Today, the world’s internet users number in the billions. Technology-enabled newcomers are disrupting industries, from healthcare and transportation to retail and media. And companies of all kinds are pushing the technological envelope to the point that self-driving cars and drone-based product-delivery systems are becoming viable.
It might seem that the digital era, which took flight in earnest a quarter-century ago with the popularization of the World Wide Web, is already mature. But it’s actually just beginning, especially for the enterprise. The changes of the past few decades—in how we communicate, shop, work, consume media, and more—are minor in comparison with what’s to come.
Evolving business models
For companies across all industries, one major trend will be the continuing transition away from producing and selling physical products, to service-based solutions supporting flexible consumption models. Instead of purchasing on-premise servers, for instance, enterprises are increasingly likely to turn to infrastructure-as-a-service (IaaS) solutions. And instead of buying shrink-wrapped software, businesses are more and more likely to subscribe to software-as-a-service (SaaS) solutions.
Powered by machine learning, advanced analytics, falling prices for bandwidth, and processing power and ubiquitous connectivity, this transition promises to keep accelerating. As companies of all kinds, producing everything from printers to jet engine manufacturers, increasingly adopt flexible-consumption, service-delivery models, buyers will benefit from lower upfront costs (along with a shift in spending from CAPEX to OPEX), instant scalability, increased agility, and lower risk.
Service-delivery models offer benefits, including more predictable revenue streams and enhanced customer engagement. Instead of touching the customer only at the point of sale (and possibly later, if issues arise with the product), organizations that offer goods and services via a flexible consumption model have the opportunity to build and maintain an ongoing relationship—which can lead to greater brand loyalty, decreased selling costs, and new ways to create value for customers that drive increased revenue.
Transforming your company for success
To make a successful transition from selling products to providing services, companies need to consider three critical concepts:
Be ready to embrace a fundamentally new business model. This transition will affect every aspect of the business, including Branding, Investor Relations, R&D and product development, IT infrastructure and operations, sales-force training and compensation, tax, and regulatory compliance.
Don’t underestimate the effort required. The challenges of making a transition to a flexible consumption model are many and varied. The regulatory and tax implications of shifting from selling products to providing subscription services can be complex, especially if you operate internationally and/or operate multiple businesses. Each and every business unit and function of the enterprise will have its own transformational roadmap with unique issues and opportunities to assess.
Make a plan for transforming your business. The complexities of orchestrating a top-to-bottom transformation are significant and no business discipline or function can be left behind. A successful transition to a services-focused model requires getting all stakeholders aligned and executing in concert—from your management team to your partners and vendors. Achieving success requires a clear model of the transformation journey; a detailed roadmap defining opportunities, milestones, and metrics; and good governance involving all stakeholders.
Whether you’re ready for it or not, the shift to flexible-consumption models is happening, and it’s accelerating rapidly. Whether you adapt successfully is up to you.
I welcome your feedback, and invite you to review the results of the Deloitte survey on flexible consumption at the enterprise level for additional insights.