Something about the Subscription Economy
Ands needs my name with Founder/CEO of Zuora, Author or Subscribed, maybe picture of book somewhere
We get this freedom through digital subscription services Companies have to transform, they have to cease selling products
INTRODUCTION
Look around and you’ll see the rise of consumer and business services built around subscription and pay-per-use purchase models.
World is different (shifted to subecon)
Why? Customers today are different
Given their expecations (immediate, personal etc), they want subscriptions, not transactions, they want experiences, not products
This is happening universally, across all industries
These are the types of experiences that are at the core of what we call the Subscription Economy.
At the heart of the Subscription Economy is the idea that customers are happier subscribing to outcomes they want, when they want them, rather than purchasing a product with the burden ownership
This is what we’ve been talking about for the past 8 years the arrival of the subscription economy; a better way of doing business…
THE WAY PEOPLE BUY HAS CHANGED FOR GOOD EXPERIENCES
Like I said, the world is changing because customers have changed in this digital age. You and I, we, have new expectations as consumers
1. Outcomes, not ownership.
2. Customization not generalization.
3. Constant improvement, not planned obsolescence.
We want a new way to engage with businesses...
Guardian? FT?
KOMATSU
Smart construction
Drones surveying job site, creating topographical maps
So what’s my company doing with Komatsu? The same thing we’re doing with Caterpillar—we’re helping them change the ques- tion from “How many trucks can I sell you?” to “How much dirt do you need moved?” By handling the subscription nances behind these services, we’re helping to power dirt removal as a service.
For the stuff below, I like to go back to the “not product” framing, not sure what the slide shows but my words are “It’s not about the car, it’s about transportation, it’s not about the software, it’s about doing work, it’s not about the movie, it’s about entertainment”
Modify with WTF feel – before /after
THE NEW HEAD OF PRODUCT
OLD:
Extensive market research
Design, produce, launch or ship your product
Either a hit-product or a flop
But this has massively changed…
Let’s start with your product managers, engineers, manufac-
29 turers, designers. They have all kinds of positions, but ultimately
30 they’re responsible for product innovation in your company. In the
31S old model their job was to do the market research, run some focus 32N groups, draw something up on graph paper, gure out how to man-
128
YOU HAVE TO THINK DIFFERENTLY
Old Business Model
Products
Channels
Customers
New Business Model
Services
Subscriber Experience
Channels
9780525536468_Subscribed_TX.indd 128
3/3/18 9:56 PM
ThaT wTF MOMENT
ufacture it at the lowest cost, get it put together, and then put it into the marketplace. If you sold lots of units and exceeded your projec- tions, then you had a hit product on your hands and made a lot of money. If you didn’t, then you didn’t. But what happens when a static product turns into a living, breathing experience? What happens when the customer comes in out of the cold and sets up shop squarely in the center of your development process? How do you happily surprise that customer on a consistent basis? Based on all this new usage behavior you’re seeing, how do you build better pathways where you see that people are walking?
From products to outcomes with ongoing value services/experiences
A CPO used to design individual products, but is now focused on delivering outcomes and on-going value through designing service-based experiences. To design products that people truly love, today's CPO has to have a deep understanding of individual customer needs and expectations
Subscribers = ongoing relationship ; constant opportunities to interact with them, every interaction is a chance to know them better interaction
No more spending millions in market research in hopes of a hit-product
Subscribers = ongoing relationship ; constant opportunities to interact with them, every interaction is a chance to know them better interaction
No more spending millions in market research in hopes of a hit-product
That understanding comes from building a relationship…
----- Meeting Notes (4/6/16 16:00) -----
every company re
the new VP of product
Change to Zoom
THE NEW CFO:
From cost authority to business value architect
What about the finance team? The controllers, the CFOs, the operation folks? The job used to be about tracking expenses and tying them back to that almighty unit of sale: How can we improve our marginal cost? How much money do we need to give to our distribution channels? How much overhead do we have? Today nance teams are experimenting with a whole new rule- book and set of metrics: costs of customer acquisition, lifetime cus- tomer value, annual recurring revenue, average revenue per customer.
oday nance teams are increasingly de ning the operating metrics that are distributed throughout entire organizations, such as pricing, packaging, and analytics. For example, how does Net ix justify spending $8 bil- lion a year on shows that it doesn’t really “sell”?
Finance is a changing. "demise of traditional finance organization”
the finance function is in transition. today it is about budget and planning, tomorrow it becomes a strategic org...
over time, finance will absorb responsibilities that are today distributed across other orgs. (ie pricing/packaging, analytics)…
The new CFO: out of controller function and into FP&A function
Accenture “Death by Digital” Finance study
https://www.accenture.com/us-en/insight-finance-2020-death-by-digital.aspx?c=str_uscfoandentvalfy16psgs&n=Finance_Function_-_US&KW_ID=sgEjk29gO_dc|pcrid|86460170936
NEW CFO NEEDS A NEW INCOME STATEMENT
Our whole financial system today—our ability to generate financial statements, create “books” that can be audited, and compare companies against one another—rests on a concept called double-entry bookkeeping. The basic premise is that your credits have to match your debits.
First, the traditional income state- ment does not differentiate between recurring and nonrecurring dollars. It’s like saying there’s no difference between a dollar, and a dollar that keeps happening every year for the next ten years. Recurring revenue is the cornerstone of subscription businesses, but traditional accounting concepts were never designed to recog- nize this fact.
Recurring revenue
Churn
Recurring Profit Margin
Growth Efficiency
----- Meeting Notes (4/6/16 16:29) -----
need simplify
Knowing what we know about the DDC, to grow you’ll need to reimagine your finance teams. Why? Let’s take a look at a few roles.
INSERT a couple of WHY slides after this:
Survey can be the frame
Based on detailed interviews with you, here’s what we are seeing
21% said customer service, but you’re in finance. What’s going on?....
Volume, Scale, One way arrow to circle, teams have to be cyclical as well
Finance is now part of the customer experience; show Rachel’s survey data (10k people)
Being “customer-focused company” is a simple concept that is in fact very diffcult to realize. It requires a cultural change. Product cultures are built around thinking and organizing like assembly lines: stay in your lane, do your job, then pass it on to the next guy. That no longer works. Subscription cultures are about making sure your customer continues to succeed with your service over time, and translating that ongoing value into revenue. And why is creating that subscription culture so hard? Because the same organizational structures that worked in the past are now hindering the future. Organization is the biggest thing holding us back—just like in the horror movie, the scary phone call is coming from inside the house.