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Subscription Based Business Models - You need to Work Hard at Making Things Simple!

By Gerard de Bourbon, Chief Evangelist Officer, DigitalRoute

According to all major analyst firms, more than two thirds of all digital transformation projects fail.

Going from selling products to services is not that easy, especially if you require an IoT rollout. Consumption/ subscription-based services and recurring revenue streams increase business complexity. For instance how do you introduce new price plans, manage settlements, and separate personal data from a value chain in a live stream? How do you make sure who is entitled to use what? These are just a few of the valid complex issues which need to be addressed and solved.

They key question to be asking here is how can you achieve true business model innovation?

When transforming your business with new services offerings your entire company needs to change and "work hard at making things simple." The challenge is that with the use of high technological comes complexity including the number of vendors involved, each with their own agenda, the lack of a clear strategy by the client, a vague understanding from the SI of exactly what you want and need all leads to a perfect storm.

If a CEO does not have a crystal-clear idea of their transformation strategy they will fail! Transforming is the responsibility of the entire C-Suite and board also requires a shift in thinking - digital transformation is not a technology play. Instead, it is a cultural leading change, and often times a re-framing organizational exercise, often, everything will change. 

HR can be one of the most important areas for a company transforming, second to true leadership, in short supply in large corporate environments full of operational line managers not leaders. A major challenge is people, most are averse to change in one way or another and are afraid to lose their jobs and tend to make even the tiniest things complicated. It is natural that people get defensive and start questioning the change rather than embracing it.

A question for you senior executives, If you were faced with the task to captain an old sloop, (tall sail boat with multiple sails) and you wanted to sail to the Caribbean from Europe, but your crew wanted to go to the Seychelles What will you have to do first?

You either need to convince the crew to change their minds and sail with you to the Caribbean, (you can't sail the ship alone) or they throw you out and take the boat to the Seychelles, hence the importance of leadership, the same can happen when transforming your company. Thus the key here is to eliminate stress points and work hard at making things simple for everyone involved!

So why is it so important for a company transforming to have the agility to launch dynamically new business models, and deploy a usage data platform?

By The Number

  • IDC estimates that by 2020 more than 55% of all organizations will be digitally transforming and changing markets as we know them. It is clear that organizations are reimagining the future through new business models and digitally enabled products and services.
  • By 2023, 95% of all entities will have new digital KPI sets focusing on product/service innovation rates, data capitalization, and employee experience to navigate the digital economy. In order to get to this maturity efficiently, organizations need to consider modern usage intelligence tools which can handle the complexity, transaction volumes in an agile and dynamic manner.
  • By 2022, IDC estimates that over 50% of software revenue will come from the subscription/consumption business model, with most of this revenue coming from SaaS applications.

Today's SaaS-based monetization systems include the latest technology (ML/AI) and easily integrate with your existing systems to provide fast time to value. Companies need to use Business Model Innovation to their advantage, remaining relevant, competitive and being able to introduce new services and price plans are the key to success.

Use Cases

Here are two use case examples which highlight the complexity of subscription-based business models and complex value chains.

1.-On-Line Services Commerce

Most people are not aware that online credit/debit online/in the store represents one of the most complicated processes. In some cases, eight or more different companies are involved in getting your card over to a bank from a website or point of sales and back again.

Everyone takes a cut and sometimes the smallest cut is taken from the ones who provide the most value (Visa, MC, Amex, DSC). If there's a breakdown anywhere it all stops.

The Value chain is show below:


2. - On-Line Travel Industry

This is the sector which has the most complex value chain, payments in the online travel industry, which pivots off the card payment model. When Booking a ticket and getting payment may take up to 20 different middlemen!

The Value chain is shown below:


Both of these examples highlight the need for and use of technologies that are based on innovate business models to ultimately help ensure a smooth digital process and revenue stream. In both cases organizations are using Usage Data Platforms which were designed to handle the billions of transactions in real time with the utmost complexity to handle the usage events of today's subscription-based economy.

Transforming your business through subscription-based services requires you to work hard at making things simple for everyone. With the right tools organizations can take complexity out of the equation to remain relevant, competitive and introduce new services and price plans that will increase revenue streams.


About the Author

Gerard De Bourbon 

Gerard De Bourbon, Chief Evangelist Officer at DigitalRoute

Mr. De Bourbon is an executive with more than 28 plus years of significant international management, sales, marketing, consulting, strategy and business development. He joins Digital Route from Tele 2 where he was instrumental for the growth of the IoT business and Tele 2’s Digital Transformation Journey, prior to Tele 2 he was at Verizon where he drove the multi-billion Euro Northern European P&L, towards their enterprise clients.

Published Thursday, August 22, 2019 7:40 AM by David Marshall
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