The Diminishing Concept Of Ownership

31 May, 2014 | Business, Markets, Trends

In todays world where software eats everything and startups producing software as a service continue to proliferate, the concept of ownership is being challenged. As software has become fast, reliable and personal we are beginning to see a shift away from ownership in the traditional sense.

In the past, ownership for most products has been a way of life. You want a car, you buy a car. You want to watch a film, you buy a DVD. You want music, you buy a CD. In hindsight, this was a pretty limited model.

In reality, we only want something for as long as we need it. In the case of a movie for example, we only want the movie for as long as it takes us to watch it. If it is a movie we really like we may want to watch it again but there is an amount of time in between when we don’t want the movie and in that time our ownership is redundant. This is also the case with music, we only want an album or song for as long as it takes us to listen to it.

The model we are beginning to see is much more powerful. Rather than paying a premium to own some thing, the product, we pay a price to own the delivery of a service. Spotify is a great example of this. Rather than pay to download many songs individually, you can pay £10 a month to have access to all of Spotify’s music.

This much more closely matches our need of the product, fulfilling our desire only for the length of time required. In the case with music, we only need a song for as long as it takes to listen. With Spotify, we get that, satisfying the demand before the demand then changes. In the past we had to make the tradeoff of how many songs or albums we can buy with our limited resource. The new tradeoff is a question of accessibility. As you do not own the product you have to request access to it each time you want it (with Spotify think typing in the song) and the success of the service will largely depend on how well it manages access (songs are available, stream quickly, site stays online etc.).

It is important to note the difference in the two models. In the past the relationship was with the product. If you wanted to buy a DVD it didn’t much matter if you bought it from a Virgin store or HMV and through buying from one didn’t mean you couldn’t buy from the other. In the new model the relationship is with the service provider. If you commit buying that service from one it is unlikely you would buy the same service elsewhere (why have access to all the music twice over?).

This makes services much more sticky. If companies know that once you buy from them you are unlikely to buy elsewhere, their focus is on perfecting that service. In the new model there is much more active competition on the quality of what is on offer (the service) than the product that is for sale (which will be the same everywhere).

What Spotify has done for music, Netflix does for films. As more startups tap into this idea we will see the concept of ownership continue to diminish. Why own something forever when you can have it for only as long as you need it and then have the next thing too?

Over time this pattern will branch out to more industries and provide many opportunities for entrepreneurs. Why own a car? Why not buy into a service that provides you a car wherever you might need it and whatever your requirements are that day. For example, the car I want when I take my family to the park might me very different to the car I need when I’m heading to work. Why own clothes? What if I could buy into a service that provides me with the latest trends and fashions on a seasonal basis?

In the above examples it is key to see where the competition lies. For cars, any service could provide both a 7 seater or a nifty city car. The competition will be in how timely can they deliver the car, can they predictively know when i’ll need the car, or will they provide the car that is more to my taste. In the example of clothes services will compete on how well they know your tastes, how on top of trends they are etc.

As the concept of ownership diminishes, the relationships we have with these service providers will become more important. They become the operational experts in the service they provide. Given their sticky nature, the markets to be won are huge.

Imagine a future where we do not own anything. We simply have a series of relationships with companies who provide services for all of our needs. Services that we can plug into as we see fit and that continually optimise to match our needs. That is a pretty powerful concept.

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