There are days I feel like the luckiest man on the planet. Not only do I love what I do—advising companies on as-a-service subscription models but I get to have really interesting conversations with the movers and shakers who are helping to shape the future of business.

Tien Tzuo, Zuora Founder and CEO, is one of those movers and shakers. If you read my last blog post, you got just a small taste of Tien’s wisdom on shifting your company’s business model to participate in the subscription economy.

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Creating a roadmap where there wasn’t one

Tien partners with large global companies like Siemens or Fender to help with the shift. In doing so, he has collected data on what fosters success versus what doesn’t. His company’s “9 Keys” highlight what works, serving as a blueprint for companies that haven’t yet made the transition from products to cloud-based subscription services.

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Image shows Zuora’s 9 Keys for Subscriptions which are described as Pricing & Packaging, Subscription Management, Rating & Billing, Payments & AR, Revenue Recognition, Accounting Close, Analytics & Reporting, Integrations, Extensibility.

Caption: These 9 keys can depict your roadmap for building an ecosystem for your subscription business.

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In my latest podcast, When does a customer become a subscriber?, Tien talked to me about what Zuora has learned over the past 12 years, as his team has partnered with and collected data from big companies launching subscription services. From Caterpillar’s Cat Connect to Ford’s FordPass, he sees companies trying to master the shift from a product mindset to a services mindset.

It’s not about product anymore

“At Zuora, we really like the story of Fender, the guitar maker,” Tien shared. “The Fender guitar is an iconic piece of musical equipment. They weren’t about to change it. But they began to look at things from the customer’s point of view. Their research said that 50% of guitar buyers are first-time buyers . . . But the big problem is, they quit. They quit after 90 days and then the guitar goes underneath the bed, or in the attic, or it lies in the corner. They realized if they could retain more of their customers, they could grow revenues. They’d buy more guitars, more amps, more picks.”

Tien explained how Fender launched Fender Play, a service that teaches people how to play the guitar. When buyers make a guitar purchase, they’re offered the option to sign up for two weeks of Fender Play. “They’re up to a million subscribers,” he said. “And so, now they have a direct relationship with a million guitar players and they can actually monitor progress. Are they playing the guitar? Are they learning? How well are they advancing? If they haven’t taken an online lesson in two weeks, let’s suggest to them that they learn the song our data says they like.”

What Tien describes is what any company can do today—establish a direct relationship with your customer as a startup that sits inside your existing business. He recommends that model to keep things agile and innovative—and to protect the new business from the legacy complexity of the old business.

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"For Fender, it’s no longer really about guitars. It’s about customers really wanting to be a rock star, even if it’s just in their own head."
- Tien Tzuo, Founder & CEO Zuora

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The mindset shift that needs to happen is key. As Tien put it: “It’s not really about music; it’s about entertainment. For Fender, it’s no longer really about guitars. It’s about customers really wanting to be a rock star, even if it’s just in their own head.”

Tien acknowledged that Fender and many other companies are going down a road telecom companies began years ago, as the original subscription business. “They built towers, switches, networks and then needed to monetize service in all sorts of ways. That’s exactly what a cloud computing company does, right? You create a service, you put it in the cloud, and then you find ways of monetizing that in pricing, in packaging.” Zuora helps companies on this journey, functioning as an open-architecture platform to allow its customers to customize a subscription system around their customer’s needs.

And it doesn’t have to be hard. This may sound like a complex endeavor but I’ve seen clients do this in a way that is not “hard.” It involves partnering with companies like Zuora to capitalize on the learning they’ve already done. And—at the risk of selling my own services—a partner like Accenture helps also. You need a trusted advisor to help you set strategy, nail down operations, assess talent needs—and so much more.

And look for more in my next blog about the right partners that can help your company accelerate its transformation.

To learn more about subscription models from Tien Tzuo, check out his book Subscribed.

Kevin Dobbs

Managing Director – Accenture Consulting

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