Trevor Bauer, then a twenty-five-year-old member of the Cleveland Indians baseball team, gave his best effort to disguise an injury to his right hand during game three of the 2016 American League Championship Series. But after he had thrown only twenty-one pitches, the television cameras didn’t need to zoom anymore to expose the evidence. Large drops of blood dripped from Bauer’s pinky finger, and his manager removed him from the game.1
Bauer, who studied mechanical engineering in college and may be described as eccentric and nerdy, offered a rather exotic explanation for his injury.2 A few days prior to that game, which his team eventually won, Bauer had gashed his finger and needed to go to the emergency room. The stitches he subsequently received could not withstand the pressure of gripping and throwing a baseball, and the gash reopened. When he initially injured himself, Bauer was not doing something mundane such as cutting vegetables in the kitchen or opening his fan mail with a pair of scissors. He was injured while repairing one of his unmanned aerial vehicles, which are more commonly known as drones.
Markets are slowly coming to grips with the vast potential, as well as the risk, that drones present. That risk makes insurance an important factor in how quickly the demand for drones and drone-powered services grows. The high-speed rotors from even a hobby drone can cause considerable physical injury, as Bauer learned the hard way. Critics and pessimists argue that drones can conceivably crash into power lines, damage buildings, collide with aircraft, and cause all kinds of other collateral damage. In late 2018 and early 2019, two incidents at important London airports underscore the havoc that drones can cause. First, reports of drone sightings forced Gatwick Airport to close temporarily, leading to the cancelation of flights affecting thousands of passengers. Two weeks later, authorities briefly shut down Heathrow Airport after another drone sighting. The Financial Times wondered whether airports can ever make themselves safe from drones.3
The challenge for an insurance company, then, is to understand and insure drone-related risk in an efficient way. That is, insurers need to offer coverage in a way that does not discourage organizations or individuals from using their machines as they would like. Flock, a startup based coincidentally also in the United Kingdom, feels it has the answer for commercial drone pilots as well as for hobby pilots such as Bauer. The company, which partners with German insurance giant Allianz as its underwriter, offers an on-demand, “pay-as-you-fly” product called Flock Cover.
What makes pay-as-you-fly different from conventional insurance policies is the way Flock provides the service and the way it managers risk. Technically speaking, the company offers “real-time micro-duration insurance” for drone flights. Pilots input information about their planned flight into an app (where and when they want to fly), which then displays data such as hyper-local weather conditions, ground hazards, and restricted airspaces.4 An algorithm calculates and aggregates risk levels—using additional third-party information such as nearby aircraft, local topography (e.g., proximity to churches, hospitals, and schools), and roads and their current traffic levels—and determines a risk-dependent price for insuring that particular flight. The app also monitors the drone itself so that it can build a risk profile unique to that machine.5
At its core, the Flock story is about how a change in the revenue model can make commerce far more efficient, broadening the user base and increasing willingness to pay. Flock Cover enables pilots to undertake more flights, under more conditions, and make optimal planning decisions much faster. For the insurance provider, it represents less expensive access to more customers. More broadly, it provides them a way to enter a new market confidently and contribute to its rapid growth.
This “real-time micro-duration insurance” creates numerous efficiencies compared to a conventional policy, whose rates are based on the pooling of risk assessed mostly from historical data rather than the prevailing conditions for any given flight. As Flock CEO Ed Leon Klinger pointed out in a blog post: “These [pooled] risks are harder still for insurance companies to quantify—after all, insurers have no visibility into what pilots are actually doing with their drones, and the industry is relatively new (so there isn’t much historical data to go on).” The result, Klinger wrote, was “outrageously priced (but often compulsory) insurance premiums for drone pilots, which can cost more than the drones themselves.”6 Flock offers policies that last for the duration of a flight, for a day, and has recently launched flexible monthly policies that allow “anywhere, anytime” coverage.7
Under the motto “the safer the flight, the cheaper the policy,” Flock claims that pilots can save 15 percent on their premium per flight by using the app to optimize their flight planning. This 15 percent represents the average price difference between a pilot’s first quote and the final risk-dependent quote for a given flight.8 For hobby pilots, Flock offers coverage “from just £3 a day,” or “the price of a coffee.” The motivation is clearly to drive more drone usage: “The Flock Cover app … takes under one minute to insure your drone flight; allowing you to take full advantage of a sudden sunny spell, or those perfect wind-free conditions.”9 Klinger feels that this same approach can apply to insurance policies for any future autonomous technological activity, from car trips to deliveries.10
In summary, the inefficiencies that Flock is trying to address are the prototypical causes of what we call consumption waste. Without a program such as Flock Cover, the purchase of expensive insurance cover can act as a deterrent to consumption or push the drone pilot (or company) to limit its use to certain environments. But an individual pilot or company ultimately wants to fly its drones. By providing access to reliable, affordable insurance at a moment’s notice, Flock makes the use of the drone—its consumption—easier and more flexible. This encourages more and smarter consumption, because it provides customers with information on when and where to use a drone, knowing that they can assess situational risk. At the same time, the app offers its underwriting partner Allianz an inexpensive way to reach a larger audience. It is also advantageous to the insurance provider, because the algorithm determines the insurance coverage on the spot instead of waiting for a human being to process the information and make a judgment.11
At the same time, tackling consumption waste also puts the onus on Flock to have the insurance available whenever the customer needs it. This is the second, less obvious dimension of a revenue model that targets consumption. Because the customer pays only based on use, the firm clearly has the incentive to provide consumption “episodes” whenever they are demanded. The firm needs to be alert for occasions when customers demand more consumption or consumption under unusual circumstances, and make sure it has the capacity to meet this surge. When the item being consumed is insurance or some other intangible good, fluctuations in demand might seem to be less of a problem. A firm such as Flock may not “run out” of insurance, nor will insurance “break down” during operations as a machine could. But an insurer could conceivably run out of processing power to handle a sudden influx of requests. This underscores the link between access and consumption. An individual or business customer cannot consume something that is not accessible in the first place.
Access is a question of scope: opening the market to as many (profitable) customers as possible. But even if customers enjoy complete, unrestricted access to a product or service, there is no guarantee that they take advantage of it. Indeed, consumption waste can take on many frustrating forms. It occurs when an asset—a car, an apartment, a bicycle, a printer, a medical device—either sits idle for a large portion of its useful life or is not acquired in the first place because customers believe that the expected use does not justify committing to ownership. In chapter 3, we mentioned that automobiles sit idle about 95 percent of time, which is a disturbingly low level of utilization for such an expensive product. However, the same fate applies to a large range of everyday durable goods and specialized business equipment.
As is the case with drone insurance, consumption waste also occurs when some barrier—such as a related risk or the price of a complementary good—prevents someone from using a product or service they already have access to. Finally, consumption waste results when customers are forced to buy a package that is either too small or too large given one’s need, and therefore end up forgoing additional consumption or throwing away any unused portion.
The three options available to organizations to tackle these consumption problems are unbundling, metering, and sharing. Each of these strategies, in its own way, improves efficiency by removing barriers and by activating dormant or underutilized capacity. Each strategy can trace its origins back decades or even centuries, but the twenty-first century’s ongoing advancements in information and communication technology—and the transparency those advancements have fostered—have expanded their potential. Each option also differs in terms of complexity, required investment, and upside. Unbundling is the most straightforward approach, followed by metering. Sharing, which today is perhaps most popular in markets for transportation and lodging, is the most complicated.
In chapter 5, we referred to Netflix and Spotify as examples of libraries: large collections of similar products (movies, television shows, songs) that would be prohibitively expensive for customers to compile on their own. Rent the Runway plays a similar role with designer clothes and accessories. Cable companies, however, are more like uber-libraries because their service bring together individual libraries (the different channels) as well as Internet access and fixed-line telephony as part of a “triple-play” package. Cable service has become so comprehensive and bloated that users end up paying for libraries they want and for libraries they don’t want. For example, some people may spend the bulk of their time watching live sports and 24/7 news but rarely watch children’s programming and documentaries. Other subscribers may do the exact opposite.
This is an example of the consumption waste that occurs when customers are forced to buy a “quantity” that does not correspond to their actual needs. While subscribers technically do not throw away the excess movies, shows, events, and documentaries they pay for in the subscription, they are likely to consider the money spent as thrown away. In response, viewers have undertaken an action known as “cord cutting.” They are dropping their subscriptions under the assumption that it is more efficient for them to build their own bundle, including only the content that they are really interested in. The prices for the individual “libraries” support this rationale. A recent study conducted by Consumer Reports, a leading consumer watchdog organization in the United States, revealed that, across all providers, the median price for a cable service bundle was $173 per month.12 This is a far cry from the $15.99 per month that, as of June 2019, Netflix charges in the United States for a premium plan.13 Similarly, YouTube TV offers “cable-free live TV” for $49.99 per month and HBO charges $14.99 per month.14 The incredible growth of these services suggests that people are proactively trying to align their spending with the kinds of programming choices they prefer, thus reducing or eliminating consumption waste. A 2019 report by PwC forecasts that the revenue of streaming video services will increase by 64 percent over the next five years to almost $24 billion per year, while cable and satellite TV providers will see revenue decline by 16 percent to $84 billion in the same period.15
Meanwhile, the evolution of the recorded music and newspaper industries over the last twenty years demonstrates just how intertwined access and consumption waste can be. It exemplifies what happens when a sector transitions from selling physical goods to selling digital ones. Physical constraints made it economical to bunch songs onto a compact disc and articles into a newspaper. The most efficient way to distribute the most news to the most people used to be the printing press. But in digital form the economics change. It is just as efficient to supply individual songs and articles, introducing the possibility to “package” the good in whatever size best fits the consumption pattern of customers. As Netscape cofounder and Internet pioneer Marc Andreesen said, “Bundles emerge as a consequence of the current technology.”16 Cycles of bundling and unbundling are a natural consequence of the advances in technology that we described in chapter 2.
In the specific case of recorded music, the rise of Napster and peer-to-peer sharing at the dawn of the twenty-first century established that listeners preferred to purchase individual songs rather than complete albums. Yet at that time the record labels earned the vast majority of their revenue from selling shrink-wrapped jewel cases containing plastic discs with a fixed set of songs on them. It didn’t matter whether listeners wanted all the songs or just one or two. Ultimately, the demise of the compact disc led to industry-supported systems for the sale of digital tracks, triggering the explosive growth of iTunes. By 2013, iTunes had sold twenty-five billion individual digital tracks, all unburdened by the unwanted tracks that would have come with purchasing the traditional album.17
What is the household chore people hate the most? According to a 2018 report by the Council of Contemporary Families, it’s doing the dishes, a task that one of the report’s authors described as “gross. There is old, moldy food sitting in the sink. If you have kids, there is curdled milk in sippy cups that smells disgusting.”18
If the task is bad enough at home, imagine doing dishes on a much larger scale, such as in a hotel or restaurant. Then imagine the demanding quality requirements for washing the dishes and silverware at elegant venues such as the Opera House in Sydney or luxury hotels such as the Mandarin Oriental in Beijing or the Burj al Arab in Dubai.19
That kind of work is the specialty of the German company Winterhalter, which specializes in “warewashing” equipment and services for commercial kitchens. Founded in 1947, the family-owned company offers its customers the dishwashers, racks, detergents, water treatment supplies, and services they need to clean their dining ware. But what makes Winterhalter truly stand out in the market is how it charges its customers for those clean dishes. Instead of relying on the simple, traditional model of selling the dishwashers and consumables, or an access model such as the subscriptions we described in chapter 4, the company went a step further and launched a program called Pay per Wash. In the spirit of the Ends Game, Pay per Wash focuses on eliminating the inefficiencies that hinder consumption, which by definition also includes problems of access. Winterhalter stresses that this program leaves the customer with “no investment, no risk, and no fixed costs.”20 The customer logs into the Pay per Wash portal, enters the number of wash cycles according to its preconfigured specifications, and starts the machines. Winterhalter then charges for each completed wash cycle. It claims that it “boosts commercial warewashing to the next level: the first warewashers you only pay for when you actually use them. That means perfect wash results for everyone—regardless of the available budget, and with maximum flexibility.”21
In chapter 4, we showed how some companies have begun to adopt XaaS subscriptions or memberships in order to minimize access waste. By substituting outright ownership with periodic payments, these revenue models aim to remove the physical or financial obstacles that prevent some customers from “reaching” a desired product or service. However, while a well-designed access model can truly open up the market, it does not track the consumption that is necessary for customers to derive value. This is the second checkpoint we referred to earlier. Rather, the products or services to which customers may subscribe on a monthly or yearly basis are rigid, predetermined bundles.
Winterhalter eliminates this rigidity by metering and charging for discrete uses. This approach is also a superior way to account for the symbiotic relationship between industrial products and the services that accompany them. Think of the ways that manufacturing companies typically charge for services. When a manufacturer bundles its “free” services into the price of its product, this effectively means that it charges for them by the pound, square foot, or some other metric that has nothing to do with their underlying nature or quality.22 This simple example underscores how bundling products and services together can distort customers’ views of what they are paying for.
Charging for products and services separately sidesteps the service-by-the-pound issue, but creates other problems. If customers do not calibrate their service needs properly, or cut corners due to cost constraints, they face the risk of owning assets that fall short of their goals for throughput, efficiency, or running time. Sticking with these traditional models can result not only in a considerable amount of access waste, but also in consumption waste. It can turn even the most customer-friendly, high-quality suite of services into an impediment to a company’s growth and sustained success.
The success of Winterhalter’s Pay per Wash, and of any revenue model anchored on consumption for that matter, is clearly tied to the reliability of the product. This point is perhaps obvious, but no less important. If the dishwasher does not work properly when the customer presses Run, Winterhalter does not get paid. Analogous to what we said with respect to Flock and drone insurance, the onus is on Winterhalter to make sure its products are in perfect working order when customers need them. The customer pays only based on actual consumption, which gives the firm the incentive to ensure that consumption “episodes” happen when demanded.
Yet Pay per Wash might only be a prelude to an even leaner revenue model from Winterhalter, which is currently developing what it calls Next Level Solutions. The goal is to use Internet connectivity to optimize the efficiency of its dishwashers. By collecting and analyzing impact data from individual customers, Winterhalter hopes to come ever so close to understanding and quantifying cleanliness, and then its value to the user. Ralph Winterhalter, grandson of the company founder and currently joint CEO, described the initiative, stating that “exploiting technological advances is the way to secure our brand for the future and ensure we enjoy sustained growth and expansion.”23 It brings the company yet another step closer to fulfilling its goal of “assuming responsibility for a perfect cleaning result.”24
Switching sector, think now of the mobile data plan a household might sign up for. The mobile network operator counts the number of gigabytes, not the number of times a family member uses a particular app. On a much larger commercial scale, think instead of a software package available to all the employees of a client organization. Some employees may be heavy users, others may be moderate users, and some may rarely use the software at all. The developer in this case might track the time spent logged into the system, data consumption, and other parameters across all users.
These two situations also lend themselves to a revenue model where the organization charges customers based on the actual consumption of the product or service it brings to market. In 2018, Deloitte conducted a survey with more than one thousand information technology specialists at large U.S. companies in order to glean their attitudes toward metered XaaS subscriptions, which focus on use, compared to the traditional purchase of a perpetual license. The specialists cited many advantages of these newer agreements, which are often referred to as flexible or on-demand consumption, with operational and workforce excellence at the top of their lists. A large majority of respondents also mentioned the reduction of time spent on maintenance and upgrades, responsibility for which now shifts to the supplier, and the opportunity to access the latest technologies.25 The survey found that suppliers that have introduced metered XaasS subscriptions “have been rewarded by consumers as well as investors, challenging conventional valuations and placing pressure on traditional industry players that are retaining traditional business models.”26
Interestingly, these findings apply not only to the latest innovations coming out of Silicon Valley, but also to classic product categories that are more than a century old. One customer who agreed to a metered XaaS contract in one of these traditional categories said the “major benefit to us is financial planning” and that the arrangement “has taken away the headache” of routine maintenance checks.27 Another customer of the same supplier is convinced that the metered XaaS model is “the correct strategy for our business” because of the economies of scale.28
Again, these customers were not buying software, computer hardware, or some other modern technological wonder. They were buying Michelin tires for their commercial vehicle fleets. To be more specific, they were signing up for the EFFITIRES program offered by Michelin Solutions, the fleet management unit of the giant French tire manufacturer. Michelin supplies the tires, but the client fleet managers pay only for miles driven. The company stresses that the program will “protect your drivers and their loads, while still minimizing your total cost of ownership.”29
One analysis published by the World Economic Forum claims that Michelin’s shift from “selling tires as a product to a service” has helped the company “achieve higher customer satisfaction, increased loyalty and raised EBITDA margins.”30 Michelin has built on that success by expanding the program to other types of commercial vehicles, using different metrics based on use. The company says it has “full solutions available for professionals in any industry” with models based on “kilometers driven, number of landings for airlines, [and] tonnes transported by mining sector customers.”31 The elements of these “pay-as-you-go” programs include tire selection, mounting, maintenance, assistance, regrooving, and end-of-life recycling.
Since 2015, the program also includes a fuel efficiency commitment for commercial vehicle fleets. In 2017, Michelin acquired NexTraq, a commercial fleet telematics company. At the time, Michelin stated that “telematics and fleet management services are a rapidly growing category worldwide and an important area of Michelin Group’s overall business plans.”32 In 2018, the company highlighted its efforts to boost the collection of impact data at the individual product level as a means to improve its tire management services. Ralph Dimenna, a Michelin senior vice president said, “It’s a matter of collecting enough data on that tire that the customer understands the [value] of that asset.” He added that the data will also enable Michelin to shift from reactive to preventive and even predictive tire management.33
Finally, one rapidly expanding group of demanding customers in the twenty-first century are the digital nomads, people who are “extended travelers who work remotely with the help of digital tools like a laptop or smartphone.”34 Whether they are traveling the globe or within their own region or city, these workers relish their freedom and their ability to work anywhere. But working anywhere ultimately means working somewhere, and while beaches and mountaintops have an undeniable appeal, many of these nomads gravitate to practical places such as restaurants or coffee shops that offer the right mix of comfort, convenience, caffeine, … and WiFi!
The Russian café chain Ziferblat uses a metered model to cater not only to digital nomads, but also to anyone who wants to find a place to socialize, play games, or simply chill out. Unlike other coffee shops or gathering places, the food, beverages, restrooms, and WiFi are free of charge. Instead, patrons pay only for the time they spend at the premises, measured in minutes. Ziferblat—which means “clock face” in Russian—opened as a “pay-what-you-want” room for poetry readings back in 2010, but quickly switched to the pay-as-you-go model.35 By 2015, the company had thirteen locations in Russia, Slovenia, the United Kingdom, and Ukraine. The café in Manchester, England opened in 2016 and attracts ten thousand guests per month.36 As one Ziferblat executive explained, “We don’t judge, we just ask people to respect the space.” Some guests come only to use the bathroom or grab a quick bite to eat, while others spend all day getting work done.
The Ziferblat model offers some food for thought (no pun intended!) for other gathering places where the value patrons derive has some correlation with the time spent on the premises. These include the popular board-game cafés such as Snakes & Lattes, which operates three locations in Toronto as well as one in Tempe, Arizona.37 For a small cover charge per person, guests can stay as long as they like and play board games selected from the location’s extensive library, which includes more than a thousand titles. If the group of customers is struggling with the rules, they can ask an onsite “game guru” for an explanation on how to play.38 The appeal of the current model is that it eliminates access waste, because assembling a large library of board games is prohibitively expensive for most people, and opportunities to try out a new game comfortably with friends and with expert help are rare. The next step would be to identify consumption waste by creating incentives for guests to come more frequently, play more often, or consume more on the premises.
The successful evolution of revenue models from ownership to metered service in anything from hardware and software to established industrial products and hospitality begs an important question: When does it make sense to charge for something you are tracking? In the spirit of the Ends Game, the answer to that question will always depend on whether the switch makes the exchange between the selling organization and the buying customer more efficient. To what extent does the change in revenue model eliminate consumption waste by making it easier, more cost effective, or more valuable for the consumer to use a product or service? To what extent does it improve the utilization of the underlying asset?
In chapter 4, we explained how Rent the Runway addresses access waste in the market for fashion by offering women the opportunity to enjoy a wide variety of dresses, gowns, handbags, jewelry, and other designer clothes and accessories without having to purchase any of these items outright.
Violet Gross and Merri Smith appreciate Rent the Runway, but the two entrepreneurs thought they could take the model one step further. Instead of a service that rents clothes from a curated “closet” stocked with popular brands, they envisioned a service that builds on something women have always traditionally done: borrow clothes from other women.
“My friends and I are always borrowing each other’s clothes,” Smith said in an interview in October 2018. “Violet and I realized there’s an untapped opportunity here. A business of renting friends’ clothes can have serious legs with the right infrastructure.”39 That infrastructure became the app Tulerie, which Gross and Smith launched in 2018. In the spirit of the Ends Game, the Tulerie website is clear that the business addresses the consumption waste inherent in a traditional ownership model: “Tulerie is an opportunity to both expand your wardrobe options and profit on what you own by sharing closets with conscious and fashionable women in your city and around the U.S.… By borrowing versus buying, you can indulge in of-the-moment pieces you would never wear to its fullest potential alone. By lending, you can underwrite those heritage pieces from high-end designers (because ethical is expensive) by temporarily sharing it with women just like you.”40
Uber and Airbnb serve as shorthand examples for the sharing economy, also referred to as collaborative consumption, but the Tulerie example shows how one of the archenemies of efficiency—the idle asset—lurks literally in any market where a significant number of customers, individuals or businesses alike, own things they aren’t fully using, and a correspondingly significant number need exactly the same product or service but cannot afford to purchase it. The idle asset is perhaps the clearest symptom of the consumption waste prompted by the classic “pay-to-own” model of generating revenue.
Sharing platforms provide access to products and services to more people. They also increase the use, and thereby the return on investment, of assets that individuals already own. This logic applies as much to real estate, where Airbnb matches travelers with open homes and apartments, as it does to warehouse space, where logistics startup Flexe matches retailers with depots that have excess capacity. It also applies in the “market” for parking spaces, where platforms such as Spothero help drivers find open spots in crowded cities by pooling the excess capacity of its participating partners.41 Finally, the logic of collaborative consumption applies to services such as TaskRabbit, which helps people find available labor to do odd jobs such as mounting a flat-screen television, assemble furniture, or move heavy objects. In this case, there are idle assets on both sides of the exchange because, for example, customers cannot make use of unassembled furniture and those offering the labor have some spare time on their hands.42
While the number of sharing platforms is increasing rapidly, perhaps the biggest impact from their presence is felt in less-developed, rural economies where communities have traditionally shared assets out of necessity, but only at a familial or local level. Modern information technology empowers the sharing of critical assets such as farming equipment on a much larger scale, increasing the well-being of both equipment owner and equipment users. Trringo, India’s foremost tractor and farm equipment rental service, is a great example. Trringo “aims to raise the level of mechanization in farming through the power of technology and a strong franchise network to make farm mechanization easily accessible, affordable and reachable to farmers across India.”43 This statement underscores the nature of the relationship between initiatives to reduce consumption waste and initiatives to reduce access waste. While access to farm equipment does not guarantee consumption, there is no consumption without access.
How large will the sharing economy become? PwC has estimated that the transaction volume across just five types of platforms in Europe—collaborative finance, peer-to-peer accommodation, peer-to-peer transportation, on-demand household services, and on-demand professional services—could reach €570 billion by 2025, up from just €28 billion in 2016.44 If the forecast becomes reality, the estimated revenue for the platform providers in these five markets could reach €83 billion, up from €4 billion in 2016. In China, the growth is similarly staggering. China’s Sharing Economy Research Center (SERC) estimated total transaction volume in 2018 at roughly $440 billion, with an annual increase of 42 percent.45 The SERC’s deputy director, Yu Fengxia, expressed optimism for future growth in terms that fit hand in glove with the spirit of the Ends Game: “The sharing economy’s potential of stimulating consumption will be released, as it can not only satisfy consumers’ needs limited by the traditional service mode, but also boost their new consumption needs.”
Li Xiao, founding partner of the Chinese venture capital firm Joy Capital, added, “We are living in a society which constantly pursues efficiency improvement. Resources that are not fully utilized give birth to sharing economy. I am confident that as the sharing economy penetrates into more and more industries, it will create great value to our society.”46
The growth of these revenue model in any region of the world will depend on whether and how the platforms and their participants—asset users and asset owners alike—overcome established social norms that frown on sharing. A survey among European consumers conducted by the Dutch financial group ING showed significant lingering aversion to use collaborative consumption.47 In the Netherlands, 64 percent of respondents said, “I don’t like other people using my property.” Concerns about insurance was a deterrent for 44 percent of the respondents, and concerns about the quality of the shared items discouraged 32 percent of respondents. Yet history shows that social norms do change and taboos can be overcome. Think about the various ride-sharing services. Most members of Generation X or older generations can recall their parents admonishing them to “never get in a car with strangers” or warning them about the dangers of hitchhiking. But outfits such as Uber and Lyft are essentially large-scale, organized, peer-reviewed hitchhiking services. The difference is that today people use their thumbs to tap their smartphone screen instead of holding them out to signal they need a ride.
Organizations that anchor their exchanges with customers on consumption improve on the alternatives of selling ownership or targeting access alone. At the same time, a “pay-per-use” arrangement may still be inefficient if consumption fails to provide the performance customers seek from a product or service. Accordingly, the next and final checkpoint in the journey to lean commerce is a revenue model that focuses on outcomes or, in some cases, on the ultimate outcome: value itself. This is the subject of the chapter 6.
1. D. Waldstein, “A Bloody Finger Sidelines Trevor Bauer Early, But the Indians Barely Flinch,” New York Times, October 18, 2006, https://www.nytimes.com/2016/10/18/sports/baseball/cleveland-indians-toronto-blue-jays-trevor-bauer-alcs.html.
2. D. Sheinin, “A Man and His Drone: Indians’ Pitcher Trevor Bauer Marshals Eccentricities,” Washington Post, October 16, 2016, https://www.washingtonpost.com/sports/nationals/a-man-and-his-drone-indians-pitcher-trevor-bauer-marshals-eccentricities/2016/10/16/35f6e430-93de-11e6-bc79-af1cd3d2984b_story.html?utm_term=.a5453ac41b57.
3. J. Spero and D. Bond, “Can Airports Ever Make Themselves Safe from Drones?,” Financial Times, January 10, 2019, https://www.ft.com/content/df78e80c-1413-11e9-a581-4ff78404524e.
4. “UK Insurtech Flock Launches Pay-As-You-Fly Drone Insurance,” Insurance Journal, March 13, 2018, https://www.insurancejournal.com/news/international/2018/03/13/483092.htm.
5. “Huge Volumes of Data Make Real-time Insurance a Possibility,” Economist, September 21, 2017, https://www.economist.com/finance-and-economics/2017/09/21/huge-volumes-of-data-make-real-time-insurance-a-possibility.
6. E. L. Klinger, “How to Insure a Flying Robot,” LinkedIn, October 25, 2017, https://www.linkedin.com/pulse/how-insure-flying-robot-ed-leon-klinger/.
7. Flock, “Simpler, Smarter Drone Insurance,” https://flockcover.com/ accessed April 13, 2020.
8. Flock, “Flock’s Data Insights Part One: Pilots Really Do Fly Safer with Flock,” October 15, 2018, https://blog.flockcover.com/flocks-data-insights-part-one-pilots-really-do-fly-safer-with-flock-40391adb7c26.
9. Flock, “Introducing: Recreational Drone Insurance for the Price of a Coffee,” May 28, 2018, https://blog.flockcover.com/introducing-recreational-drone-insurance-for-the-price-of-a-coffee-47530dc4720f.
10. “Huge Volumes of Data Make Real-time Insurance a Possibility,” Economist, September 21, 2017, https://www.economist.com/finance-and-economics/2017/09/21/huge-volumes-of-data-make-real-time-insurance-a-possibility.
11. “Huge Volumes of Data Make Real-Time Insurance a Possibility.”
12. J. Willcox, “Cord Cutting Continues, Fueled by High Cable Pricing, Consumers Reports’ Surveys Finds,” Consumer Reports, September 17, 2019, https://www.consumerreports.org/phone-tv-internet-bundles/people-still-dont-like-their-cable-companies-telecom-survey/.
13. R. Molla, “The History of Netflix Price Increases in a Single Chart,” Vox, January 16, 2019, https://www.vox.com/2019/1/16/18185174/netflix-price-increase-subscription-chart-original-content-streaming.
14. YouTube TV and HBO, sign-up pages, https://tv.youtube.com/welcome/ and https://www.hbo.com/ways-to-get, prices effective as of February 8, 2020.
15. A. Pressman, “How Cord Cutting Is Driving Big Changes Across the Media Landscape,” Fortune, June 5, 2019, http://fortune.com/2019/06/05/cord-cutting-netflix-apple-pwc/.
16. J. Fox, “How to Succeed in Business by Bundling—and Unbundling,” Harvard Business Review, June 24, 2014, https://hbr.org/2014/06/how-to-succeed-in-business-by-bundling-and-unbundling.
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