We may own a lot of stuff, but I think we are starting to have a different view of what should be owned/purchased/bought versus accessed/licensed/rented. The end desire is the same - ability to use an item to solve a problem. But how you access that solution - direct purchase or access rights - may be different. And does that matter? Or do customers care more about finding an economic and sustainable way to solve their problems?
How we view ownership in society is changing. In many respects, ownership is the goal of the buyer’s journey, the sales process, and the main interaction people have with a company. Many look to “own” a solution to a problem. We make ownership seem simple - you go to a store (brick and mortar or virtual), buy something, and bring it home. But that’s not really what happens. Subconscious decisions occur during various steps of the process to determine if a product really solves your problem, and if the product has value or worth to you at its current price point. There can be many stakeholders involved in a purchase, depending on the item, how much it costs, who will use it, the type of benefits, and how it will be maintained.
We sometimes kid ourselves into thinking that money doesn’t matter when we are solving a problem. “Money is no object.” But it is. Money is often a deciding factor for a purchase or license. We may decide that the high cost of the solution makes the problem not worth fixing and reduce the priority of the problem in our lives. We may decide that it’s ok to live with the problem as-is, or do some more research and find a free or low-cost substitute workaround. In doing this, there is a chance that we may simply not be seeing how deeply the product will change our lives for the better. We walk away from the solution because it's too difficult to see a new way. We need help visualizing the change.
An evening gown is a great example of a complex purchase that may be influenced by money. A gown may not change your life, but it is a great example of a buy or rent scenario and the factors involved in the decision making around that.
If you attend formal functions often, it makes sense to own a gown. But there are a number of reasons why gown ownership isn't practical:
- Most of us attend a formal event a handful of times in a lifetime. We don't need one in our closet.
- A gown is usually based on high fashion trends. If you only wear one every few years, then it would go out of style before you could wear it again.
- You don't want to be seen wearing a gown twice by the same group.
- Gown maintenance and storage can be costly (depending on the gown, it could take up a lot of room in a closet and require a special dry cleaner to clean it)
For many, it makes more sense to rent a gown for an event and return it the day after. Rent the Runway was founded on the premise of reducing replacement and maintenance costs. They also rent designer clothes that you may only want to wear a handful of times before they are out of fashion. They solve the problem of wearing the right outfit for the right occasion and provide a different way to finance access to the solution. The alternative solution to renting a gown for a formal event is putting the gown on a credit card (some would return the gown the next day, as unethical as that sounds...it is a common option). Another solution is simply not going to the event. But if Rent the Runway does it right (and they have), they found a way to paint a picture of a future where you get the best of all worlds - even cost-wise.
As mentioned above, the cost of ownership is tied not only to the purchase cost, but the cost of maintenance, repairs, and replacement. There are also insurances, warranties and guarantees to consider. There are pros and cons to alternatives like leasing or renting once these other costs are considered.
As an aside….I’d like to clarify the definition of a product and/or service that a company offers. Sometimes we view products from a company's perspective - as items to be sold or items that we need to get someone to buy. From my perspective, a product or service should be seen from a customer perspective as a solution to a problem. The problem could be, for example, hunger (products in a grocery store), boredom (amusement parks, zoos, museums), or desire for knowledge (books, schools).
To clarify, if someone doesn’t buy your solution, it’s because it’s not a priority for that person. He simply found another way to solve his problem without buying from (or spending money with) you.
Historical view of ownership
Ownership used to be related to investments and assets. People would purchase land as an investment. That land became a place to grow food and generate revenue from the excess harvested. Or they could sell the land because it increased in value as it sat there. Same with a house. Same with a horse. You bought a horse and had transportation, manpower, and wealth that could be sold to another bidder. Sure, you had to feed it and care for it, but those costs were far less than the value it gave providing transportation and other services (even the ability to reproduce and make more to sell).
In some ways, clothes were an investment (they could be repaired and worn for years). Food was an investment. A printing press was an investment. Owning a book was an investment. Jewelry was an investment.
Then came along automation and mass production. Costume jewelry. Plastic plates. Things that were not made to last. Things that required maintenance, serious repairs, and possible replacement because they were temporary, created for fun, or just a handful of uses.
Over time, even cars were not seen as an investment. They required a lot of maintenance and repairs. And replacement. Things were no longer seen as investments or assets. They were things that cost money and declined in value the longer you owned them.
According to this Financial Times article, businesses were the first in revising their perspective of ownership. Many stopped owning their offices and business spaces (e.g., supermarkets, airlines). They rented because it was perceived as more economical, flexible (they could change locations and not need to sell), and sustainable.
I see six trends influencing our views of ownership as well as our view of products and solutions and wealth/assets.
#1: Ownership isn't really connected to wealth and investment anymore.
As stated earlier, people in the past would own something because it was an asset with long term value. Buying a good was equated with making an investment, increasing in value over time, adding to your wealth.
With the rise of mass production and consumerism, we have witnessed that not all items we buy will increase our assets and wealth. In fact, some things we buy will decrease our wealth because of maintenance and repair costs. Again, cars are a great example. Many say that a car loses its value as soon as someone drives it off the dealer's lot. Then there are the maintenance and repair costs. After 10 or more years, there are replacement costs. It provides transportation, but are the costs worth it?
#2: Our definition of wealth and investment has changed.
What does it mean to be a wealthy person? Our definition of personal wealth is shifting from being based on money to personal experiences and balanced living. Trips are now being seen as a personal investment to broaden our views of the world and how we see ourselves in it. Education has always been perceived as an investment because you can expand how you see the world and yourself.
Sure, what is in your bank account matters when defining wealth, but that is not the only factor.
The movie Citizen Kane illustrates this best. Although the movie was made in 1941, its message is still relevant, if not more relevant, today. Charles Kane owned a mansion, the largest personal zoo, incredible artwork, but on his deathbed, he wished to find his slide, Rosebud. He had this slide as a kid before he entered the world of wealth. To him, Rosebud represented his most prized possession - his childhood with his family. It makes you wonder if he saw himself as poor, although he had many things.
This begs the question: how do you define wealth? In some ways, your perception of wealth could be a reflection of your value system.
#3: We are increasingly wanting access to things that simply can't be owned.
You can't "own" a song. You can write or perform a song. You can record a song for later listening. You can access that song to listen to it. But you can't "own" it. You can own the CD that the recording is on, but that song is not technically yours. Same with a book. Someone else wrote that book. You are reading it. You may own the paper it is on, but you don't own the tale or the thoughts or ideas outlined in the book. Those are from someone else. The person who originated the thoughts and ideas can provide access to you to read it, or keep it to himself.
In a way, the digital world and the discussion around media rights is raising a solid point about creative work and ownership. It can't be owned. It's about access.
We are almost extending the model of the library. The library provides access to books that we return. With the rise of the Internet, we now have access to knowledge. But we don't own it. It's free, we can read it at any time, but we will never own everything on the Internet. However, we can always access it.
#4: The cost of ownership (maintenance and repairs) may be too high.
The term, "total cost of ownership," (TCO) is now commonplace. Businesses consider this when they purchase a solution. It's no longer a consideration of what's the cheapest solution - it's how much the solution will cost a company or person in the time that the person "owns" the product. It's a long-term cost view of ownership.
Rather than the car example I keep using, let's look at a house. If you don't go to the right appraiser or inspector, you could purchase a house with a faulty foundation or frame. There may be a leaky roof that even the previous owners weren't aware existed. Or the shingles could have been poorly installed. Or the gutters. There is always maintenance for a house, which is why many don't own and rent. Issues can range from structural damage after extreme weather to simple wear and tear to general improvements. There is even gardening and yard work that needs to occur.
Another example for TCO is clothes that require dry cleaning only. Dry cleaning can easily cost $10-15 per shirt depending on the dry cleaner. So a $100 silk blouse may easily cost $250 after 10 wearings.
This is why ownership doesn't always make sense. Wearing a dry clean only shirt could easily double, if not triple, the cost of the shirt. We are told a home is an investment, but in some ways, given that it is based on property values and market rates and how much work you put into it, is it?
#5: Technology is changing so fast that ownership is no longer sustainable.
If we look at how technology is changing so fast, we can quickly see how items are built to last a few years, if not only a few seasons. We get new technology to replace old, dated technology. We dread buying it because we know we’ll need to replace it. Sometimes, you can't even repair it if it is broken. Further, if you can repair it, the cost is prohibitive and it is cheaper to purchase a new solution.
The iPod is now essentially dead (and iTunes is probably shortly behind) after only 16 years with the rise of the iPhone and other media devices. Another example is ethernet cables. We no longer connect to the internet with cables (for about 5-7 years now). Dial-up access is a thing of the past. The world is wireless. I predict that keys to homes will be a past novelty in 5 years - already homes are using combination locks rather than keys. And with biometric technology on the horizon, isn't that a better way to lock your door?
Cell phones can now be purchased using a monthly charge and replaced after 2-3 years - you turn in your phone and get a new one. I personally have an issue with this regarding wiping the data off of a device when you return it. However, options are now appearing to accommodate and better support sustainability and waste from the technology changes causing tech products to be obsolete in a handful of years.
#6: Time is valuable - owning may take longer to do than other means of accessing an item.
We believe a myth when we go to buy expensive goods: you go to a store or showroom, find what you want, give cash, take it home.
The reality of buying expensive goods: you research your options, you go to the store or showroom several times, you talk to sales people, research more, talk to customers, you research finance options, you decide on what you want to buy, you sign a bunch of paperwork, add in maintenance agreements and additional warranties, and then you bring it home.
Buying could include securing a loan, insurances, warranties, and more. It's not always that simple.
Again, the example of a car. Renting a car for a few days takes minutes. Buying a car is a multi-month process.
An apartment can be rented in days. A home takes at least a week to purchase.
Peer sharing is a new purchase and ownership/access method that is revolutionizing how we use solutions. Airbnb for hotels and Turo for cars are a few examples that only scratch the surface of shared ownership. There are new living environments like cohousing that have smaller living spaces to own or rent with larger common spaces so you can spend more time with your neighbors building community and socializing with them - not simply stay in your room by yourself. Some space is shared; some is for yourself.
To sum up these new models, there are 3 clear options:
- Buying - the item is your possession outright - and your responsibility.
- Renting - you can use the solution, but someone else worries about the maintenance. To them based on their values and how they operate, ownership has value.
- Peer sharing has you invested in the maintenance and share the cost of ownership during your time using the item.
And I'm sure there will be new models in the future to accommodate new perspectives of ownership and cost.
How we view ownership is changing how we access, purchase, and use items. It is also linked to how we view worth and its value. Worth and value have intertwined definitions that are unclear yet related. It also merits its own blog post.
How you view the value of something is linked to how you access it. Do you own it? Can you have it in your possession physically - can you touch it? Or is it an idea? Is this item going to bring you future wealth in some way?
Does ownership matter?
That’s the larger question. As a society, we grew to believe ownership was the answer to access to solutions to problems. But many solutions today in the sharing economy are reflecting trends that point to a different perspective. Maybe it is time to consider that ownership isn't the only last step for a buyer's journey or a way to measure worth. We need to expand our perspectives and consider all aspects of ownership, from maintenance and repair to replacement to stakeholder involvement to access to if something can even be "owned."
I'm curious what you think the future will bring us regarding new models to access solutions to our problems. Please add to the comments below!