When my children were young, we experimented with a small garden in the backyard. We planted the seeds in the spring and July just couldn’t come soon enough. I think I was asked daily for a good portion of those three months, “Daddy, why isn’t anything growing yet?”
While I won’t compare shareholders to my kids, their demands for fast growth have many company CEOs feeling I’m sure like I did as I surveyed my garden. Returns on our labor just couldn’t come fast enough.
Subscription-based business is changing that reality. In my recent conversation with Zuora CEO and Founder, Tien Tzuo, he shared that subscription businesses—on average—grow five to eight times faster than companies in the S&P 500. (If you want more detail on that, check out Zuora’s Subscription Economy Index).
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Caption: Zuora’s Subscription Economy Index measures the growth metrics of global companies across a variety of industries.
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Putting data to work
Zuora’s COVID-19 Impact Report shows that growth is holding even during the pandemic. Four out of five companies have actually seen their subscriber acquisition rates grow during this time, versus the 12 months prior. It really shows the resiliency of this business model.
Let’s not underplay, though, the importance of partnerships to building and maintaining a subscription-based business. As Tien put it: “Over the last 30 or 40 years, companies realized more and more that they should really focus on their core competency. As they focus on their core competency, they build an ecosystem of partners and vendors who service them.”
Tien said his company can help with specific areas. “We’ll put in a tax vendor like Avalara or Vertex, as well as payment gateways. We’ll pull in ecommerce systems—whatever it happens to be . . . But to use a construction analogy, we’re not a general contractor. We’re the experts in our part of the system, but you need a general contractor—and overall project designer—who really understands the customer’s needs and can put all the different pieces together. There’s a CRM piece, there’s a manufacturing piece, there’s often a cloud or big data piece. We see Accenture really playing a big role as a general contractor, putting it all together into an ecosystem that we can certainly be a part of.”
Thanks for the shout-out, Tien. As the subscription economy becomes more of a global trend, we definitely see ourselves pulled into the orchestrator role again and again. And many times it’s not just because we bring strategy or industry expertise. It’s because they realize we can add value with speed also. The faster they’re up and running in a subscription model, the faster they can get to the growth their shareholders expect.
Finding partners that are ready for the long haul
Let’s talk real-world examples to help make this come alive. Tien described his recent conversations with a “major luxury brand.” Over the past few months, with the shutdown of a lot of retail, revenue suffered—even though the brand is still fantastic. So now the brand is thinking about creating annual memberships—but to what purpose? They are exploring that. As he looks for a partner to help him figure that out and get the company up and running with the concept within about 90 days, he thinks of Accenture. “Accenture has made massive investments in Accenture Interactive to create expertise so they can help companies model user interactions, app flows, and so on. They can help us sit down with a brand and figure out what it is they want to launch, if there’s an app associated with that, etc.”
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“We’re the experts in our part of the system, but you need a general contractor—and overall project designer—who really understands the customer’s needs and can put all the different pieces together.”
- Tien Tzuo, Founder & CEO Zuora
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You know what this feels like, I’m sure. When you partner with the right people and the swim lanes align, good things can happen with incredible speed. It’s no longer about owning retail shelves or distribution channels. It’s about the direct-to-subscriber relationship. What can you do to ensure you’re who customers think about first?
“Our experiences and our expectations are being reshaped by this new model,” Tien said. And he’s so right. Many of my client conversations come down to that very statement. And more traditional companies are grappling with how to pivot successfully so they can create growth and resilience.
If you’re among those companies, you might want to check out my other XaaS Files podcast conversations with CEOs of organizations helping make as-a-Service subscription business a reality. And look for more insights to come, as we continue the conversation this month.
To learn more about subscription models from Tien Tzuo, check out his book Subscribed.