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The End of Ownership?

Winds section in orchestra

It is easy to be obsessive about technology, and want to download the latest app, or upgrade from an iPad2 to an iPad3. Or save 1.9mm in thickness by choosing the iPad Air. But sometimes in our obsession with tech geek, we miss the really big innovations, which are often not in the tech itself, but in the business models around the tech.

It is easiest to see this in the business models around music.

From the earliest times until about 1900 was the age of live music. You paid your money and went to the opera, the symphony, or the music hall. Even the most fanatical fan might only hear their favourite piece every decade or so.

At the turn of the 20th century, Edison’s phonograph developed the new idea of “owning” music. For the next 100 years, this was the prevailing business model. The technology morphed all the way from wax cylinders, 78s, LPs, cassettes, and CDs all the way to the iPod. As tech geeks, we were focused on the technology. It seems strange to group these technologies together, but they represented the same model. You chose what you wanted to listen to, then paid to own it, then could listen to it as many times as you wanted.

Then came Rhapsody, Pandora, and Spotify. The technology didn’t really change much (digital encoding, Beats headphones, hand-held playlists, etc.). But the business model was completely different. From ownership to subscription, from device to Cloud.

The same thing might be happening with cars. The biggest recent innovation around electric cars is not technical. It is that you may be able to buy the chassis, but the powertrain is offered on a price-per-mile basis. No worries about battery degradation, or trade-in value. From ownership to subscription.

Finally, even the very idea of ownership is called into question with the Sharing Economy, where hipsters share rides (on uber) flats (on AirBnB) and even dogs.

So with the rise of business networks, it is tempting to focus on the capabilities and features and miss the new business models that are emerging. We’ve already seen the transition from Enterprise software licence to subscription software. Cloud also allows other types of business models, such as buyback or gainshare.

But I am talking about more than the business relationship between a company and its software provider. Business networks allow their member companies to redefine their relationships with each other. Distinctions between buyer and seller start to morph into collaboration, as buyers start to engage electronically with multiple supply tiers, and suppliers engage with their customers’ customers. On the financial side, rather than a straight invoice-payment relationship, business networks allow all sorts of additional financial models relating to access to capital such as dynamic discounting and supply chain finance.

We technology bloggers often miss these fundamental shifts, because changes in business models are not seen to be as interesting or innovative as a higher-resolution camera, or (apologies to Apple) a phone which now comes in five different colours.

About the author
James Marland
Vice President of Network Strategy - Ariba (Twitter: @JamesMarland)

James is responsible for defining and rolling out strategies for the Network with particular focus on Europe. He joined Ariba at the launch of the Ariba Network in 1998 after previously being a Solution Consultant at SAP America. In addition he ha... Read More >>>

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