By: Melanie Jones, CORT Workplace Business Development Executive
I recently had the privilege of interviewing Tien Tzuo, Founder and CEO of Zuora, and author of the best-selling book “Subscribed”. It’s a must read, in my opinion, for anyone even slightly interested in the dynamic changes going on in the arena of subscription models, usership vs. ownership, and a world that is increasingly adopting a subscription model of consumption.
Obviously, countless companies are exploring and evaluating the benefits gained by migrating towards a subscription approach in the marketplace. We see this trend occurring within the ranks of start-ups, well-established corporate giants, and even technology firms and furniture providers. As an expert on the subscription economy, I found Tien’s answers to my questions impactful, honest and inspiring.
Q. Many people, and cultures, are embracing and expecting a subscription approach to the goods and services they use daily. From your perspective, how far along are we on this journey?
A. I think we’re just getting started. Today people associate subscriptions primarily with software and digital media. The exciting thing we see today is every product getting connected to the internet. Soon we’ll be focused on miles driven, not cars owned. Dirt moved not the number of tractors sold. Flexible workspace, not chairs and desks purchased. We’ll be consuming all those products like services. We’ll enjoy access, without the hassles of ownership. We’ll be consuming things like transportation, housing, and food the same way we consume electricity or water today.
Q. What are the obstacles you see when companies decide to switch from an ownership model to a subscription model? In your opinion, could everything switch to a subscription approach? Home? Car? Stocks? Could every hard asset be available through a subscription?
A. The biggest obstacle is the mindset. From business school to corporate management training, we’re taught to think about hit products and unit margins. But the ironic thing is that all companies are service companies (even if some of them don’t realize it yet!). The change companies need to make is to prioritize usage and consumption over strict unit sales. They need to think in terms of miles driven, not cars sold. Organizational inertia needs to be overcome to succeed with the shift to a subscription-based business model.
Q. When Zuora supports a client migrating to a subscription approach in their business model, what are some of the challenges they face and how does Zuora help?
A. Once we’re aligned on mindset and strategy, then we help with tools and systems. Because in successful service businesses, even minor customer interactions can trigger any number of adjacent operations: activations, suspensions, revenue adjustments. But keep in mind – those are good things! They are indicators that customers are finding value from your service. In fact, we’ve found from our own internal data that subscription companies that take advantage of usage-based business models grow 1.5 times faster than companies that just rely on straightforward recurring payments.
Q. I look forward to attending my first Subscribed conference soon! The next one is in just a few weeks and is the world’s largest gathering of Subscription Economy proponents. I feel like we will see an acceleration in subscription services exploring how to combine offerings to provide a better product or service and capture more market share. What are your thoughts on this topic?
A. I couldn’t agree more. And what’s particularly cool about our Subscribed conferences is that you’ve got all these wildly different companies from many industries in attendance. After a decade in business, this year is especially important. Just when you thought you understood everything about subscriptions, it’s going to change again.
You’ve got manufacturing, publishing, automotive, streaming media, consumer goods, software, agriculture, health, and wellness, you name it. And they’re all swapping notes about how to run a great subscription business.
Subscribed San Francisco will give attendees a unique experience with exclusive access to executives from WeWork, Pandora, Fender and Unity Technologies. The Subscribed community is comprised of a global group of companies formed by visionaries that see the massive shift disrupting nearly every industry in the world and want to share and learn from others.
Q. Subscribed is a great book. Why did you write it?
A. Thanks, Melanie. Mostly I wrote it because I felt like there was a gap in the market for a book like this. We’re obviously based in Silicon Valley, but this isn’t a Silicon Valley book. There are already lots of those. It’s intended as a general business book, but one that’s hopefully also pointed, interesting and occasionally funny. I’ve collected a lot of great stories over the years, so it was an excuse to share some of them, as well as provide a framework that will help any company successfully launch a subscription business.
Q. Not long ago Barron’s published an article you wrote that mentioned IKEA is now offering FaaS. Furniture as a Service is a term that originated at CORT. This subscription-like approach— Select, Order, Use, Return— is changing how furniture is used in the workplace. Is it realistic to think that one-day even products like workplace furniture will be more about usership than ownership?
A. FaaS! I love it! Flexible workplace furniture services make sense for all kinds of reasons. Most companies aren’t that interested in the maintenance and upkeep of their office environments. Most companies want to create appealing workspaces that encourage innovation and productivity. Most companies want access to the latest and best ergonomic options out there. And most companies want to save money and increase efficiency.
Q. Has Zuora assisted clients in the commercial real estate space?
A. Yes, we’re working with several companies in this space
— furniture manufacturers, co-working spaces, water providers, smart lighting, even smart flooring. There is so much more efficiency waiting to be uncovered. All of these companies are shifting from “units” to “utilization.” And if manufacturers don’t make sure that their equipment lasts as long as possible, and that the materials used to build that equipment is recycled or re-purposed effectively, they will lose out to their competitors. So there’s a really compelling sustainability aspect as well.
Q. We see Space as a Service and flexible workspaces changing how buildings are monetized; whether it be shorter lease lengths, coworking companies managing space in the buildings, or building ownership moving into the flexible space arena. That being said, do you agree that CORT’s Furniture as a Service model is in the right place at the right time to support these big changes? And, what are the typical action items firms need to take to be subscription based service?
A. I agree wholeheartedly. It sounds like CORT is doing all the right things. The one thing I encourage all subscription businesses to do is align around a usage metric (or metrics). It might sound obvious, but you need some way of measuring how people are using your service. That metric informs everything
— how you price, how you market, how you sell, how you develop new services. Ours is pretty-straightforward at Zuora
— transaction volume. The more revenue that’s running through our system, the better our clients are performing, and the better we’re doing. Ultimately, the subscription model not only helps brands understand their customers, but it also provides regular, repeatable revenue and income to the business.
Melanie Jones is an industry leader on the CORT Workplace team. Her mission is to support change in the way furniture is used in the workplace with CORT’s Furniture as a Service (#FaaS) subscription-like model.