Subscription Services
Pay-Per-Use
Product-as-a-Service
Service-as-a-Product
Data-as-a-Service
Digital Platforms
6 Disruptive Business Models for the Digital Era
Subscription Services
Pay-Per-Use
Product-as-a-Service
Service-as-a-Product
Data-as-a-Service
Digital Platforms
The appeal of the subscription model, where customers pay a recurring fee for continued access to a product or service, isn’t hard to grasp. Recurring revenue offers more stability and predictability, and also fosters stronger relationships with customers through more frequent and consistent engagement. It’s also not an either/or—you can continue to sell your product in one-time transactions and create a new revenue stream via a subscription service.
Subscription Services
Customer Benefits
Business Benefits
3,500
The number of subscription box options for purchase in 2019.
Convenience
Lower upfront investment
Faster access
Customer Benefits
Customer engagement
Recurring revenue
Behavioral insight
Vertical supply chain integration
Business Benefits
“Product-as-a-service” reimagines value in terms of the benefits of a product rather than the product itself. In its purest form, the service replaces the product: instead of purchasing a car, the customer pays for the ride. Physical products can also become a platform for service delivery, vastly expanding the aftermarket opportunity to a whole new realm of digital services. Think of the Peloton stationary bike – customers don’t just buy the bike (a one-time upfront expense), they buy the monthly subscription to live-streamed and on-demand classes.
Product-as-a-Service
Customer Benefits
Outcomes-based pricing
Frictionless
On-demand access
Customer Benefits
Business Benefits
Improved customer engagement
Lower inventory
Recurring revenue
Upsell opportunities
Business Benefits
Traditional professional services providers are starting to productize their service offerings, building tools that automate once-manual service delivery. “Product” does not mean physical. Productized services include application programming interfaces (APIs), dashboards, or fully fleshed-out SaaS offerings. Candidates for productization are low-margin, high-volume services with systemized (or sytemizable) processes. These are services that are commoditized or at risk of being commoditized. An advertising agency, for example, might productize its 1:1 design services by launching a drag-and-drop graphic design tool, setting pricing based on available features or volume of designs produced.
Service-as-a-Product
Customer Benefits
Affordability
Reliability
DIY
Customer Benefits
Business Benefits
Scalable
Competitive pricing
Low entry barrier
Business Benefits
Data-as-a-service reimagines information as an asset that can be monetized by selling access via the cloud. What distinguishes DaaS from SaaS is that the data can be decoupled from a specific platform, though it doesn’t have to be. The value to the customer is in aggregating and distilling large data sets into meaningful information that can be published using an API. Additional data services, such as predictive modeling or custom reports, can also be sold to the customer. Organizations can go a step farther, providing a self-service portal to access real-time data and analytics via the cloud.
Data-as-a-Service
Customer Benefits
Higher data quality
Agility
Actionable insight
Customer Benefits
Business Benefits
Cost-effective setup
Competitive differentiator
Supplemental revenue
Business Benefits
Data Aggregation
Data Mapping
Data Harmonization
Data Visualization
Data Science
Data Streaming
“Platformication” is the creation of business ecosystems that exponentially increase value through a “network effect”; the more participants, the greater the effect. Platform ecosystems reposition businesses as connectors—
between customers, partners, vendors, or even competitors—facilitating new ways of collaborating and co-creating value and reducing transactional costs.
Capturing economic value from a digital platform can happen in several
ways: as a data aggregator and source of customer intelligence; as an
enabler of more meaningful customer interactions; or as a more extensive offering through strategic alliances and complementary solutions.
Digital Platforms
Customer Benefits
Efficiency of scale
Sense of community
Trust
Customer Benefits
Business Benefits
Expanded capabilities
Faster speed to market
Easier customer acquisition
Business Benefits
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Creators of the platform's offerings (for example, apps on android)
Buyers or users
of the offerings
Interfaces for the platform (mobile devices are providers on Android)
Controller of platform IP and arbiter of who may participate and in what ways (Google owns Android)
Source Marshall W. Van Alstyne, Geoffrey G. Parker, and Sangeet Paul Choudary
From "Pipelines, Platforms, and the New Rules of Strategy," April 2016
Business model change has never been easy. And in today’s fast-paced digital environment, organizations don’t have the luxury of time to decide on the right course of action. To remain relevant in the still-nascent digital economy, businesses need to challenge commonly held assumptions, assess shifting market dynamics and harness the power of foresight to take bold but necessary risks.
Business Model, Disrupted
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Pay-per-use models provide a variable cost structure tailored to individual need: Customers are charged based on usage or consumption levels, offering them greater flexibility. Access to a product or service can be provided on an on-demand basis (like a Zipcar) or capacity can be scaled up or scaled down (like data storage or computing power – think Amazon Web Services). Billing is contingent on the ability to meter use—but with the advent of the Internet of Things, the universe of what can be metered is pretty much unlimited.
Pay-Per-Use
Customer Benefits
Greater flexibility
Lower upfront investment
Faster access
Customer Benefits
Business Benefits
Low-cost experimentation
Market expansion
Supplemental revenue
Business Benefits