Everything as a Service
I’m gonna give you a million dollar business idea. Actually make it a billion dollar idea. Uber currently has a market capitalization at 49 billion dollars. Airbnb is now valued at 42 billion dollars. Grab is valued at 14 billion dollars.
These companies are all part of the the sharing economy. According to a PWC report the sharing economy is expected to grow from “from $15 billion in 2014 to $335 billion in 2025”. But the sharing economy is just part of a bigger shift in how businesses are going to be done.
The lesser assets an organization has the nimbler it is. Any asset adds weight to a organization structure. Though it may provide main an auxillary benefits.
For example adding a new branch to a banking organization, adds a point to generate revenue with the customer. The branch provides opportunity to sell financial products. Other benefits include the marketing opportunities that visibility provides. The banking organization will be part of the local community.
Also a branch is a touchpoint for getting insights into the target demographic. After adding up the costs and the revenues provided by a branch, a bank will arrive at a certain number of branches.
Bank Branches are a dying breed though. A third of the branches in the UK have been closed in the last three years.
Bank branches will be relegated to special functions. Everything that’s not possible online. From mundane like foreign exchange transactions, to complex products and high net-worth individuals.
But the traditional bank business has and will be moving online.
Like banks, travel agents have been in decline. Travel agents in the US are still responsible for a third of the travel market in the US.
But the “typical travel agency of 15 or so years ago, which focused on point-to-point trips, is largely dead”. Travel agents are now catering to specialty groups e,g, business and luxury travel or people without credit card.
Nothing is new so far. If the return on an assets is too low it becomes a liability. The billion dollar business idea is an expansion of this. Provide the same service with less assets and human resources than some other business. That was easy now go and build a billion dollar business. All the rest is just implementation.
Obviously that is not the case. But the opportunities are endless indeed.
An area that is ready for disruption are insurances. In the US “By 2020, more than nine in 10 new life insurance sales are expected to be at least influenced by digital interaction, including online searches to assess life insurance providers and advisers; compare price and coverage options; and apply for a life insurance or annuity policy on an insurer’s website.”
Logistics are another are that will see a strong orientation towards being service based. Bulgarian startup Transmetrics says “More than 43% of trucks on the streets are empty. We want to change that”.
Travel itself is also being disrupted on all sides. Not only the aforementioned Airbnb, that is in the room rental business. Booking and price comparisons are mostly online now.
But also the flight itself is often not actually done by the airline you may be booking with. For example, when flying with Lufthansa you may actually end up on a flight “operated by SunExpress”.
This servification of business is wide reaching and the trend will dominate the business landscape for a while. It splits businesses into producers of a service (e.g. SunExpress) and consumers (e.g. Lufthansa). On both sides of this equation good profits can be achieved. It’s not only the business model of Airbnb to rent rooms it doesn’t own. Also owners of these rooms may find that this can be a profitable business. So profitable that cities like Prague are looking into banning it because it floods the city with tourists.
When that happens, the loosers will be the people with the rooms not Airbnb which will only loose a bit of revenue.
The asset-less business is in the better position as it can react more agile and focus on other business opportunities.
The servicification that can be seen here is enabled by a number of technologies. The biggest drivers are the web and mobile apps. Bus also APIs that allow the consumption and production of business services. Other drivers include blockchain and mobile payments systems.
These technologies are enablers though, not drivers. The business idea should not be “use blockchain to…” but replace an existing value provider with one that does not have assets.
Now get started on the business. Turn an existing industry into a service.
Thank me later.
