Jumat, 06 November 2015

Download PDF Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It, by Tien Tzuo Gabe Weisert

Download PDF Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It, by Tien Tzuo Gabe Weisert

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Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It, by Tien Tzuo Gabe Weisert

Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It, by Tien Tzuo Gabe Weisert


Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It, by Tien Tzuo Gabe Weisert


Download PDF Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It, by Tien Tzuo Gabe Weisert

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Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It, by Tien Tzuo Gabe Weisert

About the Author

Tien Tzuo is the CEO and cofounder of Zuora, the leading subscription SaaS provider, with more than 1,000 customers worldwide. Zuora, which is foundational to companies in the growing Subscription Economy, was born out of Tzuo's experiences at Salesforce, a pioneer of the subscription model, where he was formerly CMO and Chief Strategy Officer. Headquartered in Silicon Valley, Zuora also operates offices in Atlanta, Boston, Denver, San Francisco, London, Paris, Beijing, Sydney and Tokyo.Gabe Weisert is the managing editor of Zuora's Subscribed magazine. He has previous written for Yahoo!, Forbes.com, and Andrew Harper's Hideaway Report.

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Excerpt. © Reprinted by permission. All rights reserved.

Chapter 1 The End of an Era What does digital transformation look like? Well, for starters, let's acknowledge that "digital transformation" is a really vague term. It's the kind of smart-sounding phrase that gets thrown around a lot in conferences and McKinsey reports and Harvard Business Review articles. The kind of expression that lots of people instinctively nod their head at, whether they know what it means or not. It could mean everything, it could mean nothing. Let me tell you what I think it means. You've probably seen the statistic-more than half of the companies that appeared on the Fortune 500 list in the year 2000 are now gone. Poof. Vanished off the list as a result of mergers, acquisitions, bankruptcies. The life expectancy of a Fortune 500 company in 1975 was seventy-five years-today you have fifteen years to enjoy your time on the list before it's lights out. Why is this happening? Instead of dwelling on failure and looking at all the companies that went away, let's look at the companies that have stayed. Notice how big manufacturing companies like GE and IBM that were on the first list in 1955-and are still on it today-don't talk as much about their mainframes and refrigerators and washing machines anymore? They talk about "providing digital solutions," which is an admittedly jargony way of saying that the hardware is just a means to an end. In other words, these companies now focus  on achieving outcomes for their clients, rather than just selling them equipment. GE was #4 on the first Fortune 500 list in 1955, and it's #13 on the list as I write this book in the fall of 2017. GE was incorporated as the Edison General Electric Company in 1889. It made and sold lightbulbs, electrical fixtures, and dynamos. Today GE generates most of its revenue from services, not products. GE ran commercials during the Oscars with the tagline "The digital company. That's also an industrial company." Notice the switch there. This transformation is what allows GE to survive and remain on the Fortune 500 list. IBM was #61 on the Fortune 500 list in 1955, and it's #32 on the list today. IBM originally sold commercial scales and punch card tabulators. Today it sells IT and quantum computing services. It has completely transformed from a product manufacturer into a business services giant. IBM is now working on Watson-a technology platform that uses natural language processing and machine learning to reveal insights from large amounts of unstructured data. It has Bob Dylan chatting with an artificial intelligence system in its advertisements. It is now in the business of cognitive services-a pretty exciting departure from where the company started. In fact, 12 percent of the companies on the 1955 Fortune 500 list are still on it today, and most of them have similarly transformed. Xerox has moved from manufacturing photographic paper and equipment to information services. McGraw-Hill has moved from printing textbooks and magazines with titles like American Journal of Railway Appliances to offering financial services and adaptive learning systems. NCR went from selling cash registers to saloons during the days of the Wild West to creating digital payment services that compete with companies like Square. They don't really sell stuff anymore. Okay, what about some of the more recent entrants on the Fortune 500 list? The "new establishment" companies like Amazon, Google, Facebook, Apple, Netflix. The companies that instantly feel very familiar to us but are actually relatively new to the Fortune 500 list. They've rocketed to the top of the list and show no signs of going anywhere. They never thought of themselves as product companies-no transformation was needed. From the start, these companies were relentlessly focused on building direct digital relationships with their customers. And established enterprises are taking note. Let's take a look at one big company we're all quite familiar with-Disney. Its CEO, Bob Iger, said recently, "It's one thing to be as fortunate as we are to have Disney, ABC, ESPN, Pixar, Marvel, Star Wars and Lucasfilm, but in today's world, it's almost not enough to have all that stuff unless you have access to your consumer." Right now, outside of its theme park attendees, Disney doesn't have much in the way of individual customer insight. Someone who buys a Spirited Away doll at a Walmart is a Walmart customer, not a Disney customer. Someone who goes to see a Star Wars movie at an AMC Theater is an AMC Theater customer, not a Disney customer. For Disney, it sounds like that's all about to change very soon. Finally, how about the up-and-comers, the companies that may soon top the Fortune 500 list, new disrupters like Uber, Spotify, and Box? These companies came in and took everyone by storm. They haven't just gone beyond selling products, they've invented completely new markets, new services, new business models, and new technology platforms, leaving many established companies trying to play catch-up. As consumers, we love these brands, we love these services, and we love the value they provide us-a value that goes way beyond what a single product could ever offer. What are the common threads among these three groups of companies? Whether it's GE, Amazon, or Uber, they are all succeeding because they recognized that we now live in a digital world, and in this new world, customers are different. The way people buy has changed for good. We have new expectations as consumers. We prefer outcomes over ownership. We prefer customization, not standardization. And we want constant improvement, not planned obsolescence. We want a new way to engage with business. We want services, not products. The one-size-fits-all approach isn't going to cut it anymore. And to succeed in this new digital world, companies have to transform. The Product Era and the Tyranny of the Margin For the past 120 or so years, we've been living in a product economy. Companies designed, built, sold, and shipped physical things under an asset transfer model. Business was about inventory, shelving, and cost-plus pricing. The relationship between seller and buyer was based on discrete, often anonymous transactions. The sign by the cash register summed it up: "All Sales Final." Early retail pioneers like Sears and Macy's changed the way mass society consumed things, but they had minimal insight into who was actually buying their products or how they were using them. When Henry Ford's first moving assembly line went into operation in 1913, it was really just an extension of manufacturing principles first put in place during the Industrial Revolution of the 1800s. The assembly line wasn't just about maximizing efficiency through discrete repetitive tasks, it was a metaphor for how a company's product can dictate its supply chains, manufacturing processes, distribution channels, and management layer. The product was the only governing principle-it organized everything across a perfectly straight line. The actual people involved in making, buying, and selling the product were entirely disposable. Henry Ford's customers could famously pick any Model T color they wanted, as long as it was black. The result of all this relentless efficiency was that Henry Ford's cost per unit dropped precipitously, allowing him to flood the market with cheap but durably made cars. Model Ts came only in black because with one automobile coming off the line every three minutes, that was the only color that would dry fast enough. Then once these big companies established market share, the thinking went, they could start to gently raise their prices and make money off the difference, or margin. The margin ruled everything (and a little planned obsolescence never hurt). It's difficult to overstate the power that big postwar American corporations had. They organized themselves around strictly delineated product divisions and didn't have to answer to anyone. There were no call centers, no customer service reps, and, in many cases, no returns, period. This model didn't work particularly well when it came to customers like our grandparents, but it consistently shipped units and kept boardrooms happy. The emergence of enterprise resource planning (ERP) systems in the latter half of the century only exacerbated this problem. These systems did a good job of measuring operational efficiency: raw materials, inventory, purchase orders, shipping, payroll. They did a lousy job of measuring actual customer experience. But as modern management guru Peter Drucker pointed out, companies tend to manage what they can measure, and so executive teams became hopelessly product-focused, both organizationally and strategically. This period also saw the ascendance of supply chain economics. The goal was to match supply and demand with the least inventory possible. It was nirvana for engineers and management consultants, who were threatened by the new electronic products and efficiencies coming out of Japan. "Just in time inventory" meant that warehouses full of stuff just sitting around were the ultimate enemy. "Total quality initiative" meant that the work of improving processes was never over. Michael Dell built an empire based around this discipline. Then around twenty years ago, corporate America woke up to the realization that all this relentless focus on productivity was coming at a cost-namely the relationship between the vendor and the customer. The customer was a complete unknown, a receptacle at the end of a distribution chain whose sole purpose was to "consume" the products companies made. And as it turned out, many of these new consumers were having difficulty getting their new products to work. And how did corporate America discover this? Their receptionists were getting angry phone calls. So what did the big companies do to address this problem? They set up customer service departments! When in doubt, build another vertical silo-they launched market services, technical support lines, warranty contracts, and maintenance groups. The customer had truly arrived-they had their own department now. And that department was located way down at the far end of the supply chain, just past the loading dock. The Age of the Customer Today the glory days of the soulless, all-powerful corporation are long gone. Today's customers are more informed by an order of magnitude. Most of them have researched, assessed, and categorized you before you can even say hello. And to most of them, especially younger ones, ownership just isn't that important anymore. People increasingly view the prospect of buying something as unnecessary baggage. They want media at their fingertips, not physical products to manage. That's why most of the big box retailers I grew up with are gone now: Circuit City, Tower Records, Blockbuster, Borders, Virgin Megastore. A lot of the malls are gone, too! Today people expect services to provide immediate, ongoing fulfillment, from rideshares to streaming services to subscription boxes. They want to be happily surprised on a regular basis. And if you don't meet those expectations, you get dropped, not to mention trashed on social media. It's that simple. Forrester Research thinks we're at the beginning of a new twenty-year business cycle it calls "The Age of the Customer." Forrester sees a broad, systemic shift in capital models pivoting toward serving a newly empowered generation of customers who have the ability to price, critique, and purchase anytime, anywhere. Here's how Forrester describes the new customer mindset: "The expectation that any desired information or service is available, on any appropriate device, in context, at your moment of need." Customers have new expectations (and yes, those expectations have certainly been driven by millennials, but at this point, almost everyone shares them). They want the ride, not the car. The milk, not the cow. The new Kanye music, not the new Kanye record. Initially, the corporate world responded to this shift in pretty typical fashion-they built more systems. They spun up customer relationship management (CRM) databases, installed customer loyalty programs, offered membership rewards and incentives, and showered people with customer satisfaction surveys. It was a truth universally acknowledged that new customers were harder to acquire than it was to retain loyal ones, and negative customer experiences traveled much further than positive ones. There was a lot of talk about customer journeys and net promoter scores. No one knows who coined the phrase "the customer is always right," but it dates to late-nineteenth-century department-store pioneers like Harry Gordon Selfridge and Marshall Field. It was a novel concept at the time (displacing a prevailing general retail attitude of caveat emptor), but what's amazing is how all these big Fortune 500 companies still couldn't get it right. They developed a lot of prescriptive strategies built around customer focus, but they lacked a descriptive understanding of the mindset of the customer herself. Large companies were still getting blown up on social media left and right, and there were certainly no sweeping changes in public sentiment toward big enterprises. It just wasn't enough. And then a funny thing happened-those digital disrupters like Salesforce and Amazon that I mentioned earlier took the whole customer-first concept a huge step further by actually establishing direct ongoing relationships with their customers. They didn't have customer segments anymore-they had individual subscribers. And every one of those individual subscribers had their own home page, their own activity history, their own red flags, their own algorithmically derived suggestions, their own unique experiences. And thanks to subscriber IDs, all the boring transactional point-of-sale processes disappeared. Ten years ago there was no Spotify, and Netflix was a DVD company. Today both those companies own a significant percentage of the total revenue of their respective industries! Today businesses are asking themselves a whole new set of questions: What do we need to do to build long-term relationships? What do we need to do to focus on outcomes and not ownership? To invent new business models? To grow our recurring revenue, and to deliver ongoing value? So again-what does digital transformation look like? I think it looks a lot like a circle. Let me explain. The New Business Model If you remember one thing about this book, remember this diagram. It summarizes the shift under way. On the left side, you have the old model, where companies used to focus on "getting a product to market" and selling as many units of that product as possible: more cars, more pens, more razors, more laptops. They did this by getting their products into as many sales and distribution channels as possible. Of course there must be a customer on the other end buying all this stuff, but often you didn't really care who they were, as long as more units flew off the shelves. That's not how the modern company thinks. Today successful companies start with the customer. They recognize that customers spend their time across many channels, and wherever those customers are, that's where they should be meeting their customers' needs. And the more information you can learn about the customer, the better you can serve their needs, and the more valuable the relationship becomes. That's digital transformation: from linear transactional channels to a circular, dynamic relationship with your subscriber.

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Product details

Hardcover: 256 pages

Publisher: Portfolio (June 5, 2018)

Language: English

ISBN-10: 0525536469

ISBN-13: 978-0525536468

Product Dimensions:

6.2 x 0.9 x 9.3 inches

Shipping Weight: 1 pounds (View shipping rates and policies)

Average Customer Review:

4.7 out of 5 stars

71 customer reviews

Amazon Best Sellers Rank:

#26,911 in Books (See Top 100 in Books)

The topic of subscription pricing is very important to businesses today. Yet I felt that this book missed its mark for the following reasons:1. It is full of hype and tired old assertions like "Successful companies start with the customer", "Ownership is dead. Access is new imperative," "You've probably heard of unicorns..." etc. While some degree of this sort of commentary is to be expected, this book is full of it.2. A significant amount of the book reads like a PR brochure hyping up the services and the clients of the author's company, Zuora. Detailed successes of these clients are described. But what is missing is any discussion about the weaknesses and the problems with subscription pricing. What about the thousands of subscription service companies, startups and established companies alike, that have failed, largely because they used this model poorly or inappropriately? As one example, just look at the tatters that the meal kit delivery industry is in at the moment. The subscription model didn't seem to do much for them. Selectively discussing successful clients reduced this book's value to me significantly. I felt I got a distorted picture of this model.3. Everything in this book is discussed in very general terms. There are no detailed case studies, no discussion of underlying math, or comparison of a subscription model vs. other models. Information about how to work out whether a subscription model makes sense in a particular situation vs. other alternatives would have been really helpful rather than the simplistic positive view of this business model.

Four years ago, I interviewed Tien Tzuo about his thoughts on subscription. His insightfulness, vision and generosity blew me away.When I received Subscribed, the book Tien wrote with Gabe Weisert, I tore through in in one night, and filled it with notes and yellow stickies. There are so many great case studies, not just about today's subscription businesses--the SaaS, Media and Services organizations, but also on how subscription pricing is transforming other industries--from automotive to manufacturing and consumer products.In addition to their surveys of key emerging industries for subscription, the authors delve into the organizational impact of subscription pricing. I particularly enjoyed the section on marketing, and how CMOs need to rethink the "4Ps" (Pricing, Place, Promotion, Packaging) in light of this new way of selling value.I bought two copies--one to keep on my desk (that's the marked up one) and one to share.

There are changes that are profound and changes that are merely interesting or even fascinating. This book describes an easily missed but profound change, that simply cannot be ignored.To understand this change, consider that more than half of the companies listed on the Fortune 500 in 2000 are now off that list. Today companies last only 15 years before dropping off. Then consider GE and IBM which have been on the list since it started in 1955 and are still there.Today however, you will hear very little talk of GE’s refrigerators and washing machines, or IBM’s mainframes. Instead they talk about “providing digital solutions”. Their focus is achieving outcomes for their clients, not selling them equipment. They are not alone: Xerox has moved from equipment to information services. McGraw-Hill now offers financial services and adaptive learning systems. “They don’t really sell stuff anymore,” Tzuo and Weisert explain.Neither do the new behemoths on the Fortune 500 list - Amazon, Google, Facebook, Apple and Netflix. The common thread between all these companies is that they all recognize that we live in a digital world, and it is quite unlike the product world of the past 120 years.As Peter Drucker pointed out, we manage what we measure, and so executive teams became hopelessly product-focused. This however came at a cost to the relationship between the vendor and the customer.To grasp the importance of this issue, contrast Walmart with Amazon. 90% of all Americans live within 20 minutes of one of Walmart’s 5,000 stores which serve 140 million shoppers a week. Walmart clearly knows how to buy and sell products, but every customer is nothing more than a vehicle for purchasing goods.Amazon now has 90 million ‘Prime’ members (customers who get special treatment such as free delivery,) or roughly half of all American households. They pay $9 billion in membership fees and spend $117 billion each year. “The Amazon versus Walmart battle has been framed as ecommerce versus traditional retail, but that’s always been a false dichotomy. It’s about starting with the customer instead of the product,” the authors note.Walmart has no idea what you purchased last week, and no way of finding out. A focus on the customer was not built into their business model. Amazon, by contrast does know. In fact, they know the first book I ever bought from them in 1999 – ‘Maximum Achievement’, by Brian Tracy, and they know everything I have bought ever since. (Check your order history. I just did.) The customer is the centre of their business model.In the digital economy customers are different: they prefer outcomes to ownership, they want the ride, not the car. The milk, not the cow. Forrester describes the new customer mindset: “The expectation that any desired information or service is available, on any appropriate device, in context, at your moment of need.” Today successful companies start with the customer.Ecommerce represents 13% of the total retail market and is growing at 15% per annum, versus just 3% for physical retail. Physical stores are not going to disappear soon or ever: they need to and will simply pivot the script to customer centricity.Smartphone manufacture is a useful illustration. The battle is no longer over units sold, but on how phone use can be monetized. In February 2018, Apple revenue from services was $31b – enough to make services alone a Fortune 100 company. Apple’s focus is now on revenue per Apple ID over a user’s lifetime - and growing this base.With a focus on the lifetime value of customers, suppliers must do everything to know them, their interests, aspirations, and more. This customer focus includes making it easy for customers to leave if they want to. You can certainly ask them why they’re leaving, or try to win them back, but you don’t get in their way of leaving. This demands that you constantly raise your game.“You need a mindset that treats your customers like subscribers—partners in an ongoing, mutually beneficial relationship,” state the authors – hence the title of this book, ‘Subscription’. To achieve this requires a change to your entire way of thinking.According to McKinsey, the subscription ecommerce market has grown by more than 100% a year for the past five years.Husqvarna, a 329-year-old tool manufacturer, is now offering a monthly subscription. It allows access to tools that are serviced daily, and fully charged before customers take them home. Then customers return them when they are done, no storage, no maintenance, no hassle.Netflix, which started streaming movies in 2007, went from zero to 100 million subscribers in ten years. Spotify, founded ten years later, went from zero to 50 million paying subscribers in less than nine years. Music streaming in the U.S. now represents more than half of the US music business.Subscribers to Ford’s Canvas programme can pick a monthly mileage plan for your car, and can roll over unused miles into the next month, much like a data plan. Everything is covered except the petrol. And your FordPass app allows you to warm up your car in the driveway on cold mornings, find and reserve parking spots, schedule service appointments, find nearby gas stations, and make mobile payments.Ford has around 6 percent of the $2.3 trillion global automotive market, but close to nothing in terms of the $5.4 trillion transportation services market.Surf Air, an airline operating in the Western U.S. and Europe gives it members access to limitless flights for a flat monthly fee. Together with its other travel-related perks, is growing rapidly.SNCF, the 80-year-old French state-owned rail company, is competing against transportation start-ups like BlaBlaCar, an online marketplace for carpooling. Through clever use of its digital subscription system, it does not tie customers down, but serves them better.Can getting rid of earth for construction be “subscription?” Komatsu has achieved this by moving from the question: “How many trucks can I sell you?” to “How much earth do you need moved?”Building starts with the removal of earth to lay the foundation. Manual surveys generally have a 20% - 30% margin of error contributing to the knock-on effects that routinely cause time and budget overruns.Komatsu, the world’s oldest construction and mining equipment manufacturer offers the ‘Smart Construction’ programme. Their drones create a 3D-rendered topographical model of the site in centimetre-level detail, calculate the exact area and volume of earth that needs to be removed, and runs thousands of simulations of possible scenarios. All in 30 minutes. They provide a finished project plan, with materials, equipment, labour, and a work schedule detailed down to the last hour.Oh, they also feed your project plan into its fleet of semiautonomous excavators, bulldozers, and backhoes, and these giant robots basically take care of the project for you.Subscription is a mindset that faces the reality that manufacturing is not giving way to a digital world: it is the basis on which the digital will grow. In fact, manufacturing is a stirring giant, not a relic. Rethink Detroit vs. Silicon Valley, but from a subscription viewpoint.Readability Light ---+- SeriousInsights High +--+- LowPractical High -+--- Low*Ian Mann of Gateways consults internationally on strategy and implementation and is the author of the ‘Executive Update’ and ‘Strategy That Works’.

The book lists non-trivial interesting ideas about the subscription economy and how to run a company that sells subscriptions. Unfortunately, some of the ideas are presented without arguments. For example, the authors claim that an ERP application cannot report the number of active customers under various subscription contracts. This claim is presented without any argument and according to my knowledge is simply not true.

I am a Senior HR leader and I try to learn about business trends, technologies, and economies. This is an excellent overview of the SaaS economy today and looking to the future. There will be very few companies and industries not impacted by SaaS. I highly recommend this book to HR and other business professionals.

This book provided a 360 degree view of moving towards a subscription based model. It highlighted the challenges in achieving "recurring revenue" such as an initial drop in revenue. Removing barriers for customers to exit and relying on having a solid value proposition partnered with an exceptional customer experience was eloquently explained and justified with very solid research and data. An excellent read for all companies, particularly those more mature ones with an historical product centric approach.

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