How Customers Are Driving a Once in a century Shift in Business Models

33
The Subscription Economy A Once in A Century Shift John Phillips GM Europe

Transcript of How Customers Are Driving a Once in a century Shift in Business Models

Page 1: How Customers Are Driving a Once in a century Shift in Business Models

The Subscription EconomyA Once in A Century Shift

John PhillipsGM Europe

Page 2: How Customers Are Driving a Once in a century Shift in Business Models

The Subscription Economy Is Everywhere

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100 YEARS AGO…

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THE ERA OF MASS PRODUCTIONProducts, products and more products

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BUT TODAY WE LIVE IN A DIGITAL WORLD

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

HAVE DISAPPEARED

Average life expectancy 15 years20151955

Average life expectancy 75 yearsvs.

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GENERAL ELECTRICFrom light bulbs to digital services

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

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IBMFrom punch card tabulators to cognitive data

servicesBob Dylan + IBM Watson

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AMAZON, GOOGLE, APPLE, FACEBOOK, SALESFORCE

The relationship-makers

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UBER, SPOTIFY, BOX, AIRBNBThe new disruptors

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WHAT IS THE COMMON THREAD?

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OUTCOMESNot Ownership

CUSTOMIZATIONNot Generalization

CONSTANT IMPROVEMENTNot Planned Obsolescence

THE WAY PEOPLE BUY HAS CHANGED

FOR GOODWe have new expectations

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WE WANT THE SUBSCRIPTION EXPERIENCE

Ongoing Value

On-demandFulfillment

Personalized Service

Anywhere, Real-time

Memorable Experiences

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A NEW WAY OF THINKING

customer

product

channels

subscriber

channels

product + service

vs.

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Products1970s

Product + Services

1990s

Customer Centric

2000s

Relationship Centric

Today

The Business World Has Changed

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Product Growth Finance

A NEW SET OF ROLES

IT

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• Know your subscribers

• Innovate constantly

• Deliver experiences

The New Product

Imperative

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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:

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• Build relationships

• Tie pricing to value

• Monetize anything

The New Growth

Imperative

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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

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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

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

metrics

The New Finance

Imperative

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COGSR&DG&A

Sales & Marketing

CACLTVARR

ARPU

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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

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• Deliver agility• Unlock

innovation—flexibility, speed

The New IT Imperative

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“FROM SYSTEMS OF RECORD TO SYSTEMS OF INNOVATION”

- Gartner

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Marketing Product Sales Finance IT Ops

A product

THIS IS HOW YOU OPERATE TODAY

? ?

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Mktg

FinanceSales

IT

Product OpsTHE NEW RULE

FOR CULTUREWrap your org around your subscribers

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THE NEW CEOBreak down the silos, build a relationship

culture

#oneteamonedream

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VP PRODUCT VP GROWTH

CFOCIO

CEO

Continuous innovationMonetize outcomes Own the business modelUnlock agilityLive a subscription culture

NEW WORLD, NEW ROLES

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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

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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

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The End.


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