The Subscription EconomyA Once in A Century Shift

John PhillipsGM Europe

The Subscription Economy Is Everywhere

100 YEARS AGO…

THE ERA OF MASS PRODUCTIONProducts, products and more products

BUT TODAY WE LIVE IN A DIGITAL WORLD

IN THE LAST 15 YEARS, 52% OF THE FORTUNE 500 COMPANIES

HAVE DISAPPEARED

Average life expectancy 15 years20151955

Average life expectancy 75 yearsvs.

GENERAL ELECTRICFrom light bulbs to digital services

“The digital company. That is also an industrial company”

IBMFrom punch card tabulators to cognitive data

servicesBob Dylan + IBM Watson

AMAZON, GOOGLE, APPLE, FACEBOOK, SALESFORCE

The relationship-makers

UBER, SPOTIFY, BOX, AIRBNBThe new disruptors

WHAT IS THE COMMON THREAD?

OUTCOMESNot Ownership

CUSTOMIZATIONNot Generalization

CONSTANT IMPROVEMENTNot Planned Obsolescence

THE WAY PEOPLE BUY HAS CHANGED

FOR GOODWe have new expectations

WE WANT THE SUBSCRIPTION EXPERIENCE

Ongoing Value

On-demandFulfillment

Personalized Service

Anywhere, Real-time

Memorable Experiences

A NEW WAY OF THINKING

customer

product

channels

subscriber

channels

product + service

vs.

Products1970s

Product + Services

1990s

Customer Centric

2000s

Relationship Centric

Today

The Business World Has Changed

Product Growth Finance

A NEW SET OF ROLES

IT

• Know your subscribers

• Innovate constantly

• Deliver experiences

The New Product

Imperative

SUBSCRIBER IDENTITYDemographic dataBehavioral dataFinancial data

#dataisgold

Name

Email

Twitter

TRADITIONAL RECORD

Phone

Company

Facebook

SUBSCRIBER IDENTITY RECORD

Purchases

Products

Local Pricing

Promotions

Adjustments

Customer Moments

Usage metrics

Add-Ons

Payment history

Refund history

Lifetime Value

Renewal Value

Aging balance

New world:

Old world:

• Build relationships

• Tie pricing to value

• Monetize anything

The New Growth

Imperative

1.Acquire customers for a new service

2.Expand into a new geography

3.Move into a new segment4.Launch new pricing model5.Cross-sell or upsell new offerings

6.Reduce churn7.Grow your sales team 8.Acquire or spin-off business

8 STRATEGIES FOR GROWTH

GROW RELATIONSHIPS NOT TRANSACTIONS

Growth in the old world1. Selling more units2. Lowering per-unit cost3. Increasing prices

Growth in the new world1. Acquiring more

customers2. Lowering churn3. Increasing value per

customer

• Own the model• Guide the business• Customer-centric

metrics

The New Finance

Imperative

COGSR&DG&A

Sales & Marketing

CACLTVARR

ARPU

A NEW INCOME STATEMENTRecurring Revenue

ChurnRecurring Profit

MarginGrowth Efficiency

Annual Recurring Revenue

$100

Churn (10)Net ARR 90

COGS (20)G&A (10)R&D (20)

Recurring Profit 40Recurring Profit Margin 40%

S&M (40)New ARR 40Ending ARR $130

• Deliver agility• Unlock

innovation—flexibility, speed

The New IT Imperative

“FROM SYSTEMS OF RECORD TO SYSTEMS OF INNOVATION”

- Gartner

Marketing Product Sales Finance IT Ops

A product

THIS IS HOW YOU OPERATE TODAY

? ?

Mktg

FinanceSales

IT

Product OpsTHE NEW RULE

FOR CULTUREWrap your org around your subscribers

THE NEW CEOBreak down the silos, build a relationship

culture

#oneteamonedream

VP PRODUCT VP GROWTH

CFOCIO

CEO

Continuous innovationMonetize outcomes Own the business modelUnlock agilityLive a subscription culture

NEW WORLD, NEW ROLES

HERE’S THE PROBLEMExisting systems were built for products and one-time transactions,

not subscribers and long-term relationships

Multiple Systems | Manual Processes | Rigid Technology | Product-Centric

A Product

? ?

Quoting Fulfillment

Ecommerce

Revenue Recogni

tion

Financials

ERP

SCM

Inventory

Product Catalog

ue

Collections

Invoicing

INTRODUCING ZUORAA prospect-to-cash solution for relationship-centric enterprises

SUBSCRIBER MANAGEMEN

TCross-sell,

upsell renewals, 360

sync, self service

PRICING & PACKAGING

Pricing, Bundling,

Entitlements

QUOTING

Configuration, Guided-Selling, Rules Engine

BILLING

Rating, Invoicing, Taxation

PAYMENTS

Offline & Online

Payments, Credits,

Adjustments

Integration. Scalability. Reliability. Security. Compliance. Extensibility. App Marketplace. Platform

REVENUE

Revenue Recognition, Accounting Close, GL

Integration

REPORTING & ANALYTICS

Report builder,

Dashboards, Segmentation

, Predictive

The End.