According to management experts, there are 12 recognised renewal strategies that will create a growing and profitable future for a company. However, these are not one-size-fits strategies. Therefore, if you are using those strategies, you have to tailor each one to fit the needs of your company.
In the coming weeks we will review these 12 strategies.
All businesses have certain characteristics in common. They have customers who purchase their goods and services to satisfy their needs. And, they have assets (both hard and soft) to be utilized to create the customer needs.
Sometimes the customer needs are long-lived. For e.g., cooks need cooking oil. That won’t change. On the other hand, only a decade ago, people could have a decent living selling and repairing video cassette recorders. Today, VCRs have been supplanted by digital recording devices. The moral is: customers’ needs evolve, and if you don’t match them, your formerly attractive offerings become obsolete.
A company’s hard assets are easy to see. But its soft assets are much more difficult to visualize. A company’s soft assets are found in the interaction among the design engineers, manufacturing personnel, equipment, suppliers and so on. The soft assets reside in the skills, knowledge, attitude and culture of the people in the organisation.
For clarity’s sake, we’ve divided the 12 strategies into four groups of three strategies each. The four groups are:
1. New concept (Catch the new wave; put old wine in new bottles; revise your profit model).
2. Extension (Aim higher or lower; make a time shift; get a personality transplant).
3. Solutions (Build share of wallet; shift to the sweet spot; leverage your core competencies).
4. Transformation (Declare victory and move on; keep the knowledge, switch the business; cash out and double down).
Let’s examine each group in detail.
Catch the new wave
Suppose you are an importer and a seller of magazines and journals. You wish to transform your business into a subscription business. That means converting your traditional selling business into an organisation handling only mail order, which includes books, music discs, newspapers, magazines and academic journals. This major change requires a huge shift from product focus to customer focus, with a commitment to providing real customer solutions. So how can you transform the very DNA of your company? We will discuss the six core steps to building out a successful subscription business from an existing business.
1. Assess your current business model
But, to transform your business, you first need to take a 360-degree look at your current model, operations and culture and ask yourself some pointed questions. Where are you winning? Where are you struggling? How is your business model working for you and for your customers? Is it sustainable?
Perhaps the core key questions are: What are you really providing? How are you offering value? What are your customers paying for?
Note that what your customers are paying you for may not be the same thing as what you think you’re providing!
2. Look at your customers
If you don’t have customer insight, you don’t have real relationships with your customers. If you don’t know your customers, how can you differentiate yourself from your competition (and highlight your better solution)? How can you retain your customers? And how can you possibly sell (and upsell) to customers you don’t really know?
3. Identify your ‘way in’ towards building a subscription business
For a company to successfully shift to a subscription business model, there has to be a compelling value proposition for customers: what is the event that will encourage customers to subscribe, rather than be one-off consumers? How can you provide greater value in the form of a subscription?
4. Pull - don’t push - customers towards your subscription business
This is the golden nugget here: To make the transition from a product company into a digital solutions and services company, everything needs to grow out of the customer – selling, innovation, service management, everything! It’s an organisational transformation. You cannot push a customer to accept your new business. You have to fully understand the customer’s workflow and address their problems – that’s how you invite old and new customers and get them to stay.
5. Overcome challenges to transformation
Of course there going to be challenges to spinning off in a new direction. You can’t just layer a subscription on top of an existing business. Building a subscription business requires changes to your entire business process. And, as we know, people don’t generally like change.
When you’re thinking about how to build a subscription business, you need to be aware of these potential challenges and be ready to protect your new approach. Some of the biggest obstacles to creating a subscription culture include:
Finance – The finance function is there to optimize the existing business and to maximize a profit from the existing resources. It’s not there to take risks. And it’s not tasked with understanding what could be a new business model in the future. To deal with finance, you have to be very number-driven, clearly demonstrating the recurring revenue that a subscription business will yield. Sales and marketing – You’ll need to forget about marketing and selling around channel or product. Your sales and marketing teams are going to have to reorganise themselves around the customer workflow instead. This is definitely a shift within your organisation, but it has to be done, whether you like or not.
Service development – Service development also has to be organised around customer workflow and needs, in a real way. You need to seek out customer input and really listen to what they’re saying about their process. Don’t start with your product; start with customer needs and pain points.
Experts – In some businesses, you’ll have to deal with the objections of experts, like editors in publishing or software engineers. In general, experts are not the ones who drive change. They don’t want to hear that there is a new process and they have a new boss. You need to get these experts on board by explaining that there will still be an ongoing need for their kind of insight.
Back office IT – Back office logistics can create a significant hurdle between your past business model and your future subscription business model. Pricing, billing, collections – all of these operations are more complex relative to a subscription model.
Organisation – You may need to establish new rules for your subscription business or separate out the new venture into a different division, in order for it to thrive.
6. Use customer data to optimize and upsell
Watch and learn from your customers. How are they using your service? How can you help them to use it better and increase their productivity? Observe what your customers are doing on your site and from what channels they are accessing you.
Track your customers, step by step, from the first moment they log into your ecosystem. When you’re completely focused on the customer experience journey, you know what keeps them awake. Help your customers to engage with your product, to test out your offering. When you track usage, you can collect data that will help you to identify new business opportunities to continually accelerate your growth. And you can create exit barriers to ensure that your customers stick around.
In the end, your best customers are your heavy users – those customers whose businesses are growing with ours and who are dependent on you for that growth.
(Lionel Wijesiri is a retired corporate director counting three decades of senior management experience. He is now an independent consultant and a freelance journalist. He may be contacted on firstname.lastname@example.org)