Composable Commerce and a System of Systems
These incredibly important market trends represent a system of systems
A helpful example of this modular approach and how the ecosystem expands, is the car manufacturing industry. In the early 20th century. Henry Ford wanted to industrialize and democratize his factory line, making it cheaper and faster to produce cars.
To do this, he built an ecosystem around Ford, including towns for workers, rubber plantations, OEMs for parts, and delivery networks. He also decentralized development of specific physical parts.
The result was faster and cheaper manufacturing, making it easier for people to buy Ford cars. The company blurred industry lines and transformed the automobile sector - from slow, manual production to high-quality, agile mass production.
Take BMW. They have expanded beyond car manufacturer, blurring industry lines to become a software company producing physical devices for its smart cars.
They have also built a complex ecosystem around their brand worth 20% of their revenue ($20Bn revenue from subscriptions).
The company has formed relationships with ISVs and service providers, decentralizing much of its development. It has also democratized the experience of luxury cars through subscriptions. Today, many more people can dream of driving even the most expensive BMW, albeit only for short term.
If a BMW customer today would like to add in-car infotainment for holidays, add extra engine power, or connect to s smart city to find a parking space, they can easily do it. This is a series of subscriptions, powered by an ecosystem and they raise ARPU over customer lifetime
The benefits of this modular approach have tripled BMW’s revenue from 2020 to 2021, when they reached $149Bn.
Customers don’t need to own anything or be stuck with configurations or functions they no longer use. Life is changeable, for both people and businesses.
New growth opportunities for partners.
Someone might move from the city to the country. Someone might become a parent. Businesses might grow faster than expected, and all of this opens up new growth opportunities for partners.
With transactional software sales, the relationship ends when sales are made. With the subscription model, suppliers can tap into invaluable usage insights that will help improve customer experience and identify new upsell and cross sell opportunities.
Reliable recurring revenue streams for every business.
Ultimately, this creates a way to build higher-value, long-term customer relationships – and unlocks reliable recurring revenue streams for every business.