LogiSense provides cloud subscription and usage-based billing solutions for customers all over the world, specializing in upper mid-market and enterprise deployments. LogiSense helps customers complete their quote-to-cash process with flexible, integrated, and automated billing solutions for the Internet of Things, Communications, and Software markets.
Table of Contents
- You're Late
- The Prolific Proliferation
- The Economics of Apocalypse
- They can sell water
- The interconnectedness of all things
A strong billing capability allows businesses to automate manual processes, provide flexibility for product teams and ensure accuracy and compliance for finance and operational teams while empowering your business to compete with new and disruptive business models. Further, it enables businesses to stop revenue leakage, enforce contract terms at scale and monetize physical, digital, or hybrid products in an infinite variety.
Billing is core to customer experience, product development, go-to-market, and operational execution. Monetization is the core mechanism of every business. Let’s explore what usage-based monetization means and how social, environmental, and economic factors are presently converging to create volatility and opportunity the likes of which have never been seen. Welcome to The Usage Economy.
1. You’re Late
Comparison may be the thief of joy, but it’s good form to keep your head up and understand what the competition is doing and how public or business perception is changing. It’s easy to rest on your laurels and remain stagnant in the face of new or changing ideals for monetization and what is considered to be a fair, equitable, and transparent commercial relationship – assuming that is your goal!
I like to use the example of cable television packages since they’re broadly relatable and demonstrate several of the factors that are driving the urgency to adopt granular, usage-based flexibility in contemporary product offerings. In 2019, The Economist published an article called American pay-television is in decline in which they describe an industry that has lost 5% of its customer base, experienced a 20% drop in consumption, while simultaneously managing to increase sales over the past decade. Sources like Business Insider indicate we achieved ‘peak cable’ in 2012 and the subscriber loss has been steadily increasing since then.
I believe we’re all familiar with the ‘overstuffed’ and ‘But I only want this one channel…” packages on offer and the opacity around why as a consumer you are not empowered to simply consume the content or products you’re interested in. I’m sure an industry insider could make a case around content licensing packages and negotiation and passing those costs along as they’re incurred in complex arrangements with the licensor, but on the buy end of this transaction, it would be easy to feel taken advantage of and have a poor customer experience.
What has happened in the vacuum created by this massive customer churn is the swift growth of more dynamic, subscription, and usage-based streaming services to fill the gap. Offering a larger catalogue for a lower price, adding premium content offerings and new releases with cost commensurate to novelty and release status, perhaps even creating ‘bucket’ or ‘sharing’ programs for content consumption or volume discounts to appeal to content-hungry families would further bolster the reinvention we’re seeing in the media space.
When customers feel as though they have an honest, value-for-money and perhaps most critically; empowering experience they tend to stick around longer and the potential to maximize lifetime value and upsell them increases dramatically. This can also affect everything from customer ratings and reviews to referenceability and churn rates. Simply having the option to get charged for the pieces of media I choose to consume empowers me in the customer/vendor relationship, which is always a positive factor in considering customer experience and retention. The cable television example is a simple one, but the customer experience and empowerment ideals impact B2B and B2C customer interactions alike.
Enabling your organization to change and flex product models with commercial expectations and customer experience requirements means you’re also setting yourself up to compete with an innovator somewhere who is about to turn your industry upside down; if you’re caught with your proverbial pants down when this happens and are operationally unable to re-design or re-invent your monetization structure – you may already be too late. Consider how Uber and Airbnb shattered existing business models in bricks and mortar/steel and tire industries with some great pieces of software and a deft, disruptive, and empowering monetization model for existing physical assets by offering a greater utilization rate for a network of asset owners – particularly in the case of Airbnb where the asset is in its majority, the product.
Every industry is susceptible to this fundamental disruption through pricing and monetization innovation, and if you’re not the disruptor you must ensure you are a fast adapter and have the tooling in place to make the changes necessary to thrive.
2. The Prolific Proliferation
As Albert Allen Bartlett put it: “The greatest shortcoming of the human race is our inability to understand the exponential function”. The growth of our population and topics of sustainability, utilization, and climate change is now starting to affect our day-to-day lives as we see weather events, food shortages, pandemic conditions, and other outputs of our human activities with greater intensity and regularity. Whether you support Bartlett’s assertion about our misunderstanding of the exponential function or are cornucopian, the practice of maximum utilization for renewable and nonrenewable resources is gaining increased focus. Waste not, want not, right?
The concept of maximum utilization makes sense on a number of fronts, and not just environmentally. Having idle assets, which could otherwise be productive/revenue-generating is bad business. If one entity has paid-up capital in an asset and can only utilize 10% of its productive capacity for its own monetization, it would be remiss not to monetize the remaining 90% of the free capacity if it were feasible to do so. A simple consumer example of this is apps like ruckify.com or ptmoney.com where you can rent out tools or personal assets for money via a marketplace application. This example could be extended to transportation and logistics for container or vehicle sharing, aerospace for usage-based engine rental and service, or a multitude of other asset-intensive industries. It can even be applied to human-time, consumables, or other assets or inventory. Your imagination is the limit, if it can be recognized and counted, it can be incorporated into a usage-based utilization model or mediated and transformed for future use or deposit in a data lake.
The concept of sharing something while you’re not using it is simple, the capacity to monetize that interaction or develop a business model or supplemental revenue around it, particularly at scale and in B2B scenarios is complex and requires automation and a granular capacity for monetization with the accouterments of modern, flexible commercial pricing instruments such as dynamic, step or volume-based pricing models, automated contract term enforcement for ramp periods, activation or termination fees, usage elements and other complexities required of your particular solution or product design. Preparing to support these types of models is an activity to undertake today since it often requires an in-depth understanding of your enterprise architecture and data models.
In addition to our own human proliferation, the explosion in the number of connected devices on the Internet Of Things is also profound. Statista believes by 2025 almost 40 billion connected devices will be online worldwide. Imagine a 4 to 1 device to human ratio that is expected to grow again to 50 billion connected devices by the end of the decade. The numbers are staggering. Each one of these connected devices is an asset, it can potentially consume or transmit data, process sensory information, create events, conduct an action or actions or dispatch an API call to trigger any possible process you can imagine. How will this proliferation of connected devices impact your business and your business model? How will you take products to market in the new connected future? Wearable account management and ‘post-experience billing’ at a theme park, automated replenishment for just-in-time manufacturing, cashier-less-retail, healthcare monitoring, and connected or remote services, agriculture, and home automation are all examples that are real today. Companies that will thrive during this great proliferation will look to the capacity to monetize this connected network and its vast capability. We are in a revolution with regards to how information, content, and digital data are monetized and traded as an asset – increasingly; information IS the product.
If you have the capacity to ingest, transform and control the data generated by your company/industry/market’s Internet of Things, even if starting within your four walls, you have an advantage. One of the single best things an organization can do to prepare for the future is to deeply understand their data and the architecture of their systems and have the capacity to capture, transform and monetize it. It is not ‘the plumbing’ or the financial systems, it is the disruptive point of the spear in the next decade of product innovation and economic shift.
3. The Economics of Apocalypse
Perhaps too provocative a title, but I bet it got your attention, and I doubt any of us could deny that the last couple of years have been a staggering exhibition of human potential for both the pessimists and optimists amongst us. Through this period we’ve seen social unrest, economic disruption, pandemic, environmental catastrophe, and a massive shift in the human capacity to organize via our relatively new digital toolset; sometimes for the better, sometimes for the worse. In the coming decade, I believe we will see massive changes in consumer behavior and in turn impact on the business models supporting those consumer bases. Companies will have an absolute need for clarity and transparency in the post-post-truth future; let us hope.
As we emerge from pandemic circumstances, which may yet still exist for some time we’re going to see a rather unprecedented economic situation: as it pertains to employment rates, debt, government spending, failed businesses due to the pandemic and their hopeful subsequent replacements / new businesses spring from the proverbial ashes nobody can have a true level on what the disruptive impact of this massive wave will be. Should we be tucking in for the next roaring 20’s? Will it be business as usual? Will fiat currencies collapse in the face of inflation, the proliferation of crypto/digital and decentralized alternatives, and lost confidence over record debts. It’s truly overwhelming to consider the possible futures and how best to prepare for them. In addition to the shake-ups, we’re seeing societally the emergence of decentralized and unregulated cryptocurrencies warrants some serious attention. Is your business prepared to bill in bitcoin? Do you have a relationship with an exchange or processor for these types of transactions? Are you considering foreign exchange, taxation, security, compliance, and other issues that will eventually, surely impact crypto markets in the same way they impact the world’s fiat markets today? One thing that seems to consistently emerge in conversation around these topics through business models won’t be the same as they were.
When we do establish our new normal and if we do experience the next roaring 20’s, what will the business and monetization models of the next generation of entrepreneurs and innovators look like? How will they sell their products and what will those products be? Will they settle the transaction in the crypto-currency of your choice or allow you to set up a recurring and usage-based digital payment plan tailored to your needs at their point of sale or over the internet?
In addition to the mechanics of go-to-market, pricing and product innovation to accommodate these new innovators, will your company’s brand ideals, values and product offerings pass the test with regards to what’s considered moral in this new economic phase? Can you account for the carbon offset of your product and each usage event within your value chain? Can you account for maximum utilization of your products or assets as an organization and a 0 waste mandate? Can you demonstrate transparency, choice and empowerment in your customer experience? Can you be accurate, compliant, and automated at the same time? It’s wild to think how quickly the pace of change has accelerated over the past 10 years – now imagine that as an exponential function coming out of the key inflection point that has been the social, political, economic, and environmental disruption of the early 2020s. Things are about to get very exciting and new demands will be placed on organizations to compete not only with their contemporaries but also with the morals and ideals of their customers as they shift along with technology and the continued proliferation of information, connected devices and communications.
4. They can sell water
It’s not about the cost to your company or the inputs to your particular business equation and their ideal markup. It’s about the value derived by the customer be it perceived or empirical. You typically aren’t paying for the water in the bottle, but rather the experience of convenience the portable container represents, the confidence that the water is of a certain quality and because you cannot do without water. Understanding this concept of value monetization is vital, particularly in digital industries where more and more 0 marginal cost elements are established in the value chain. If infrastructure is approaching 0 costs and the cost to duplicate a piece of digital information once it’s been created is the same as the cost to produce the first 1 million units, how do you add, measure and sell value to customers? As we see more and more elements both physical and digital approach this 0 cost threshold with our ever-increasing efficiencies, how the water is sold and the value it conveys must be clearly articulated and incorporated in the customer experience.
This is the same in the way that we compose and monetize products, as Tara Hunt put it “Designing your product for monetization first, and people second will probably leave you with neither”. I’d harken back to section 1 and the cable television example where the value provided to consumers became disconnected from the monetization strategy and ultimately was a sure factor in the decline of that model.
When you think about usage-based monetization it’s important to measure not only the events that are relevant to the provisioning of your product or service but also any metrics that may be associated with or used to calculate events where value may be delivered to or perceived by the customer. These are the key elements around which your pricing and product strategy should be designed: Putting the customer’s point of view around the value you provide at the center of your philosophy. Selling value has been an adage in sales probably since people began selling, but being able to measure, capture and extrapolate those precise events is something technology has only recently begun to truly enable. To effectively gain insight into these interactions, capturing and having the capacity to transform your data is of paramount importance, particularly with digital or information-based products or services where every interaction is a potential API call away from a data lake.
Customer experience is also principal in composing, measuring and monetizing products around value and is perhaps the last bastion of permissible and real customer communication. A thousand companies may send me a thousand emails, LinkedIn messages and PPC ads to capture my attention, but send me my bill and I WILL read it, every time. This precious real-estate and moment of customer attention where you have their permission to send the invoice to them is an opportunity to drive value and improve customer experience. Positioning dynamic product offerings to help optimize the customer’s spend while optimizing their margin profile so both parties come out ahead or showing add-on or upsell services for customers who demonstrate behavior suggesting interest in those add-ons. Billing and invoicing – whether it’s through a traditional invoice or via a digital customer portal is one of the most unrecognized and profound opportunities for communication with a customer in both B2B and B2C scenarios. Are you able to recognize and leverage these events to improve lifetime value and retention or to upsell products? If not, perhaps it’s time to consider why.
5. The Interconnectedness of All Things
A nod to Douglas Adams, who had so many things figured out. As we see the massive proliferation of connected devices, software automation, and robotics, we will increasingly see organizations who are capable of achieving a near-maximum – for the current epoch – of efficiency within their particular area of market discipline. I believe over time this will result in a diminished prevalence of integrated vertical stack companies and a preference for more dynamic ‘network of networks’ companies and product offerings, which offer greater flexibility.
One very topical example of this is GameStop, who in the midst of an unprecedented wave of retail investor support has a unique opportunity to reinvent its bricks and mortar retail model and capitalize on a heretofore unheard-of accumulation of positive brand capital as a result of the recent goings-on of the ‘apes’ from /r/wallstreetbets. The simple change they made was to start listing the merchandise in their retail storefronts on DoorDash, allowing for near-immediate delivery of consumer electronics and gaming merchandise to retail customer homes. Simple, right? It’s a deft move. It means that GameStop can leverage the transportation and logistics network/business model of DoorDash, which has optimized their particular area of discipline to compete with their contemporaries in the rideshare space. GameStop gets the benefit of having to-your-door consumer electronics sales differentiating them in their space and door dash gains the benefit of the increased volume against their established model by taking game-stop on as a customer even though they’re not a restaurant. Neither company has needed to deploy the capital or take the time to build the capability to take the new offering to the market – they have simply ‘connected their networks’ and are monetizing the ride and ‘picking’ provided by DoorDash with the stocking, distribution and retail capability of GameStop. To their customer base, the outcome or value is simple – for a few extra bucks, I can have a new headset at my door in an hour and be back in the game after dinner!
This concept of ‘network of networks’ products could be extended to everything from connected cars; offering integrated usage-based media catalogues to kids in the back seat or the capacity to pre-order your next Starbucks stop from the head unit of the vehicle or monetizing rain-sensor data to weather media providers, government institutions, transportation and logistics providers or other entities. It’s unlimited, and the most agile organizations in the future will look to how they can quickly combine, innovate, include or remove suppliers from within these networked products to remain competitive, innovative and delivering value to customers. What could you ‘plug-in’ to your business model today to fundamentally change the way you provide value to customers or extend your product’s differentiation or capability? Who is your DoorDash and if you know who they are, would you be able to mutually or independently monetize such a product today without having to create a two-organization Frankenstein’s Monster of accounting and manual integration to pull it off? What would your customer experience be like?
Nimble organizations who can integrate, disintegrate, reinvent and evolve their product offerings, ‘network of networks’ capabilities and use of information and data will be the companies who define the economics of the future and this future will be deeply based on our ever-increasing capacity to derive value from the interconnectedness of all things.