Amy Konary, VP of Customer Business Innovation at Zuora, joined Vala Afshar, Chief Digital Evangelist at Salesforce, and R “Ray” Wang, Principal Analyst, Founder & Chairman of Constellation Research on the latest episode of DisrupTV.
Before joining Zuora in 2017, Amy was an analyst for 19 years at IDC where she launched the company’s SaaS practice and produced the industry’s first SaaS forecast. Now at Zuora, Amy is the VP of Customer Business Innovation as well as the founder and chair of the Subscribed Institute at Zuora, a think tank for the Subscription Economy. Through the Subscribed Institute, Amy brings together a community of business executives, thought leaders, industry experts and a series of executive summits and generates research and industry benchmarks on subscription transformation topics.
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Or read below for highlights from Amy Konary:
Consumers want an experience that gets better over time.
Subscriptions are fundamentally different than products on so many different levels. One of the reasons why I am so fascinated by this topic is that in my consumer life, I love things that keep getting better over time. I tend to change my mind fairly quickly about how I want to interact with the products and services that I interact with. And I also have really high expectations that the companies I interact with are going to build relationships with me. I want them to know who I am. I want them to get to know me, and I want them to provide an experience that gets better over time. Those are all the expectations that I have.
ERP systems assume that products travel from point A to the customer in a linear fashion — subscriptions don’t work like that.
Historically, the way business has been done, you do all kinds of research upfront to guess what you think will relay subscriber value. And then you try to come up with a way to price and package it upfront before your customer’s ever experienced it. And then you toss it over the fence and hope they have a good experience, and hope that they get in touch with you. If they don’t, you’ll fix things down the road.
The problem with that model is it doesn’t allow for experiential services that get better over time. So the way the ERP systems have been built is for that first model, that product SKU value chain type of a model, and it assumes that the product travels from point A to the customer in a linear fashion. And your financial metrics are historical in nature. They look back at what you did as opposed to projecting what you need going forward.
There’s no notion of customer journey in a traditional ERP.
Our journey becomes or should be part of that system of record, and there’s no notion of customer journey in a traditional ERP. So that disconnect tends to be managed by companies as they start their subscription journey very manually ad hoc. And the problem in doing that is it becomes very expensive, very inefficient, and very error prone over time. Whether B2B or B2C, consumer expectations are very high, and so how you manage your back end becomes incredibly important for that front-end customer experience.
Finance were the historians of a business, and now they’re the architects of the business model.
When it comes to who’s leading the transformation from legacy business models to a subscription-based model, it really depends on the company, but the commonality is it’s a C level executive. Very often it’s finance because finance is going through this tremendous change where they were historians and now they’re the architects of the business model.
So you absolutely have to have commitment from the CFO level that you’re going to look at things differently. You’re going to look at recurring revenue. You’re going to look at customer lifetime value. You’re going to shift from those backward-looking metrics to the forward-looking metrics — and then everything hinges off of that.
When it comes to digital transformation, it’s very common to get “blinded with science.”
Sometimes when people go through digital transformation, it’s very common to get blinded with science. There’s so much: so many different layers, so many different acronyms, so many different things to focus on. But what’s important is keeping the customer first, particularly in the SMB space and the medium size company space.
If you are going through a digital transformation and subscription is part of your journey, you absolutely have to think of everything that you do: ‘How does that help your customers?’ There are parts of the business that people feel are disconnected from customer experience that really aren’t.
Transformation isn’t just digital optimization. It’s a whole new business model.
An optimization is taking something and giving it a facelift, making it work better. If you think of a home renovation metaphor, I’ve got my existing kitchen footprint. Everything’s in the same place. I’m just going to get all new appliances. And it’s going to work better and that might solve the need, and that’s going to appease the people that are in the kitchen and it’s going to help us make a better product in the kitchen for a period of time.
But transformation is … our kitchen might be in the other end of the house. This isn’t the best place for the kitchen. And to do that, we’ve got to move all the plumbing. We’ve got to knock out that wall over there. And then we start to think about that. There are all these downstream effects. If you move the plumbing, you’ve got to get an electrician. If you do that, you’ve got to get a permit. Well, if you do that, you’ve got to get an engineer. It’s got to be surveyed, and if you do that, there are these cascading effects.
And this is what business transformation looks like for a company.
It becomes overwhelming because there are so many different elements. From an executive perspective, the questions is “How am I going to control all these pieces? Control costs? Make sure that I can communicate this out to the Street? How do I get employees feeling good about it because they’ve got to go through all this transition too and it’s really hard to change what people do every day?
Find the North Star—and keep focused on it.
The only way that any sane person would embark on a major renovation where they’re moving everything is that they have a north star. That is where we are taking the company. That is where we are going to go. If you think of any company that’s done that type of transformation successfully, you know that things are going to get worse before they get better. But you believe. You’ve got that north star.
There’s a Chief Transformation Officer or a VP brought in to lead the transformation and they’re getting hammered every time they go into a meeting with their executives. It’s really uncomfortable to go through these transformations. Those executive sponsors need to go in with something that helps people feel confident, helps them build confidence. We can give them benchmark data so they can say ‘This company did it and here’s their shareholder value, here’s what their stock price looked like through the transition, and here’s what it looks like now.’
If you’re charging consumption, the product can’t break.
With subscriptions, companies have to think through how they engineer their products. There are a lot of companies and physical products that have been built to break. They have not necessarily been built to last because they have a whole channel of people that their whole job is fixing them when they break.
So if you’re charging consumption on something, it can’t break because then you can’t get paid. So you have to build products that are more durable and so then that cuts out a whole portion maybe of your ecosystem or your ecosystem changes because of that. Engineering is different.
Invest in your customers beyond that initial sale.
The way you support your customers is very different. Customer success — that’s a whole discipline that didn’t exist before. As a company, you want to invest in your customers beyond that initial sale.
One of the things we found at Zuora is, as our customers start to grow their businesses, about 70 percent of their revenue comes from upsell / cross-sell activity. And yet, a lot of companies, even subscription companies, are still focused on new logos and initial sales—and that’s where they invest. To put it simply, that’s just 30 percent of the revenue picture, the tip of the iceberg from a revenue perspective.
The rest of it requires you to carefully cultivate relationships, make sure that people are using the products and services, make sure they’re getting value, provide training, connecting … a whole bunch of activities that have to happen after they get their hands on what it is you provide, that didn’t have to happen in the past.
Learn more about the Subscribed Institute.
DisrupTV is a weekly Web series with hosts R “Ray” Wang and Vala Afshar. The show airs live at 11:00 a.m. PT/ 2:00 p.m. ET every Friday. Brought to you by Constellation Executive Network: constellationr.com/CEN.