PDF Summary:Subscribed, by Tien Tzuo

We are in the midst of a profound economic transformation, marked by a shift from products to services. In Subscribed, Tien Tzuo explains how subscription-based business models are reshaping the global economy and customer expectations. Companies must adapt by fostering a customer-centric culture, continuously innovating, and nurturing ongoing relationships with their subscriber base.

Tzuo argues that to thrive in this new landscape, organizations must dismantle product-centric thinking and adopt new financial frameworks focused on customer retention. He explores how diverse sectors—from retail and media to healthcare and education—are undergoing substantial changes as they embrace subscription models tailored to modern consumer preferences.

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Context

• This metric provides a clear picture of the revenue expected on an annual basis from subscriptions, offering insights into growth trends and financial health.
• Organizations may need to undergo cultural and structural changes to support a subscription model, including retraining staff and reorganizing teams to focus on customer success and retention.
• This measures the rate at which customers stop subscribing to a service. A high churn rate can indicate dissatisfaction or better alternatives, making it a critical metric for businesses to monitor and address.
• In subscription models, revenue is recognized over the life of the subscription rather than at the point of sale. This affects financial reporting and requires different accounting practices.
• An innovative economic framework allows businesses to be more agile and responsive to market changes, as it emphasizes ongoing adaptation and customer feedback rather than static product offerings.

The significance of persistently innovating and maintaining an ongoing state of development.

An economy that relies on consistent income streams must constantly evolve. Businesses should embrace a mindset of perpetual improvement and development, treating their offerings as works in progress that are never completed. Tzuo emphasizes the necessity of maintaining a continuous "beta" phase, where customer input is actively sought and used as a basis for ongoing refinement.

Companies must adopt an adaptable and forward-thinking approach when developing and offering their products and services.

Services operating on a subscription basis thrive by continuously improving and adding new features, as opposed to one-time product launches. Consequently, the author recommends adopting an adaptable approach that shortens the duration of development periods, accelerates the introduction of new functionalities, and continuously incorporates suggestions from users.

Netflix frequently skips the pilot stage when creating its exclusive shows. They utilize their comprehensive customer data to enhance their insight into the preferences and behaviors of their audience, surpassing the insights that traditional market research techniques like pilot episodes and focus groups are able to uncover. The elimination of this intermediary step empowers Netflix to commit quickly to full seasons and make adjustments as needed, based on viewer data.

Other Perspectives

• Rapidly changing products and services can lead to a lack of thorough testing, potentially increasing the risk of defects or security vulnerabilities.
• In certain industries or product categories, the market may not demand frequent updates, making continuous improvement an unnecessary expense.
• Shortened development periods might not allow for adequate testing or quality assurance, leading to products that may be buggy or have issues upon release.
• Accelerating feature rollout can strain resources, potentially leading to burnout among employees and a decrease in overall product quality.
• Some user suggestions may not be feasible due to technical constraints or may not align with the company's business goals or regulatory requirements.
• This approach could potentially alienate certain segments of the audience who might have been drawn in by a strong pilot episode.
• Customer data may be subject to privacy concerns and regulations, which can limit its use and the insights that can be derived from it.
• The use of comprehensive customer data does not guarantee success, as it may not capture the full spectrum of potential viewers, especially those not already within Netflix's user base.
• This approach might lead to a homogenization of content, as decisions are driven by data trends, potentially stifling creativity and innovation in programming.
• Viewer data may not always accurately reflect the quality or cultural significance of a show, as it often measures immediate engagement rather than long-term impact or critical reception.

Leveraging insights from customers to rapidly expand and vary the selection of products.

Companies utilizing a subscription-based approach gain valuable insights from their consistent customer engagement, enabling them to enhance and broaden their services. The author underscores the importance of creating a feedback loop where customer experiences inform improvements in offerings, thereby nurturing greater loyalty and satisfaction.

A firm located in the United Kingdom that specializes in curating snack boxes is a prime example of this strategy. When they initiated their operations in the US, they did so without allocating funds for conventional market analysis. Their decision-making was entirely informed by the feedback provided by their subscriber base. They enhanced their services rapidly by utilizing immediate knowledge gained from consumer preferences, demonstrating the power of continuous feedback.

Practical Tips

• Start a beta test group by inviting a small, diverse group of people from your personal network to try your product or service for free. In exchange, ask them to provide detailed feedback on their experience. This can be done through regular check-ins, feedback forms, or focus group discussions. The insights you gain from this group can be invaluable in understanding how your offering is perceived and what might need to be changed before a larger rollout.
• You can enhance your service by creating a simple feedback form on free platforms like Google Forms or SurveyMonkey and sharing it with your customers after every interaction. Explain that their input is crucial for improving your service and offer a small incentive, like a discount or entry into a prize draw, to encourage participation. This way, you'll gather real-time feedback that can be quickly analyzed and acted upon.

Businesses are progressively shifting towards subscription models that emphasize catering to the desires and requirements of their clientele.

The reach of subscription-based business models extends well beyond the realms of software and digital services, as demonstrated by the varied approaches of enterprises like Graze and Netflix. The transformational principles are being applied in various sectors, including Komatsu's 3D construction simulation and Fender's online guitar lessons.

The retail, media, transportation, and manufacturing sectors are all undergoing substantial transformations.

Industries that have historically concentrated on strategies centered around products are rapidly adopting models based on subscriptions. Tzuo underscores the need for conventional businesses to evolve by adopting subscription-based business frameworks.

Retail outlets are transforming by focusing on enhancing the overall customer shopping experience.

The decline of brick-and-mortar stores underscores the necessity for a change in strategy. Tzuo argues that the transformation of retail is dependent on creating personalized experiences that go beyond simple product exchanges. Retailers should enhance the in-store shopping experience by leveraging insights from interactions with customers and from analyzing digital data, ensuring uniformity and personalization across all touchpoints.

Retailers such as Warby Parker and Bonobos are actively adopting this strategy. They have revolutionized their physical environments, transitioning from mere points of purchase to dynamic hubs that emphasize exploration and tailored experiences. They have transformed the traditional approach by crafting an online experience that extends seamlessly into the physical environment.

Practical Tips

• Adopt the concept of personal customer service by becoming your own 'shopping assistant.' When you're out shopping, take detailed notes on your phone about products you love or dislike, sizes that fit you best, and your preferred brands. Use this information to streamline future shopping trips, making decisions quicker and more tailored to your tastes, much like a personal shopper would.
• You can explore subscription models for products typically sold in physical stores to adapt to the changing retail landscape. For example, if you're a fan of a particular type of coffee that's only sold in a local shop that's struggling, suggest to the owner to start a subscription service where customers can receive their favorite coffee at home regularly. This not only provides the business with a steady income stream but also caters to the convenience that online shopping offers.
• Create a digital scrapbook of your favorite purchases, including photos, why you chose them, and how they fit into your life. Share this scrapbook with friends or on social media to initiate conversations about meaningful consumerism. For instance, if you buy a new bike, document the process of selecting it, the bike rides you take, and how it enhances your lifestyle, encouraging others to think about their purchases as experiences rather than just transactions.
• Develop a habit of observing and noting down innovative interactions or digital integrations you encounter in stores. If a particular technology or staff interaction caught your attention, think about why it stood out to you. This awareness can guide you to seek out stores that provide these experiences or suggest them to your favorite retailers.
• Develop a feedback system for your online purchases by setting calendar reminders to review products after you've had enough time to evaluate them. This can help you make more informed decisions in the future and also provides valuable feedback to online retailers, contributing to the uniformity and personalization of their services.
• Use technology to enhance the physical aspects of your environment, like installing smart lighting systems that adjust to your activities or mood. This mirrors the innovative use of technology in physical spaces to create more personalized and engaging experiences.
• Experiment with augmented reality (AR) apps that allow you to visualize products in your home before buying them. Use these apps to see how furniture, decorations, or even clothing items would look on you or in your living space, providing a blended digital and physical shopping experience similar to what innovative retailers offer.

Companies within the media sector are shifting their focus to develop direct relationships with their audience, moving away from dependence on advertising revenue to create steady sources of income.

The media landscape is experiencing profound transformations. The writer highlights the growing difficulties faced by models supported by advertising, even though they remain pertinent. The decline of traditional revenue streams for digital publications is further exacerbated by the prevalence of ad-blocking software, in addition to the impact exerted by major platforms like Facebook and Google. Tzuo encourages media companies to embrace subscription models as a strategy to foster direct relationships with their audience and secure financial stability.

The New York Times serves as a compelling example, having skillfully transitioned to a business model that emphasizes consistent income via subscriber involvement. By focusing on exceptional journalism and customizing content to suit personal tastes, they have cultivated a loyal audience, which has broadened their revenue streams and diminished their reliance on advertising dollars. The newspaper has shown that by offering captivating material and enhancing online engagement to build direct relationships with its readership, it can grow and maintain lasting success in the ever-changing media landscape.

Practical Tips

• You can start a niche blog or vlog to share your insights and experiences on a specific topic you're passionate about. By consistently creating content that resonates with a particular audience, you'll establish a direct line of communication with them. For example, if you're an avid gardener, share your gardening tips, progress, and stories online to connect with fellow enthusiasts.
• Offer a paid membership area on your blog or website where members can access premium content, community features, or special services. If you run a tech review site, members could get early access to your reviews, exclusive webinars, or one-on-one tech support. This membership model can provide a consistent revenue source.
• Engage with interactive media content to experience firsthand the evolving nature of media. Look for opportunities to participate in live-streaming events, interactive webinars, or online communities that discuss current events. This active participation can give you a deeper insight into how media is becoming more participatory and the role of audience engagement in shaping content.
• Diversify your online content to include interactive elements like quizzes and polls that engage readers on a deeper level. By integrating these features, you can increase user interaction and time spent on your site, which can be attractive to advertisers looking for engaged audiences. For example, if you run a cooking blog, add a quiz to help readers determine what kind of meal they should cook based on their preferences and pantry items.
• Consider directly supporting content creators through subscription services or donations. If there's a blogger, YouTuber, or podcaster you enjoy, see if they have a Patreon or membership program. Contributing even a small amount monthly can help offset the loss of ad revenue due to ad blockers.
• Curate a monthly digital newsletter with content tailored to a specific audience, charging a small fee for access. Use tools like Substack or Mailchimp to manage subscriptions and distribute your newsletter. You could concentrate on local events and happenings for expats in your city, providing valuable information that's not easily found elsewhere.
• Develop a habit tracker to monitor and increase your engagement with activities that contribute to your personal growth. Use a simple spreadsheet or a mobile app like Habitica to track daily habits such as reading, exercising, or learning a new skill. Set reminders and review your progress weekly to stay motivated and involved in your personal development journey.
• Curate your newsfeed to reflect your interests and values by using social media platforms' customization features, such as following specific topics on Twitter or joining niche groups on Facebook. This mirrors the personalized content approach and ensures you're informed about the subjects you care about most.
• Develop and sell complementary products or services related to your content. If you're creating content about fitness, consider designing workout plans or nutrition guides for purchase. This not only provides additional value to your audience but also creates a new revenue stream that doesn't rely on advertising.
• Experiment with interactive storytelling by creating a serialized fiction or non-fiction narrative through email newsletters. Each installment could end with a cliffhanger or a question that prompts readers to reply with their thoughts, predictions, or decisions that might influence the next part of the story. This not only keeps readers engaged but also gives them a stake in the content you're creating.
• Offer a virtual coffee chat or Q&A session where you invite your audience to join you in a live video call to discuss topics of mutual interest. This creates a sense of community and gives your audience a chance to interact with you directly. You could do this monthly and choose different themes each time, like discussing a recent event in your field or answering questions about a project you're working on.

Businesses are transitioning their emphasis from selling tangible products to emphasizing service provision and ensuring their customers achieve favorable results.

Advancements in interconnected smart devices are propelling the transformation of the manufacturing industry. The author highlights that manufacturers have progressed beyond simply selling products. They can utilize insights gathered from networked sensors to develop unique services that monitor performance, improve functionality, and guarantee particular outcomes.

Caterpillar epitomizes this transition, historically focusing on the marketing of robust machinery. They have embraced the concept of a smart network of vehicles that are interconnected through IoT technology. This transformation allows them to offer outcome-based services like site surveys, data analysis, predictive maintenance, and optimized equipment utilization. Caterpillar transitioned from simply selling equipment to providing comprehensive solutions designed to meet the specific needs of its customers.

Other Perspectives

• The shift to service provision may not be suitable for all industries, particularly those where tangible products are the core of consumer demand.
• The narrative that smart devices are transformative could overshadow the potential negative impacts of such a transition, such as job displacement due to automation and the increased vulnerability to cyber threats.
• The effectiveness of services based on data insights is contingent on the quality and accuracy of the data collected, which may not always be reliable or comprehensive enough to form the basis of a service offering.
• While Caterpillar may have incorporated IoT technology to provide outcome-based services, this does not necessarily mean they have ceased selling machinery; the core business may still heavily rely on the sale of physical products.
• Offering advanced services requires a significant investment in technology and training, which could lead to increased costs for customers, potentially making Caterpillar's offerings less competitive compared to simpler, more traditional options.

Subscription-based models are becoming increasingly common across a variety of sectors, including healthcare, government, education, and finance.

Subscription models are driving a significant shift in numerous traditional industries, including retail, media, and technology.

Healthcare is evolving to offer patients more control by breaking down traditional service structures.

The digital revolution is propelling the healthcare industry forward by increasing patient independence, adaptability, and access to information. Tzuo emphasizes the shift toward a subscription-based economy, which allows for the customization of healthcare services into specific bundles designed to meet various needs, from wellness and preventive measures to personalized medication management.

New entities like One Medical are thriving by prioritizing customer satisfaction and accessibility, integrating healthcare services into a foundational subscription-based framework. Telemedicine enhances access to medical professionals, and wearable technology permits continuous health monitoring. Empowering patients takes precedence over navigating a bureaucratic system.

Context

• New models encourage collaboration among various healthcare professionals, such as doctors, nutritionists, and mental health specialists, to provide comprehensive care tailored to individual needs.
• Platforms and forums offer patients the opportunity to connect with others who have similar health conditions, providing support and shared experiences.
• Companies like One Medical and Forward Health are examples of healthcare providers using subscription models to offer primary care services, emphasizing convenience, accessibility, and patient-centered care.
• Bundling services can lead to cost savings for patients, as they pay a single fee for a package of services rather than separate fees for each service. This can also simplify billing and reduce administrative overhead.
• The company uses data analytics to improve patient outcomes, tracking health metrics to provide personalized recommendations and interventions.
• Successful telemedicine services require reliable internet access, secure communication platforms, and sometimes specialized equipment for remote monitoring or diagnostics.
• Advances in sensor technology and data analytics are continually improving the accuracy and functionality of wearables, expanding their potential applications in healthcare.
• By giving patients more control over their healthcare decisions, they are more likely to be engaged in their own health management. This can lead to better adherence to treatment plans and healthier lifestyle choices.

Governments are exploring digital platforms to enhance the experiences of citizens and to improve how they deliver services.

Tzuo argues that governments, by focusing on sustained service commitments, can achieve benefits akin to those experienced by commercial enterprises. This involves reimagining the delivery of services, emphasizing a "citizen journey" that leverages sophisticated techniques and data analytics to customize services to meet specific individual requirements and foster greater transparency and engagement while improving the effectiveness of operations.

Estonia, Rwanda, and Australia exemplify the significant changes underway in several nations. Subscription-based digital platforms and services are increasingly utilized to improve processes, expand access, and strengthen engagement between citizens and governmental bodies. Subscription-based models have demonstrated their ability to enhance the effectiveness and adaptability of public sector offerings, including electronic tax filing and the online distribution of driving permits.

Practical Tips

• You can provide feedback on digital government services you use to help improve their functionality. After using a digital service, look for a feedback option, which is often available on government websites or apps. Share your user experience, report bugs, or suggest features that would make the service more user-friendly. Your input can guide future updates and enhancements.
• Start a community initiative to create a 'service scorecard' for public services. This could involve gathering neighbors' and friends' experiences with different government departments and compiling the data to present to local officials, advocating for a focus on long-term satisfaction rather than one-off transactions.
• Improve your personal efficiency by learning from streamlined public services and apply similar principles to your household management. Create a centralized digital hub for your family where all members can access schedules, important documents, and communicate effectively. Use a shared cloud storage platform and a family organization app to keep everyone on the same page.
• Experiment with personal budgeting by adopting a subscription mindset for your regular public service usage. Track how often you use certain services, like libraries or parks, and calculate what a fair subscription fee might be for you. This personal audit can help you understand the value of consistent access versus pay-per-use and can serve as a practical example when advocating for such models in public services.

Educational institutions are exploring continuous learning models beyond the traditional degree program

The traditional educational framework, with its fixed degree courses, finds it challenging to match the rapidly evolving skill demands of the current employment landscape. Tzuo champions the transformation toward continuous educational frameworks that facilitate tailored learning experiences, flexible sign-up choices, and regular skill improvement through educational initiatives that operate on a model of recurring membership.

Platforms such as Kaplan and Udemy are prospering by meeting the increasing need for career advancement and skill improvement. An increasing number of people are now choosing to acquire specific skills through "micro-credentials" and online courses rather than following the traditional path of a four-year college education.

Other Perspectives

• Continuous learning models may not be as universally recognized or valued by employers as traditional degree programs, potentially affecting graduates' job prospects.
• The structure of traditional education provides a social learning environment that helps in developing soft skills such as communication, teamwork, and leadership, which are also highly valued in the workplace.
• Tailored learning experiences may not always align with standardized educational benchmarks, potentially leading to gaps in foundational knowledge.
• Continuous educational initiatives with recurring membership models may not be affordable for all learners, potentially creating a barrier to access.
• The thriving of these platforms does not necessarily equate to the effectiveness of the learning or the long-term career benefits for the learners.
• Employers in certain industries may still prefer or require a traditional college degree, viewing it as a more rigorous and reliable indicator of a candidate's abilities and knowledge base.