We have come to a time in history when there is a growing preference not to acquire things, but simply to have access to them when we need them for a small monthly fee. Who wants to bother with owning a car when you can Uber? For a small monthly fee you can borrow a lawnmower and get a tuxedo.
According to Tien Tzuo, the author of a new book called "Subscribed-Why the Subscription Model Will be Your Company's Future-and What to Do About It," this is just the beginning.
Mr. Tzuo has a company called Zuora. They create software for subscription businesses.
"The world is moving from products to services. Subscriptions are exploding because billions of digital customers are increasingly favoring access over ownership, but most companies are still built to sell products," Mr. Tzuo said.
There are exceptions. Husqvarna, the Swedish maker of forestry and garden tools, maintains what it calls the Husqvarna Battery Box out of a parking lot in Stockholm. It offers subscribers access to hedge trimmers, chain saws, leaf blowers and other equipment. Users pay a monthly flat fee to borrow the tools and return them when finished. Husqvarna gets a steady income stream and becomes less reliant on fluctuations based on seasonality. It also gains insight into consumer behavior.
Surf Air is a five-year-old company out of Santa Monica, CA. Subscribers can fly on the company's fleet of small executive aircraft for an annual fee plus a per-flight cost.
Major car companies are also testing the water with subscriptions. Subscribe with Volvo and everything is covered except for gas.
This is all possible because of technology that has closed the gap between companies and their customers. For example, Netflix doesn't have to create pilots like the networks to see what will play with their audience. They are constantly amassing data about what their audience wants to watch. It already has a pretty good idea about audience preferences before it throws millions of dollars into production.
Mr. Tzuo quotes Amazon's Jeff Bezos on the difference between an e-commerce company, one that's constantly dialed into its customers and physical stores: "I don't know about you, but most of my exchanges with cashiers are not that meaningful."
Amazon's Prime members "spend an average of $117 billion a year," says Mr. Tzuo. Apple's revenue from services, $31 billion in 2017, now represents more than half the company's growth. France's state-owned railway company is changing its model, too. To stem the migration of young people to ride-sharing services, discount airlines and long-distance buses, they created a monthly plant for 16-27-year-olds. Travel all you want for $92 a month. That brought 75,000 new passengers into the network.
Before companies can move to a full subscription model, Mr. Tzuo says they have to blow up their silos. "Product cultures are built around thinking and organizing like assembly lines: stay in your lane, do your job, then pass it on... subscription cultures are about making sure your customer continues to succeed with your service over time, and translating that ongoing value into revenue."
Changing customer attitudes may demand moving to a subscription model. And if you don't shift now, Mr. Tzuo says, "chances are that in a few years you might not have any business left to shift."