how customers are driving a once in a century shift in business models
TRANSCRIPT
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The Subscription EconomyA Once in A Century Shift
John PhillipsGM Europe
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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
TRADITIONAL RECORD
Phone
Company
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.