After scrolling headlines in the New York Times, you head into the kitchen and open today’s Blue Apron box to prepare a shrimp risotto before turning on Netflix for an episode of Comedians in Cars Getting Coffee. You may not have noticed, but you’re now fully enmeshed in the subscription model. The subscription model is a booming field. In recent years, the market has grown by more than 100% a year, increasing from $57 million in sales in 2011 to $2.6 billion in 2016, according to one expert. Tien Tzuo, who earned his MBA from Stanford GSB in 1998, says the subscription model is the way of the future. In 2008,
after nearly a decade at Salesforce, Tzuo
founded Zuora, a soft ware company built to
aid organizations shifting to subscriptions.
In his recent book, Subscribed: Why the
Subscription Model Will Be Your Company’s
Future — and What to Do About It, Tzuo
aims to change how executives think about
their products and organizational structure
in the subscription economy.
“If you’re not shifting to this business
model now,” Tzuo writes, “chances are
that in a few years you might not have any
business left to shift.”
Here, Tzuo shares more about why it’s no
longer the era of the “unknown customer,”
what it means to transform a business to
a subscription model, and his current views
on the value of an MBA.
You write a lot about the need to change
our mindset. Why is this shift difficult?
Once you get in the habit of thinking this
way, it becomes easier. My colleagues
and I, often over dinner and wine, would
challenge each other to come up with
businesses that couldn’t be turned into
a subscription model. We tossed out ideas
like guitars, cement.
We realized it’s not about the physical
product, it’s about what the customer is
trying to do. And that inversion of thinking
is at the root of everything.
Using cement as an example, you realize
that flooring is the actual need. There’s
a whole revolution of industrial carpets
now. There’s a service contract, you simply
pay some monthly fee plus overages, usage,
etc. So you can actually subscribe to a floor.
Will Be a
Everything you purchase — from
transportation to entertainment to
groceries — will soon come with
a monthly plan, says Zuora CEO Tien Tzuo.
BY JENNY LUNA
Illustration by Derek Brahney
52 WORLD SPRING 2019 STANFORD BUSINESS
Tien Tzuo earned his MBA from
Stanford GSB in 1998.