended to other areas. For example, leasing or renting or leasing high-quality office equipment according to the asset-light principle.
Sharing economy - a concept with advantages and disadvantages
One of the biggest problems for companies that sell high-quality, non-durable products is, of all things, their quality. This is a real paradox, which some companies are suspiciously countering with planned obsolescence in order to stabilize sales. The subscription model of the sharing economy, on the other hand, promises more stable sales in the long term.
However, the model does not generate much cash at the beginning. This neither appeals to investors, nor does it leave much scope for larger investments from the equity generated in this way.
For consumers, on the other hand, subscription models are particularly attractive for goods that are only used a few times and have a high price in comparison to the benefit or duration of use.
Be it cars that are only moved for a few minutes a day on average, the Blue-Ray that is only watched once and then never again or the 300-euro hammer drill that is allowed to drill three holes a year. However, the concept makes little sense for frequently used and low-priced goods.
Sharing models are uneconomical from a cost perspective, restrict individual freedom and increase transaction costs. This applies both to end consumers and to companies that want to benefit from asset-light measures. The subscription or sharing economy is also problematic due to its currency: data.
This applies both to consumers, who are having to disclose more and more data, and to companies, which have a duty to protect it adequately. Not to mention the necessity and cost of comprehensive big data analyses to predict customer wishes. On the other hand, those who fully benefit from the "selective" minimalism of prosperity are the environment.
Less is more
While we, as consumers and companies, create new value chains together, thereby conserving resources and avoiding emissions, we do not forfeit any prosperity, contrary to some dreamy ascetic models.
Now it's your turn! Both as a private consumer á la Marie Kondo and in your role as a responsible manager in the office to make your company fit for the subscription economy.
Because one thing is certain: it will happen whether you adapt or not. If we may freely quote Erich Honecker: "The subscription economy in its course, stops neither ox nor donkey!"
