Reimagining Black Friday: Business Models Based on Services, Not Stuff

By Aarthi Rayapura November 30, 2016

By Manish Bapna and Kevin Moss

Black Friday. The name sounds ominous, but for retailers, it’s a day for thanksgiving after Thanksgiving. Historically, it’s the biggest shopping day on the U.S. calendar, so named because it puts businesses in the black. Somewhere in our psyches, though, we know our acquisition habits are excessive.

Our economy grew 20-fold in the last century and is forecast to grow 20-fold again by the year 2100. That’s 400-fold growth over 200 years. At the same time, our use of resources has grown even faster than our economy, such that we are close to reaching or even exceeding our planetary limits.

As markets such as China, India, Africa and Brazil strive to lift their people out of poverty, they present a conundrum: If they follow Western patterns of consumption, there simply will not be enough raw materials at the start of the consumption cycle or a planetary ability to absorb the waste at the end of the cycle. Without a change in business models, environmental concerns will be a brake on growth and our ability to deliver prosperity.

The good news is that it is possible. We even know a little about what that future might look like.

We can envision stepping into a Walmart, Target or Carrefore in 2030 and seeing three separate departments: one selling new stuff, one repairing or upgrading existing stuff and one reselling previously owned stuff. The companies will make just as much money selling these services as they currently do selling just new stuff. They’re also likely to employ more people, since services generally require more personnel support than products, bringing a double contribution to growth and well-being. These are the markets for tomorrow.

We are seeing the beginnings of such models in the household goods sector. Steve Howard of Ikea speaks about peak stuff, and how that might transform the global giant’s business model. Progressive companies in the apparel sector are experimenting with disruptive models, leading to pilot projects such as Schwopping at Marks and Spencer and recycling at scale at H&M.

Progressive companies in the auto industry are looking to tomorrow’s markets now, too. It is not just about clean fuels. It is about transformative business models in which vehicles are designed for sharing markets and circular economies. The leasing business is the beginning of that model, in which drivers may never own a car, just seek the use of one when they need it. The car companies that thrive will be those that adapt their models to ones with less volume but much higher utilization, less ownership and more sharing, and less focus on the driving experience and more on what else a driver can do while in the vehicle. Ford is one company that is re-imagining car ownership as a shared experience .

A transition from products to services is the innovation we need: changing the question from “What do we own?” to “What can we do?” While technological innovation will be required, it will not lead. Technology innovation will follow business model transformation.

Read the full article on Forbes

And check out Zuora CEO Tien Tzuo’s interview where he predicts that “In five years, you won’t buy anything but subscribe to everything!”