Businesses Forced To Rethink Support Of Transformation

In today's society our needs are being fulfilled by services, rather than one-off purchases. Once we get a taste of what it's like to stream videos instead of buying physical DVDs, use Zipcar rather than buy a car, or store business files with Box as opposed to on our own servers, our lives work so simply that it's pretty much impossible to look back. Gradually, we are all becoming a part of what we call the "subscription economy".

A recent survey of 293 business executives in the UK, US and Australia, commissioned by Zuora and conducted by the Economist Intelligence Unit, found that four out of five businesses are currently seeing changes in how their customers prefer to access their services. It's a trend that is impacting every industry and one that businesses have become very aware of.

To provide the subscription experience their customers demand, organisations are reacting by reinventing themselves. 51 per cent are integrating new pricing and delivery models such as subscriptions, sharing, and rental goods and services. Of those, subscription-based models have been most widely adopted, with 40 per cent of these companies implementing subscription services as part of their core business.

This trend of signing up to subscription services doesn't come as a surprise when you consider the benefits they can bring to both customers and businesses.

For customers, it's about accessing the services they want, in the way that they want to receive them. They appreciate the flexibility with which they can tap in and out of their services when required, and the associated convenience of such an "I-get-it-now" experience. For businesses, it's about customer relationships. Why? Because subscription services provide businesses with the opportunity to better understand their customers and develop longer-lasting and more meaningful relationships. Long relationships in return drive new, more predictable revenue streams, a sharper competitive edge and a stronger business foundation.

Technology is what makes this transformation to a subscription business model possible. Show me a business that has not got cloud on its agenda or an employee that doesn't use their phone and tablet to drive business processes from anywhere. Because networks are always on, we can connect, consume and drive 24/7. This technology is what's transforming everything into a service, from software to digital media to the Internet of Things, making it available at our fingertips at any time.

However, one of the greatest challenges in moving to a subscription business model is centred around the legacy systems businesses once ran on. These must be reconsidered if organisations want to create a subscription experience for consumers with the ability to reinvent an industry. What is the system that allows you to do that?

Is it ERP? No, because ERP was built to track products that can be put on a pallet - rather than services which are consumed over time. In the new subscription economy, where services are being consumed on a pay-as-you-go basis, the ERP model is dying out. Is it CRM? Not entirely, because CRM doesn't provide you with the flexibility to price and package your offers across different customer touch points. It's insufficient for reinventing your business.

Instead, CRM has to be paired with a relationship business management (RBM) system. RBM consists of an emerging class of software focused on building, managing and optimising the ongoing customer relationships that are the lifeblood of a subscription business. They give you the commerce capabilities to craft your journey and create a subscription experience.

Music, transportation and storage are just the beginning. Subscription business models are spreading from industry to industry and eventually all companies will embrace them. However, this shift requires new ways of thinking, and new flexible IT systems which allow you to understand your customers and tailor and price your services to them specifically. This change won't be easy but, as Charles Darwin once said, it's those that are most responsive to change that survive - in today's constantly transforming business climate, success depends on it.

Tien Tzuo is the founder and CEO of Zuora