May 19, 2020

The subscription economy: a new way to travel

Mobility as a Service
UK transport industry
5 min
The subscription economy: a new way to travel

Brits have traditionally been focused on owning things – from cars to record collections. However, the ‘ownership’ obsession is on its way out and is paving the way to the subscription economy. The rise in this non-ownership culture is changing the way people interact with businesses and their surroundings. At the heart of this shift are people who are happy to subscribe to the outcomes they want, when they want them, without an outright purchase.

Our expectations have changed drastically: on-demand services increasingly sit at the top of consumer lifestyle essentials, with the likes of Spotify and Amazon Prime creating new business models which are leaving competitors behind. They marry on-demand instant services with personalised recommendations all informed by other users’ recommendations and the easiest, manageable subscription models.

Importantly, these services are built upon an aggregation of third party sellers into an easily accessible marketplace, be they Amazon retailers’ products, music company recordings or films. This could be seen as a threat to third party providers as they are then challenged to give consumers what they want, at the right price and with the service levels they demand.

However, it is also a real opportunity to reinvigorate these third parties and grow the total marketplace for all. Music streaming provides a good example. Following the music industry’s catastrophic collapse in the late 90s, Spotify resurrected sales through its subscription-streaming model, turning the industry profitable once again. Reports indicate the retail value of music subscription-streaming services has hit $1bn in the first half of 2016 up by more than $500m in just one year.

The mind-set of modern day consumers has changed, and it’s not just in the consumption of entertainment, but almost every aspect of life. The movement away from ownership will see the subscription culture transform an array of industries, with transport next on the consumer agenda.

The shift in transport

This shift towards the transport service model - or Mobility as a Service (MaaS) - is being driven by two mutually reinforcing trends. Firstly, there is the generational shift to the sharing economy. Millennials are technology natives who have lives built on networking and sharing.  This has seen companies such as Airbnb and Deliveroo flourish and has now extended its reach to transport with BlaBlaCar, Zipcar, Enterprise Car and JustPark emerging and growing. The modern-day traveller now expects transport to be easily accessible, convenient and seamless.

Secondly, the growth of mobile and wireless connected devices in home and pocket, coupled with fast connectivity speeds, has catalysed this generation. This light infrastructure enables on-demand internet based choice and booking wherever or whenever needed. Add real time traffic updates, delay notifications, platform alterations and intelligent journey planners, and the full the mobility service economy is now available at the tap of a smartphone screen.

The next stage - the truly fundamental shift in the transport service model - will be the bringing together of all the siloed transport, buses, taxis, trains and car clubs, into a full subscription MaaS service. 

This type of service is beginning to take shape: in Birmingham, a trial called Car Freedom is providing a one stop service to older people. The service matches them with the right mobility and provides all the support they need (including customer service and peer to peer support), when they receive a concessionary pass; transitioning to reducing their car use or giving up the car completely. A similar service, PicknMix, is being designed by young people, to offer the same support for their own mobility transitions. Whim, a Finnish app aims to provide packages of mobility to suit all needs without the need to own a car.

A shift in the UK?

The UK transport industry is on the edge of a fundamental shift to an integrated service economy. There is still a need for infrastructure spending and upgrades but the focus must now be to obtain the most from that infrastructure, managing demand and pulling the whole transport system together to attract and retain new users. 

This requires a fundamental shift to service and support – only made possible by placing the user at the heart of design.  New ways of packaging transport, delivering support, creating transport marketplaces and having integrated ways to pay, including subscription models can match changing and evolving needs. The requirement to own a car will reduce and ultimately become a thing of the past.  Spotify has excelled by identifying a culture shift and addressing the change with a solution which worked for the user, ultimately growing the market for music and rejuvenating an entire industry. Transport must now follow.

Where are we going?

A major step toward this required level of change is happening right now as The Bus Bill continues its way through the House of Lords. It will see local authorities in England and Wales given the power to franchise its bus services. This will enable them to set routes, frequencies, pricing and quality standards that can support local residents.

This Bill will allow the often confusing price structures and route layouts to be simplified and enable Oyster-like smart ticketing. This will allow MaaS to flourish by making it easier to embed such stable public transport services into a package of mobility. 

The transport industry is going places; however, it must move to the subscription economy to take that large leap forward. With the right package of transport, combined with personalised support, the mobility service subscription based economy can grow the market for non-owned transport and consign the term “public transport” to the history books.

By Dr Steve Cassidy, Managing Director, Viaqqio, part of ESP Group

Read the January 2017 issue of Business Review Europe magazine. 

Follow @BizReviewEurope

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Apr 29, 2021

Opinion: why CEOs should focus more on shareholder value

Andy Clayton, Founder, Scale a...
4 min
Andy Clayton, founder of Scale outlines how CEOs of mid-size companies can massively improve the value of their business, and why they should
Andy Clayton, founder of Scale outlines how CEOs of mid-size companies can massively improve the value of their business, and why they should...

If you run a privately held Small to Medium Enterprise (P-SME), you will know what a tough but rewarding experience it is. It affords you the opportunity to achieve two things in life:

  1. Change the world in your own special way – set and deliver on your own Purpose, and create a culture based around your held beliefs and values.
  2. Be financially well-rewarded, for you, your team, and your community.

At Scale, we work with many companies, and much of the work we do with them focussed on setting Core Purpose, Core Values, and ambitious goals for the business, then putting in place the plans to achieve them. To be clear, this work always leads to a more valuable business – a well-aligned and motivated team drives increased revenues and profits, and a strong management operating system adds significantly to the value of a business.

However, the primary focus of such initiatives is typically not explicitly focus on improving Shareholder Value. And to be clear, in the event of tension between Purpose and Shareholder Value, purpose should always prevail. We work with a business who help companies to improve their performance through diversity and inclusivity. They have a strong culture of bringing their best and latest ideas on diversity to market regardless of whether those ideas are current, popular, or mainstream. Belief should always trump profit considerations in such decisions (in fact, with time, the former usually drives the latter).

Why focusing on Shareholder Value matters

However, as the owner of a P-SME, focusing on growing Shareholder Value is important, because:

  • It will allow you ultimately to sell the business, and leave a legacy that outlives you
  • It allows you to realise value (i.e. make money) from your years of risk and investment
  • When shared, it can do the same for your team (and get them motivated towards the same outcome)
  • Many of the actions to improve Shareholder Value bring benefits that can be summed up in the phrase ‘allow you to sleep well at night’

So why don’t more entrepreneurs have a stronger focus on building Shareholder Value? Having worked with dozens of companies over the years, and our own experiences being unprepared to sell companies previously, we’ve identified the key reasons why entrepreneurs don’t build their companies with enough due consideration of Shareholder Value. Do any apply to you?

  • The voice of Shareholder Value is a minority This may sound odd, but there is often just one, or a few shareholders, and though they are the most influential and powerful people in the company, their voice often gets drowned out by demands of the market, customers and staff. 
  • Lack of understanding of what drives Shareholder Value Most entrepreneurs only sell their business once in their lives, so by default aren’t good at it. They don’t have the knowledge and experience to understand what investors look at and value in a company.
  • Lack of capacity to work on it Projects to drive Shareholder Value often fall into the ‘Important but not Urgent’ category. For entrepreneurs it is hard to get out of the gravity well of working in the business and not on it, and thereby apply leadership bandwidth to the problem of growing Shareholder Value.
  • The actions to really grow Shareholder Value are hard It’s common to see companies where incentive schemes for key leaders are based solely on profit. Having a growing and profitable company is already difficult, but it’s far from the only key component of Shareholder Value. Take a look at the Shareholder Value Checklist. Many of the things on the list are really difficult to achieve (to the point where they may evoke a deep sigh and feeling of being ‘intractable’).
  • Misplaced idealism Some entrepreneurs are uncomfortable with prioritising Shareholder Value, feeling it may be too selfish or materialistic, that leadership is about just focusing on Purpose and Vision. In fact, the opportunity and the challenge is to build a business that promotes both, a successful business can achieve both.

The Shareholder Value checklist

Obviously, it takes years to really grow Shareholder Value. Even if you have the notion to sell the company ‘in a few years’ time’, the process of preparation must start now. Often, by the time these issues become apparent, it’s already too late. 

The specific actions to take will depend on the current strengths and weaknesses of your company. Our checklist, which highlights the key areas that investors value in businesses, and that often fall short in P-SME’s, will allow you to run an assessment of where you currently are for your own company. Bring together the management team and decide which one will you focus on fixing first - make it a priority for the Quarter. 

If you repeat that each Quarter, and improve these scores, you will massively grow the value of your business. 

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