Subscribed
Future-proofing your business
Description
Historically, business success followed a consistent formula. Now, digital advancements have empowered consumers, changing the success formula. Modern success hinges on transforming products into services that deliver desired outcomes. This involves shifting from one-time sales to subscription models that provide ongoing value.
We're at a significant business evolution, akin to the Industrial Revolution, moving from products to services. With the rise of subscriptions driven by consumer preference for access over ownership, companies not adapting to this model risk obsolescence. Tien Tzuo highlights this shift as crucial for future business viability.
Table of contents
01Understanding the subscription economy
The business landscape is undergoing a seismic shift as the subscription model revolutionizes industries across the globe. The compelling nature of providing access to the benefits of a product or service, rather than ownership, is reshaping consumer expectations and business strategies. This paradigm shift is poised to redefine commerce, as customers increasingly seek the outcomes they desire without the burdens of owning physical assets. The surge in demand for subscription services is opening up new revenue streams and heralding a new era in the way business is conducted.
In the past two decades, the Fortune 500 list has witnessed a dramatic turnover, with over half of the year 2000's companies no longer present. In their stead, digital giants such as Amazon, Apple, Google, Facebook, and Netflix have risen, sharing a common disregard for traditional product-based business models and a relentless pursuit of direct customer relationships through digital means.
Historically, companies like Disney sold their products through third-party distributors such as Walmart, which inadvertently made customers loyal to the retailer rather than the brand. However, today's consumers are distinct in their preferences—they favor personalized experiences and continuous improvement over standardization and planned obsolescence. This shift in consumer behavior is driving monumental changes in markets worldwide.
The traditional business model focused on bringing products to market swiftly and selling in high volumes to leverage economies of scale. However, today's successful companies are flipping the script by starting with the customer. They immerse themselves in the environments their customers frequent, gather extensive knowledge about them, and deliver a tailored mix of services that achieve the desired outcomes. The modern business model revolves around a dynamic, ongoing relationship with subscribers, with a customer-centric approach at its core.
02Thriving in subscription markets
To thrive and distinguish oneself in the realm of the Subscription Economy, it is imperative to dismantle the barriers of departmental silos and align the collective focus on crafting customer experiences that yield the desired outcomes for subscribers. Concentrate on these outcomes and devise an optimal blend of services, experiences, and channels. In the contemporary landscape of the Subscription Economy, there are five innovative rules to adhere to:
Offering a subscription implies that your service is perpetually evolving. There is always room for enhancement, allowing you to refine your offering indefinitely. The advantage of having subscribers over traditional customers is the access to real-time data regarding their preferences and usage patterns. This information is invaluable as it enables you to continuously improve your service, thereby delivering increasing value without end.
Consider the case of Graze, a British enterprise that specializes in delivering nutritious snacks through the postal service. Every fortnight, Graze sends its subscribers a selection of four different snacks. The subscribers then provide their feedback on these snacks via a straightforward online form. This feedback directly influences Graze's production and sales decisions. Anthony Fletcher, the CEO of Graze, boasts about the agility of his operation, stating that he can manage the entire factory from his smartphone, including supplies, distribution, and packaging. Each box shipped is uniquely tailored for an individual subscriber.
Graze's nimble manufacturing process is certainly commendable, but the true secret to its success lies in its ability to learn from its subscribers' preferences to drive the company forward. Instead of relying on traditional focus groups to predict market trends, Graze integrates market research into its service, adapting its product offerings based on subscriber feedback. Anthony Fletcher, who previously worked for an energy drink company, contrasts his past experiences with his current role at Graze. He recalls how his former company would invest heavily in market research for international expansion, often with inaccurate results. In contrast, Graze launched in the U.S. without spending on market research, relying on its self-adjusting system to cater to the market.
Netflix employs a similar strategy. Traditional TV networks would produce a pilot episode, broadcast it, and then decide whether to invest in a full season based on viewer feedback. Netflix, however, leverages its extensive customer data to develop TV show concepts that are likely to be popular, funding entire seasons upfront. This approach has led to the creation of widely discussed shows. Tien Tzuo points out that while Netflix operates in a creative industry with inherent risks, it benefits from a "giant brain" of subscriber insights that traditional networks lack. By designing services in collaboration with subscribers and using usage and behavioral data, Netflix can create content that resonates with viewers and evolves with their preferences.
Related books
