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In this second iteration of Welcome to the Future, called Streaming the Physical World, we’ll dissect one of the most transformative paradigms (potentially) in our lifetimes – the prospective shift from ownership to usership in our physical lives. From buying to own, to buying to access. "Streaming" physical products.
The purpose of Welcome to the Future will be to give investors, and other curious people from all walks of life, spicy distillations of future scenarios that could transpire in the next few years or decades. My name is Christopher Lyrhem and I’m the Chief Future Officer at Sircular, a Swedish company whose mission it is to empower investors with AI.
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Highlights:
Usership is one of the biggest investment themes on the planet (one should pay attention)
Big disruptive shifts almost always start with startups (focus on young companies)
Disruptive innovations like autonomous vehicles, general-purpose robots, and AI-generated renewable materials (among many others) will enable the shift from ownership to usership, and prospectively a circular society
Disruptive shifts are always way different from what people project beforehand – which is why one shouldn’t expect current marketplaces and product categories to stay the same.
List of usership pioneering companies at the end of this research letter.
Streaming the Physical World
Imagine a future for you as a consumer. Let’s say in 20 years. By the year 2044.
In this future, things are a bit different from what you’re used to. Instead of buying to own pretty much every single physical product – you’ve changed your consumer persona quite a bit and you’ve decided that paying for the access to (not the ownership of) some of the physical products that you use in your daily life, is a better way to simplify your life rather than owning everything.
You’ve decided that things performing some kind of problem-solving utility for you, is better to outsource to someone (or something) that can help you simplify your life. You'd rather press that Play-button, instead of "add to chart".
The most time- and capital-saving example – is the way you’ve chosen to move around in society. Instead of owning a car and dealing with all the messiness when the car needs your attention, you’ve happily switched over to an autonomous car service, that serves you. It’s not you, serving the car – anymore. Partly because it’s almost 50% cheaper than owning your own car, but also the fact that you do not have to drive anymore (it just makes life simpler).
Apart from the car, in this future, you also subscribe to your very own general-purpose humanoid robot that takes care of many of mundane tasks that you used to hate. Just like the smart phone replaced, or at least decimated, product categories like calculators, digital cameras, journals, and newspapers – this general-purpose robot have replaced your robotic vacuum cleaner, lawnmower, mop, alarm system, and even your entire toolbox with screw drivers and hammers going extinct. The robot will take care of all their respective utilities.
On-Demand Homes
So, you now subscribe to both autonomous mobility, and autonomous home services of all kinds. But it doesn’t end there. You’ve also decided to shift over from ownership to usership in the white goods department. Instead of owning your refrigerator, freezer, oven, microwave, dish washer, washing machine, and dryer – you’ve bundled all these seven capital-heavy and life-essential products, into a single package that you pay on a monthly basis.
The price you pay is equal that of owning them, meaning the monthly cost of depreciation. But what you also get is the absence of having to deal with the hardship of figuring out or paying for repair when they break down, as well as the absence of having to figure our and buy a new piece of white good when end-of-life is reached. Instead of you owning the hardship aspect of these white goods, the supplier of these products has taken ownership of it instead. You are always being served the latest models, software upgrades, and other perks.
We’ve gone from the car to a general-purpose robot, and now white goods. We’ve also got your monthly subscription of five pair of shoes from Nike, we’ve got your Apple subscription (containing your phone, smart glasses, and computer), and lastly, we’ve got your bundle of five pieces of furniture from a local producer.
In total, you’ve got six subscriptions of life-necessary consumer discretionary products – on your consumption plate. Together, these comprise roughly 20% of your monthly total costs. Everything included. All the way from your mortgage and utilities to food and music.
So, for you, as an individual, the usership business model (meaning not owning the product) has taken 20% of your overall consumption. Which is more or less (depending on how dissect things) in the same range of the current e-commerce penetration rate.
E-Commerce – A North Star Inspiration
So, what I’m saying here, is that the shift from ownership to usership could be likened to that of the partial shift from physical stores to e-commerce. And furthermore, I’m saying that there are a few product categories out there that are more likely than others, to convert to usership. Things that solve problems, meaning a high likely hood of AI coming in and doing the work, or simply it’s good at washing or microwaving – are higher up the usership ladder.
While, things that only look good, these are way less likely to be accessed. People don’t really like to share their clothes with others....
When e-commerce first stepped onto the retail scene, a lot of people out there were skeptical over its’ incredible ability to lower complexity for shoppers. This skepticism was completely unfounded. The inverse won the game, stirring around the retail pot so that distribution, business models, where products are made, how they move from producer to consumer, and so forth – all got flipped on their heads.
E-commerce completely transformed the game of retail.
But the core economic incentive that governs the way we make, consume, and waste – is still exactly the same as before. Actually, the linear economic incentive has only gotten stronger and stronger. E-commerce made manufacturing far way from end users even more lucrative, made low lifespans and low recyclability even more sought after, and hence further ingrained the linear economic model atop the food chain.
And here we are.
At record-levels of greenhouse gas emissions.
The extremely intriguing aspect of the prospective shift from ownership to usership, is that once a manufacturing company really excels in delivering the intended customer utility (like delivering passengers swiftly, safely, and cheaply), the economic incentive goes from making product with just the right balance between price and quality (not too poor quality, but not too good either) – toward a new reality where we truly want products to be made by the most durable and renewable material out there.
Instead of predominantly making products for only really lasting the warranty period, the incentive will be to make products so that they’ll last forever.
When people are truly incentivized, watch what will happen. When people are made to urge for something, we become forces that aren’t easily quenched.
A new equilibrium is forming
After talking to and working with numerous business developers for a range of manufacturing companies over the past few years, and after having spent over a decade and a half in analyzing a wide spectrum of companies, industries, customer groups, technologies, and geographies – when customers and the supplier of a customer utility, finds and agrees on the next new big thing, one should not back away from it.
E-commerce was wonderful for both customers ands those who provide it. Similarly, electric vehicles have also been great for customers and their provides. Furthermore, cloud services, smart phones, GPUs, heating pumps, LED-bulbs, and video-streaming services, for example – have all brought something new to their respective marketplaces, and found a new (improved) equilibrium for customers and their providers.
Now, paying for getting me from point A to B, or always having five nicely looking shoes, or mowing my lawn – are not things that each individual will love. Things are extremely seldom binary.
Marketing campaign by Lynk & Co., a Swedish car subscription company.
Society is always in transformation where some parts are drawing to one direction will others are trying to move somewhere else. Which is why there is a strong case to be made for our physical society implementing some of the transformation that have taken place in the digital world.
In this particular case I mean the shift from ownership to usership.
Instead of buying physical newspapers, music CDs, video DVDs, billboards, and journals, we collectively "decided" it’s better to press that subscribe-button. Instead of buying a single music album to own, we now buy the access to all music albums without owning. The digital world has gone on-demand.
We just love the simplicity of not dealing with all the administration of ownership
Now, the shift from selling units toward selling service, for the things that I just mentioned – it went quite smoothly from an historical standpoint.
The first reason for this, is that all of the things mentioned could be converted to ones and zeros. From physical to digital. This is not the case with cars, robots, white goods, electronics, or shoes. They’re all physical products. And physical products need to be moved if one user decides to unsubscribe one of them, to another user. Which needs to be done swiftly and to an economic upside.
The second reason is that it is not economically worthwhile in creating a platform of physical products that can be shared between all of its members.
When e-commerce started its’ very early journey at the latter half of the 1990s and succeeding 10-15 years, the economic rationale to build e-commerce platforms and logistics, was certainly not sound from an income sheet standpoint. There were constant losses, for many years and for most market actors. But for some, the values of their companies could withstand continuing losses as their investors took care of the difference – in order to get a ticket to a future where e-commerce have taken a serious slice of the retail pie. And this is just one of the hundreds of disruptive transformations that have taken place in society historically.
My point here, is that after analyzing this topic and its’ underlying components for many years, this potential paradigm shift could usher in yet another disruptive in the commerce landscape – and simplify the lives of consumers. Now, some of the components that collectively point toward a society where we pay for the usership of physical products (“streaming” in other words), are comprised of autonomous vehicles, general-purpose humanoid robots, and renewable materials (at least according to my research theses).
Because, when we can move and share products swiftly and cheaply, and when we can have economically competitive factories close to the point of consumption (due to general-purpose robots and renewable materials) – the most economic business model might not be selling units anymore, it might be selling access instead. At least for some product categories (both B2C, and B2B).
Source: Sircular.
Three learnings from history
The next question in-line here, is the following: what have been the most important learnings of the past when major disruptive transformations happen in society?
The first learning, in my view – is that the game of disruptive innovation is both so extremely complex, but yet so simple. Simple because as long as you create an improved customer value, you will get rewarded. But complex because the road to improved customer value is a wild one. It’s certainly not a straight highway.
Secondly, because the road ahead is complex and hence not particularly suitable for the risk-averse – the future has always favored the brave. Not the ones playing it safe. Disruptive innovation is disruptive for a reason. It radically comes with something new to a marketplace. Not incrementally better.
And thirdly, as the brave are favored in building something new, it favors entrepreneurial spirits that want to create this something new. It doesn’t favor making things just a bit more efficient, as legacy companies usually focus on. This has made history filled with newcoming companies disrupting legacy companies. Time and time, and time, again, this has been the same story repeating itself but in a different dress and era.
During past eras of disruptive innovation, the most dominant market players from before, usually aren’t the dominant market players after. The learning is that future dominant market actors are usually companies that one heard of before.
Examples of companies with disruptive traits
Enough with the history lesson. Let’s instead look forward instead and exemplify a few prospective usership companies, that at least exhibit some of the traits of the great disruptors of the past.
Further down in this letter, you’ll find this list and some research about these companies (using Sircular’s AI Copilot), simply by dropping their respective website URLs.
First up are Waymo and Zoox, two companies developing autonomous mobility software, and that are subsidiaries of two big tech juggernauts. Waymo is built from within and owned by Alphabet, while Zoox is acquired from the outside and owned by Amazon. These are companies and brands definitely not popular amongst the general public in terms of mobility providers, yet. But they are at the very forefront of technology disrupting the mobility market.
Source: Waymo.
Together with Tesla, I mentioned these companies in last week’s letter, but I wanted to mention them gain because they’re simply too disruptive not to mention again. These companies have their eyes on the very long-term future of autonomous mobility and are fully committed to converting the car to a usership-first product.
Another company is Figure, a US based manufacturer of general-purpose humanoid robots. Not only will this company, most likely in mind at least, sell their robots as-a-a-service to individual customers – but they will also be able to form a robot “fleet” (for lack of a better word) that together moves from building to building and cleans them up, or do basically any type of work. They’ll able to be shared freely in the marketplace like we’ve never seen before.
Next up are Beleco and Hygglo, two Swedish companies enabling the usership business models in two quite different ways. Beleco offers subscription-based furniture solutions for offices and home workspaces, including design, delivery, and assembly. Beleco is the middle-man enabling usership subscription provided by them. Hygglo is different because it doesn’t provide subscriptions, but rather a peer-to-peer marketplace for consumers to rent out their products to other consumers. Like an AirBnB but for physical products.
Source: Beleco.
And lastly, we have Danish Leneo and German circuly. Although a bit different from one another, these are software companies that offer the back-end infrastructure for any company to shift from ownership to usership. Doing this transition is not easy, trust me on that one. Which is why there are companies like Leneo and Circuly.
Source: Leneo.
Links to automated research about the mentioned companies:
Waymo: https://app.sircular.io/public/Waymo-JgMLK4?us=public_share
Zoox: https://app.sircular.io/public/Zoox-otcyjl?us=public_share
Figure: https://app.sircular.io/public/Figure-5XLZmm?us=public_share
Beleco: https://app.sircular.io/public/Beleco-no1Tqc?us=public_share
Hygglo: https://app.sircular.io/public/Hygglo-N9iDkH?us=public_share
Leneo: https://app.sircular.io/public/Leneo-Nn_j5H?us=public_share
Circuly: https://app.sircular.io/public/circuly-GTqt_0?us=public_share
A distributed end-game
Once streaming morphs into the physical world, from the digital world it has become the most popular business model – I believe we’ll see the start of a substantial recalibration of the way we structure society.
Instead of moving factories ever farther away, in order to optimize unit-economics, we’ll see the making of a new manufacturing order where having factories as close as possible will be the most economic thing to adhere to. And that the physical material used when making products, are circular instead of linear. It’ll be much wiser to use materials that last as long as possible, and that can be renewed.
But such massive paradigm shift will most likely require a complete reshuffle of most value chains out there. For e-commerce, we simply sped up already materializing trends. But for usership, all parts of a value chain need to work together. If this thesis proves correct, we could see a substantially more distributed manufacturing complex in a few decades from now.
Thank you for staying to the very end of this research letter that every week will dissect one or more long-term future scenarios, for a wide array of sectors. If you’re intrigued by this research letter, do not forget to subscribe on the landing page or on Spotify where you can listen to it.
All the best,
Christopher Lyrhem
Chief Future Officer at Sircular
Listen to this research letter on Spotify
Visit us at: www.sircular.io
Disclaimer: this research letter is meant for general informational purposes only, and is based on the personal research the author, not Sircular. The research letter does not give advice in any way. Sircular is not affiliated in any way with mentioned companies.
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