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You can bet your aaS that data is the key to new business models for physical goods

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Companies are already building big businesses selling digital assets such as computing (Amazon) and music (Spotify) as a service but the purveyers of physical goods are getting in on this business model too. Maybe it’s a car service such as ZipCar or Lyft or even sharing access to homes via Airbnb or HomeAway; when it comes to physical goods, we’re taking the same on-demand models from the digital world to the real world. Even Google may be getting in on this trend with Google Mine.

And as this model matures, data will be both the enabler and a high-value byproduct of the “as-a-service” economy.

Given that the real world has much higher levels of friction — from trying to easily get shared goods to the people who want them, to the regulatory hurdles that might protect consumers but can be used to stifle startups — data about where products are being consumed will be invaluable. Knowing that people in California like to borrow Honda Civics as opposed to pickup trucks can ensure that a car-sharing service stocks the right vehicles in the right market to meet demand.

And while there’s proof that some consumers are changing their behaviors to consume services rather than products, for companies producing physical goods, the sharing economy is both enticing and a threat. Data might help mitigate the pressure such a shift could have on their bottom lines, by helping them price their offerings tuned to each customer or merely offer better customer service.

That’s why a blog post by Jeremiah Owyang at Altimeter Group on the sharing economy got my attention. The post offers a few helpful clues for big companies on how they can test the waters and build business models around collaborative consumption.

It’s a great read, but it doesn’t get into some of the impacts of this shift on consumers and how that in turn might help generate new startup or big business opportunities. For example, Owyang mentions popular business models like Netflix or Comcast delivering video on demand as well as monthly subscriptions to services such as Dollar Shave Club or Bag Borrow or Steal as business models. But as a consumer who subscribes to upwards of 30 services I think there’s an unmentioned opportunity in two areas: payments and the aforementioned data.

In the collaborative consumption model, companies big and small need to rethink how they deliver goods and turn them into services, which is what Owyang focused on. My hunch is physical goods companies will offer a wider array of service-oriented products and have an opportunity to play around with their margins by using granular data to decide how to create packages and what to charge for them. Additionally, if you set in place the tracking mechanisms and automation needed to make a shared good profitable, you can get a lot more data on how a consumer uses it, which could lead to insights about new products or just help deliver the service more efficiently (that’s important when talking about physical assets).

This helps the company providing the service, but is also a potential goldmine of data that the service company can sell to other businesses. For example, sharing data about my travels in a ZipCar might help fast food companies choose future locations or municipalities decide where to allocate transportation dollars. That’s a new line of revenue for those companies.

As for payments, this is a bit more concrete. I need my credit card company or bank to create a lockbox or proxy of sorts where I can change payment information across my 30 different services in one place. I recently had my credit card stolen and am still trying to change the old number in my myriad services that range from Twilio to Nicely Noted, a company that sends me stationery each month.

I want to go to one or two places to adjust my payment information and then have that reflect across all of my services. Because, at an average of eight minutes to go to a site and tweak that setting spread out across 30 different services, that’s four hours of work, especially given that my card is now switched over roughly once a year on average.

So to bring on the consumption economy, big companies should look to data, plus new services that the over-subscribed consumer might appreciate.

One Response to “You can bet your aaS that data is the key to new business models for physical goods”

  1. As increasing numbers of devices become connected there will be tremendous opportunities to create new service offerings – the “platform innovator” strategy is one such approach among several outlined in this study.

    Platforms will also have to handle micro-monetisation issues associated with personal data as recently highlighted in the Financial Times and here.