Diane Pierson, Founder and Chief Marketing Strategist of Innovate on Purpose and former Subscription Insider contributor, discusses what black swans are and the strategies subscription businesses can implement to respond to and see success in the midst of them.

Disease, disaster and downturn…three topics many subscription businesses aren’t keen to discuss, let alone create strategies around. But, as Diane Pierson, Founder and Chief Marketing Strategist of Innovate on Purpose and former Subscription Insider contributor, says, “There’s no time like the present to plan for these events.”

“This is not only a timely topic but a skillset — to be ready for black swans — that a lot of organizations don’t develop,” says Pierson.

While talking strictly about black swans can be a bit depressing, the good news is this article focuses on more than just the events themselves. Pierson also shares her insight on how subscription businesses can battle black swans…and win.

Defining black swans

The term “black swan” was coined by Nassim Nicholas Taleb in 2007. He wrote a five-book series titled “Incerto,” naming one of the books in the collection, “The Black Swan.” The book is about unpredictable events, and it spent 37 weeks on the New York Times Bestsellers list.

According to Taleb, there are three key elements to every black swan. First, all black swans are outliers. They’re not just singular events, they’re highly unusual. Second, because black swans are typically something humanity hasn’t seen before, they are often very extreme in their effects, their impact, and how humanity talks about them. Third, black swans are not predictable, even if they seem so in the aftermath. 

“You can probably all think about a few of these things that you’ve experienced because you’ve probably said to your family and friends, ‘Where were you when that happened?’”

Pierson has battled black swans since before 9/11. She’s fought these unexpected events as a product leader, product marketer and product manager in subscription businesses that were largely B2B. In the last six years, Pierson has spent a lot of time thinking about, analyzing and writing about battling black swans. This time and research led her to add a few more characteristics to black swans that can help subscription businesses better contextualize them.

First, black swans threaten subscription viability. Sometimes changing technology can be a black swan, as Nicholas Thompson, CEO of The Atlantic, pointed out in his keynote address at Subscription Show 2022. The advent of the internet was such an event for the publishing industry. As content moved online, $30 billion in advertising was lost, making the period from 2004 to 2015 a very tumultuous time for publishers.  

“Subscription businesses…you might be affected by a black swan differently than other people. So you might not have a corner on the black swans, but they impact you very differently,” says Pierson.

Second, black swans affect the viability of business operations. From individual businesses to industries to the global economy, these events require responses.

Third, though Taleb doesn’t count COVID as a black swan because he claims humanity should’ve seen it coming, Pierson views the pandemic as a black swan.

Copyright © 2023 Authority Media Network, LLC. All rights reserved. Reproduction without permission is prohibited.

Tools to battle a black swan

Given the above definitions of black swans, how are subscription business owners expected to fight and defeat them? Pierson says there are five key strategies.

“Any subscription business can implement these,” says Pierson. “I know some of you have small businesses. Some of you are just starting out. Some of you have very big, complex organizations where subscription is just a part of it. It doesn’t matter. At whatever level, you’ll be able to implement these things.”

1. Invest in market knowledge before a black swan arises.

When a black swan hits, business owners are flabbergasted. Because they’re big and extreme, these events minimize one’s ability to think clearly due to their shocking nature.

“That’s why it’s important to conduct market research,” says Pierson.

“I suspect most of you are doing some sort of feedback loop where you’re getting information. The [following] questions might be a little different than the ones you’re asking,” Pierson says. “These questions help you prepare for a black swan. This is the kind of information you’re going to want to have ready specifically if that black swan happens.”

Subscription business owners should always be able to provide answers to the following prompts:

• What are the alternatives to buying X offering through a subscription? Subscriptions provide ease and convenience, but many of those offerings are available elsewhere. Knowing a customer’s alternative will guide the business into knowing its own alternatives.

• Why do customers prefer a subscription? Understanding the answers to this question provides business owners with key insight into why their customers choose them over the alternatives available.

• What are the reasons customers buy from your business specifically? The answers to this question need to go beyond differentiation from competitors; business owners should seek to understand what draws customers to their brand.

• What would make them stop subscribing? Subscription business owners can prepare for the outcomes of a black swan if they understand the answers to this question.

• What are the strengths and risks in your supply chain? Each point in the inbound and outbound movements in the supply chain are potential areas of risk or strength for subscription businesses when a black swan hits.

This research may seem basic or akin to catastrophizing. But if subscription business owners can get a clear grasp on the answers to these questions, they will be well-poised to respond to a black swan when it hits.

“The best time to be ready to battle a black swan is going to be before it happens. And you can do that even if you don’t know what that is,” says Pierson.

2. It’s not the black swan, it’s the outcomes that you’re going to fight.

This is a crucial distinction, says Pierson. Since black swans are unpredictable, there’s no way to fight them directly. Instead, business owners should focus on fighting the outcomes. This requires a shift in perspective and the defining of several key terms.

Black Swan: unpredictable, extreme event

Outcome: the effects/impacts that occur as a result of the black swan

Opportunity: how businesses can innovate and respond to meet customers’ needs in the midst of their experience

“Think about the outcomes because that is what you’re really fighting. It wasn’t COVID for a lot of us. It was the direct issue of the outcomes it caused,” points out Pierson.

3. Maintain a monitoring team and escalation plan.

Once subscription business owners develop the required market knowledge and understand they are responding to outcomes, not the black swan, they need to develop a monitoring team and escalation plan. This positions them to respond quickly and effectively when a black swan hits. 

With this in mind, Pierson suggests the following workflow for creating a monitoring team and escalation plan.

I. Develop an awareness team.

“This means your entire team has to be aware and listen for disturbances and odd things that might be happening in the market,” says Pierson.

This team needs a central place to funnel that knowledge through, like Slack, Teams, email or phone.

II. Establish a black swan slayer team.

“That team is going to take a look at [the information from the awareness team] and think about the outcomes that could occur, perhaps even the opportunities you might have to do something about it,” says Pierson. “They’re going to make a decision: should we monitor this or escalate it?”

This team should be small and relatively senior, but not the owners or the leaders of the business. This is a stage-gate group. It’s their job to sieve the information that won’t support the leaders in making decisions. The members of this team must be engaged and enlivened by their work. And, most crucially, being part of the black slayer team must be part of their job requirements. Everyone on the team should know they’re on that team and should work together.

III. Alert leadership

If the indications of a black swan are present, then the black swan slayer team needs to alert leadership.

“These are the people who can make big decisions. They’re going to make announcements and are the face of the company. They’re also the ones that can move the money and teams around, so that team has to be able to release funds, rearrange teams and talk to the world,” says Pierson.

This team (or individual) will respond to the black swan and create a road map for navigating the outcomes of that event for the company. 

IV. Test in the market.

“Whatever team gets put together to do this, it’s now a series of outcomes and opportunities that we’re testing in the market,” says Pierson. “We’re actually doing a rapid cycle of experimentation in the market based on what you know about your market and what opportunities you see for your business.”

Doing this in the midst of a black swan? It’s tougher than it sounds. Pierson recommends several tactics for doing so in an empathetic way: 

• Test recovery options before a full rollout. Define an outcome and then test to see what happens.

• Update reason codes for cancellation. Chances are the reason codes in place aren’t the reasons needed for the black swan. This is a prosaic and inexpensive way to get insight from customers.

• Get expert insight. When a black swan hits, there are many organizations and groups that can provide insight that can be translated to a customer base.

• Share the insights gathered. This adds value for customers and can leave a lasting impression.

• Lend a helping hand, then observe and report. It’s not only a nice thing to do or the right thing to do, but it’s the best way to get information about the people being helped. This helps to not only create goodwill with the existing market but allows businesses to find out what’s happening with them.

Copyright © 2023 Authority Media Network, LLC. All rights reserved. Reproduction without permission is prohibited.

4. Perform retrospectives.

Once the black swan arrives and business owners have responded, it’s time to begin a retrospective of the initiatives in place.

“These short, quick retrospectives help you gather the knowledge you can use. And gathering the knowledge you can use will result in something like an after-action review,” says Pierson.

First, business owners should assess the tactical black swan responses in the organization. How were they received by customers? How were they received internally? Then they should assess the intended outcomes versus the actual outcomes. How do they compare, and how much overlap occurred?

In the course of doing this, an after-action retrospective (AAR) is created. This AAR should be designed for the team, by the team. It should happen in a format that makes sense for all of the stakeholders. And it’s important that the focus of the retrospective is on improvement, not blaming.

“This is only as good as you’re prepared to use it,” points out Pierson. “It’s great to have an emergency readiness team, and it’s great to do retrospectives. But you’ve got to use it, which means you have to have a culture that’s anti-fragile.”

5. Create an “antifragile” culture.

Antifragile? Sure, companies have heard about fragile, strong and even resilient cultures. But antifragile takes it a step further. According to Taleb, cultures that are antifragile not only accept the unknown and rise to the challenge, but they do it in radical ways.

“They’re willing to shut down entire products, entire offices and do business differently,” states Pierson.

Fragile companies have weaknesses they ignore. These weaknesses and/or resistance to change make them unable to maintain their market position. Resilient companies are willing to respond to a black swan but don’t do anything radical in the process. They have a certain level of strength and adaptability that allows them to survive. Antifragile companies, however, not only eliminate weaknesses and respond to black swans, but they work hard to make changes that will allow them to effectively meet the needs of the situation and their market.

Antifragility is a mindset, one that prizes innovation, creativity and radical change in the name of staying current and providing value. Pierson offers several tips for businesses to become antifragile:

• Prioritize capacity of efficiency: Look at outcomes and opportunities before layoffs. Though this seems counterintuitive, it provides a certain level of reliability that can make a huge difference during black swans.

• Focus but diversify: It’s important to be clear about the goals of the organization and the offerings available to customers. But companies that fail to diversify eventually fail.

• Enable human adaptability: Empower employees. Hire people that aren’t at work to mess around, but rather are people who are brave and bold and who encourage others to be the same.

Nobody knows what’s coming next

It’s true that the average business owner cannot see the future. This includes Pierson. But she does offer several predictions for subscription businesses as they move into the rest of 2023.

First, she believes the state of the world isn’t going to become happier any time soon.

“Things are going to be nuts for a while and in different ways. All of the ways we know of now and a bunch of new ones,” she says.

In light of this, she encourages business owners to think about subscription distribution channels, specifically, spaces that might not be top of mind for owners right now, like how products are purchased in the B2B world.

“If you’ve got a big sales team that’s really good at selling or relationship management, I think you’re going to have to shift a lot of that online. Start looking at selling and realizing you have to enable the way people want to buy. Don’t resist it,” says Pierson.

Second, she encourages businesses to find ways to rundle or bundle their offerings.

“You’re going to probably have to do this with some competitor products. Think about this. Don’t shy away from new and different ways to sell your product. It’s going to be hard enough in the future,” she points out.

Third, Pierson firmly believes that only antifragile companies are going to survive.

“You’re going to have to create this culture. It’s going to be tough to be a business out there,” she states. 

While all of this sounds a bit gloomy, there is a silver lining. Subscription businesses are well-positioned to experiment in the market.

“This is a nice bite-sized revenue model. It eliminates a lot of risk for people. They feel safe trying it. They know that they can stop if they want to, but once you’ve got them, you can build this relationship and make it so it’s something they never want to leave,” points out Pierson.

Now is the moment that subscription businesses should start developing the antifragile culture they need to survive another black swan. As the world comes out of one black swan (COVID), and into others, it’s important for business owners to plan to the best of their ability. It’s not foolproof, but it will allow businesses to adapt and better respond when catastrophe strikes. Through the tips and strategies that Pierson offered, they can set themselves up to not only survive but see success in the midst of another unbelievable event.

Summary

• Black swans are outlying, extreme and unpredictable events. They threaten the viability of subscriptions and business operations.

• The tools to battle a black swan include:
  • Invest in market knowledge before a black swan arises
    • What are the alternatives to buying X offering through a subscription?
    • Why do customers prefer a subscription?
    • What’re the reasons customers buy from your business specifically?
    • What would make them stop subscribing?
    • What’re the strengths and risks in your supply chain?

• It’s not the black swan, it is the outcomes that you’re going to fight.
  • Black Swan: unpredictable, extreme event
  • Outcome: the effects/impacts that happen as a result of the black swan
  • Opportunity: how businesses can innovate and respond to meet customers’ needs in the midst of their experience the outcomes

• Maintain a monitoring team & escalation plan
  • Develop an awareness team
  • Establish a black swan slayer team
  • Alert leadership
  • Test in the market
    • Test recovery options before a full rollout
    • Update reason codes for cancellation
    • Get expert insight
    • Share the insights gathered
    • Lend a helping hand; then observe and report

• Perform retrospectives
  • Create an “antifragile” culture
    • Prioritize capacity of efficiency
    • Focus but diversify
    • Enable human adaptability

• Predictions for the coming years include:
  • The state of the world isn’t going to improve any time soon.
  • Rundling or bundling offers is going to become crucial.
  • Only antifragile companies will survive.
  • Subscription businesses are well-positioned to start experimenting with changes that will prepare them for future black swans.

Copyright © 2023 Authority Media Network, LLC. All rights reserved. Reproduction without permission is prohibited.