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Perspective

On-Demand World

How SMBs can prosper in an on-demand economy

By Jasbir Singh

Fall 2017

With consumers embracing on-demand ride-sharing (think Lyft) and hospitality services (think Airbnb), progressive business managers are coming to an important realization. New consumption models aren’t just for a few niche players—they represent a fundamental shift with huge implications for large enterprises, midsize businesses, and small companies across many types of industries. The shift, or what is commonly called disruption, is coming fast to stable bricks-and-mortar-based economies.

Jasbir Singh

Jasbir Singh, Vice President of Enterprise Resource Planning and Supply-Chain Management Applications, Oracle Asia Pacific

The upheaval is being driven by millennials who prefer to consume a service rather than purchase a product. Pay per use for the outcome is the current mindset. Why buy a refrigerator when the need is refrigeration, and why engage an HVAC contractor when you could get a smart home service contractor? This powerful cohort is fast becoming a majority of the buying public. Within a couple years, millennials will represent about a third of US adults, and by 2025 they will comprise approximately three-quarters of the workforce. As their spending power increases, they’re bringing a new perspective to the marketplace, essentially asking, “Why buy when you can share?”

Global management consulting firms have a name for how businesses are responding: everything as a service (XaaS). Deloitte describes it as a strategic and operational blueprint that could soon upend business models.

Whether large or small, companies can successfully cash in on this trend if they’re visionary enough to create consumption-oriented business models. Fortunately, there’s a clear way to make this fundamental internal shift and do it before digital insurgents dominate their respective markets. Business-model change is built on four key steps: sense and measure, think, monetize, and bill.

New consumer consumption models aren’t just for a few niche players—they represent a fundamental shift with huge implications for large enterprises, midsize businesses, and small companies across many types of industries.”

The sense and measure step takes advantage of innovations such as Oracle Internet of Things Cloud Service to monitor assets, activity volume, and usage parameters for on-demand or “consumption-based” services. For example, companies might create “laundry as a service” for consumers who’d rather not purchase appliances outright. Using Internet of Things (IoT) sensors, these companies monitor laundry usage patterns based on time, load per wash, and continuous use (stress), and charge customers accordingly.

The think step also capitalizes on innovation, in this case the advanced machine learning and artificial intelligence algorithms also available in Oracle Internet of Things Cloud Service. Thinking and processing terabytes of data and identifying patterns are what will help business leaders make on-the-fly decisions about pricing and discounts based on real-time demand, seasonal factors, or other market dynamics.

Collecting recurring services revenues is easier than ever with the arrival of Oracle Monetization Cloud, which enables companies to consume various streaming services data, process the bill in real time, and monetize it.

As their spending power increases, [millennials are] bringing a new perspective to the marketplace, essentially asking, ‘Why buy when you can share?’”

At the end of each month, billing data flows from this IoT monetization billing cloud service to a cloud-based enterprise resource planning platform for management revenue reporting and analysis. Because the monetization and billing services use the same data model, financial managers can monitor services revenues in real time. They can closely track revenues from each on-demand asset and customer, and they can turn to machine learning technology again to make pricing adjustments, such as giving special offers to important customers.

New Opportunities

Cloud’s low barrier of entry means forward-thinking enterprises and small-to-medium businesses (SMBs) can quickly modernize their business models for an on-demand world. Cloud also gives companies an efficient way to capitalize on application and service updates over time to address the changes that will continue to come with technology innovation and business disruption.

The combination of on-demand business models and cloud services for businesses unleashes exciting opportunities. Consider a health insurance company that creates an app to promote discounts on premiums for policyholders who share lifestyle information streamed from IoT monitors. This could influence customers to make healthier choices and potentially reduce what the company pays out in claims each year.

Small-to-medium businesses can quickly modernize their business models for an on-demand world.”

Now imagine the new revenue streams that are possible. Let’s say a beverage company wants to promote a new low-calorie yogurt drink targeted to health-conscious consumers. An insurer agrees to promote the product in its app by guaranteeing that a half-million of its healthy-lifestyle customers will receive an ad. Next, in exchange for a percentage of the sales, the insurer further guarantees that at least 1,000 of its customers will buy the drink.

In this case, the insurance company isn’t only making money via XaaS; it’s also opening new revenue streams from a valuable ecosystem it has created for business partners.

There’s a fast way for enterprises and SMBs to prosper in an on-demand economy: start by ingesting the right cloud-delivered business services. This, in turn, enables leaders to offer innovative and profitable outward-facing services for the rising tide of on-demand customers.

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Your Product as a Service

Photography by Namas Bhojan, iStock.com/baona