In their 2011 book Consumption Economics, J.B. Wood, Todd Hewlin, and Thomas Lah outlined the upcoming disruption to business models in tech, whereby consumers opt-out of singular large investments in technology, choosing instead to redeem vendors only when they successfully consume the business value of their products. They describe a market where the measurement and exchange of value will be driven down to the microtransaction level, leaving vendors to earn additional revenue from their clients through enablement of smaller bites of functionality and rewarded only when the value of that functionality has been realized. We can see that model in action today in any cell phone game or cloud service subscription of our choosing.
We can also see this world of microtransactions expanding exponentially with the explosion of the Internet of Things (IOT), which enables smart devices to communicate with each other. This technology allows us to see who’s at the front door from the comfort of our couch and enables our vehicles to take corrective action should we stray outside our lane or attempt to back up over our kid’s bike. We are quickly, and willingly, making the jump from centralized decision-making where we decide whether to correct our vehicle’s trajectory, to delegating those decisions to a decentralized network of machine-to-machine communications. Today we still must pay up-front for that video-enabled doorbell or that lane sensing technology, but the shift to delegated decision-making, decentralization, and pay-for-value microtransactions is moving quickly on all fronts.
As we continue to raise the bar integrating consumer electronics into our everyday lives, exploiting artificial intelligence to improve manufacturing productivity and streamlining the value chain between producer and consumer, the importance of accurate data collection becomes increasingly vital for success in business. This puts a price on all that data and ownership rights will play a big role. Consumer and business attitudes have changed, and future transactions will include delegated, permissioned transfers of data with ownership rights attached. Data exchanges will intrinsically include a perceived exchange of value and an expectation of payment for the use of that data; whether the transaction is based on machine-to-machine consumption or machine-to-human.
As the streamlining of the value chain continues, and the realization of the value of their data opens consumers’ eyes to what they have – up until now – been giving away; data aggregators who add little value other than the store and forwarding of personal information (or currency) will be squeezed out and centralized systems will be replaced with trustless, decentralized processes and platforms. These centralized targets for exploitation and identity theft will simply fade out. The big enablers of decentralization are distributed ledger technology (a.k.a. Blockchain), a decentralized network of “miners” paid to keep the system running through microtransaction rewards, and a newly-legitimized field of cryptocurrencies which become the vehicle for the exchange of value.
In this newly decentralized Internet of Value, we all win. Billions of people who do not have basic banking privileges today will be able to trade goods and exchange funds without the need for an intermediary. Controlled access to our data through smart contracts means we decide who gets to see it and how it gets distributed. And negotiations are now open on what the value of that data is. It’s the age of the Smart Economy, intelligent machines and Web 4.0. Virtual ecosystems are taking root and despite the FUD, more barriers will be torn down than put up. It’s a threat to many of today’s business models and a huge opportunity for groundbreaking innovation. And like many IT innovations before this one, it’s disruptive and we get to be the change agents.
Reference: Wood, J.B., Hewlin, Todd, & Lah, Thomas. (2011). Consumption Economics. (pp. 66-67). USA: Point B, Inc.
The opinions of the writer do not necessarily reflect those of Sierra Systems.