Have you been in meetings where someone lets out phrases such as, “we need to cater to new consumption models”, or “we need to evolve our business model”? I am sure you have. So have I. Absent business context, the word consumption evokes a sense of dread if one knew that in the early 20th century, it referred to Tuberculosis and a person’s health wasting away!
Over the years, here’s how I have come to terms with consumption models, breaking down the consumption model in to Mode-Ownership-Payment:
Consumption model can be broken down into three parts: mode of consumption, ownership and operation of what is consumed, and payment method for what is consumed.
M: Mode of Consumption
Mode relates to the precise mechanics of how we consume anything. As technologies have evolved, the means to create and distribute products have evolved as well. As a result, mode is the most important part of the consumption model. Ownership and payment follow the consumption mode and haven’t fundamentally changed as we’ll see below.
Here is how consumption of water and books have evolved.
Water went from “Dig It Yourself” (DIY) to packaged to on-tap. Books went from physical to digital-readable to digital-audible in form-factor and delivery. Clearly these are dramatic changes in the mode of consuming the same thing.
O: Ownership and Operations of the Consumable
We have many choices on how to own and operate (manage) what we consume. For ownership, our choices are to own outright (“asset-heavy”) or buy rights-to-use (“asset-light”). Then we get to decide if we want the asset to be managed by us (Do-It-Yourself) or someone else (Get-It-Done). This leaves us with four options shown below using transportation by cars as an example.
The same four applies whether you are dealing with software/SaaS or other consumables. Even though the combination of ownership and operations looks tricky, there is nothing new here when we look at the ‘O’ aspect of consumption model in isolation.
P: Payment for Consumption
How we pay for the things we consume have not changed either over the years. All of our monetization models for products or services can be mapped in to these two types below.
Trio of Consumption
In short, the mode of consumption together with the ownership and operation of the consumable and its payment type makes up the consumption model
From consumption model, it is easy to parse the accompanying delivery model and the business models. No rocket science there. Next time you hear consumption, just ask if the speaker means Dig-It-Yourself, packaged, or on-tap, and in what 21st century form-factor. No more wondering if we are talking about a disease. Just MOP it!
