In his seminal work, Future Shock (1970), futurist Alvin Toffler described the growing car rental market in America to note the growing transience of our relationship with "things". His prediction was eerily accurate as a McKinsey report of U.S consumer behavior showed that the purchases of goods and services had vastly declined, only to be replaced by consumer purchases of ‘experiences’. While this might translate to convenience and lesser burdens to consumers, it is yet another ‘reset’ for businesses as they will need to abandon older ways of doing business to appeal to an entirely new pattern of consumerism.
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As the number of renters in the U.S. alone grew from 9 million to 43 million families between 2005 to 2015, this trend is here to stay and poses a massive opportunity for enterprises to rethink the way they package products and services so as to maximize revenues while ensuring they can maintain advantages over their competitors. One of the most popular answers to the rent vs. own quandary has been the Everything-as-a-service / Anything-as-a-service (XaaS) business model, a concept that has been borrowed from B2B companies that have broken previous revenue ceilings by extracting more value out of their clients in the long run.
The XaaS model might seem ludicrous to anyone steeped in the older way of doing business, especially in light of the inevitable vendor lock-in that adopting such a system would bring. However, the upsides to such a model are enormous cost savings, especially for the consumer, and a higher customer lifetime value (CLV) for businesses. When executed properly, the XaaS business model creates a win-win scenario for all stakeholders and warrants closer inspection.
Unlocking Business Growth with XaaS
As markets begin to saturate and growth starts to throttle, enterprises often have two ways to continue to grow: expand their offers in terms of range, or value. Some of them even dare to attempt both strategies. While these are traditional ways of inviting growth, the XaaS business model is a relatively new take on growth that bundles offerings such that convenience becomes the prime appeal.
It takes full advantage of the boom in experiential consumerism by providing everything as an experience instead of a product, essentially becoming XaaS:Anything-as-a-service! The magic of a XaaS solution lies in how it takes any ordinary product, productizes it and adds multiple layers of services to it; a phenomenon colloquially referred to as ‘servitization’.
This subtle change in the conception of a product ensures that transactions are not one-off instances and provides a unique opportunity for building long-term relationships with the customer. Naturally, focusing on the long-term enables businesses to incorporate innovation as a cornerstone of their growth strategy and deepen relationships, both of which are key pieces that ensure the company’s health in the long run. Such an approach has been proven to have a positive effect on company-wide performance.
The biggest promise of a XaaS model is the prospect of assuring recurring revenue from a sale as a vehicle to sustain business growth over a longer time frame. Companies are starting to realize this as a recent study by Deloitte revealed that a staggering 75% of respondents believed the XaaS model fosters innovation and enabled faster time to market, while 39% confessed to using it as a means to close any and all gaps that exist between them and their competitors.