We recently conducted a study of 10 different new software categories that have emerged in the past 10 years in market segments such as finance and accounting, procurement and supply chain, human resources and payroll, sales and marketing applications. Our focus was on understanding the strategies that market leaders use to launch new categories. We identified four key strategies that new category creators use to get the market to embrace fundamentally new products:
- Re-imagine the Business Processes – Category leaders don’t want to incrementally improving the current business processes. They want to fundamentally reinvent the way the work is done.
- Re-design the Organization Chart – Category leaders don’t want to just get a lot of people trained on their technology. They want to create new job functions, new career paths and entirely new organizations.
- Re-define the Success Criteria – Category leaders don’t want to just help customers achieve their existing goals. They want to redefine their KPIs and what it means to be successful.
- Re-invent the Technology Stack – Category Leaders don’t want to just plug-in to the customer’s existing ecosystem. They want to displace the existing tech stack and replace with their own platform.
Most of the category leaders we studied excelled at one or two of the four strategies. However, Zuora, leader in the subscription management category, stands out as an example of a category leader that excels in all four. Below are some examples of the strategies Zuora has used:
Reimagining Business Processes
From Customer Transactions to Customer Relationships
Zuora encourages companies to follow the examples of businesses such as Netflix, Uber, Spotify, and Box and transition from product-driven business model of the 20th century to the new, subscription-centric business models of the 21st century. CEO Tien Tzou describes this new era of companies and business models as “the Subscription Economy.”
CEO Tien Tzou authored a book called the Subscription Economy that the company markets aggressively.
It chronicles case studies of companies such as Adobe, PTC, and Autodesk that have made the transition from product to subscription oriented businesses. If you visit the Zuora website there are various testimonials from Jim Cramer of CNBC and Marc Benioff of Salesforce.com, encouraging you to read the book as well as reviews from the Wall Street Journal, Forbes, Inc. and Financial Times.
Making the shift to the Subscription Economy requires companies to reimagine their end-to-end business processes. Sales is no longer about a transactional approach to acquiring new customers. It’s about helping customers achieve long-term success as well as retaining, upselling, and growing the accounts. Finance is no longer about measuring historical product sales and revenue. It’s about measuring forward-looking metrics on future performance such as annual recurring revenue.
Zuora has emerged as the leading evangelist for the Subscription Economy. It promotes the vision through a variety of marketing channels unified under the “Subscribed” brand including:
- Subscribed Book – Offers a blueprint for how to redesign your business model from a product to a subscription business.
- Subscribed Weekly – Email newsletter that features the latest stories from leading subscription and as-a-service businesses.
- Subscribed Podcasts – Features interviews with entrepreneurs, analysts, and other innovators discussing the shift to the subscription economy.
- Subscribed Magazine – Published digitally, semi-annually featuring case studies of subscription economy leaders and insights from Zuora executives.
Redesigning the Org Chart
Product, People, and Money
Zuora encourages subscription businesses to break down the traditional organizational silos that permeate 20th-century product-centric companies. As an alternative, Zuora promotes its PADRE (Pipeline, Acquire, Deploy, Run, Expand) operating model. Instead of marketing and sales, Zuora encourages companies think about pipeline and acquisition. Instead of customer support and operations, Zuora recommends companies think about deployment, running, and expanding customers.
- Subscribed Events – Zuora sponsors a series of conferences to share case studies and best practices for success in the Subscription Economy. Each event features tracks for sales and operations, billing and finance, product and strategy teams. Recent Subscribed conference locations included San Francisco, New York, London, Paris, Tokyo, and Sydney.
- Subscribed Institute Membership – Executives at leading subscription businesses can request to become members of the Subscribed Institute. Members get early access to industry benchmarks and research, as well as exclusive networking opportunities to meet with academics, analysts, and other industry experts.
Zuora also offers a number of programs and forums for users of its products to pursue career development, training, and networking opportunities.
- Online User Groups – Regional user groups in Asia-Pacific, Europe, and North America. Other groups for Advisory Board members, Early Adopters, and SuperUser “Guru Lounge.”
- Zuora University – One-time, classroom-style training and subscription-based, online learning programs for end users, administrators, consultants, and implementers.
Redefining Success
Business Models and Monetization Strategies
Zuora is actively investing to help the industry redefine success in the new subscription economy through its “Subscribed Institute.” Positioned as “The Think Tank for the Subscription Economy,” the Subscribed Institute provides qualitative and quantitative research on business maturity models and monetization strategies.
Specific publications of the institute include:
- Subscription Business Maturity Model – Designed for CXOs, the model offers 300 success criteria and five stages of maturity across four dimensions (strategy, process, systems, and culture).
- Subscription Economy Benchmark – Studies key business issues for subscription companies such as trends in usage-based pricing and managing change orders.
- Subscription Economy Index – Tracks growth metrics of hundreds of companies in SaaS, IoT, media, telecommunications, and corporate services sectors and their performance versus the overall S&P 500.
Although not included in the PADRE acronym, the supporting functions of Product, People and Money are important as well. Zuora uses the PPM acronym for Product (think R&D and product management), People (think HR), and Money (think finance, operations, and legal).
Zuora provides a number of venues for subscription economy believers to congregate both face-to-face and online. These forums provide an alternative to the big ERP user conferences which continue to promote the traditional, product-centric view of business.
In addition to the official Subscribed Institute publications, Zuora also subsidizes research by third parties to help promote its vision through recognized thought leaders such as Gartner, IDC, Forrester, Deloitte, and YouGov. On its website, Zuora hosts a library of reports from these organizations discussing best practices and trends in subscription business models.
Reinventing the Technology Platform
Marketplace and Developer Platform
Zuora doesn’t just solve point problems in the subscription business model, it provides a suite of applications to “launch, monetize, and manage the entire order-to-revenue process on a single platform.” Much like many other leading SaaS and cloud providers, Zuora is seeking to achieve exponential growth by encouraging a community of third party developers to build on its platform. Zuora wants to be the “connective tissue between your CRM, ERP, and entire IT architecture.”
- Subscription Business Maturity Model – Designed for CXOs, the model offers 300 success criteria and five stages of maturity across four dimensions (strategy, process, systems, and culture).
- Subscription Economy Benchmark – Studies key business issues for subscription companies such as trends in usage-based pricing and managing change orders.
- Subscription Economy Index – Tracks growth metrics of hundreds of companies in SaaS, IoT, media, telecommunications, and corporate services sectors and their performance versus the overall S&P 500.
