How do you rapidly grow ARR subscription revenue? For high-volume and complex subscription companies, it’s critical to identify growth levers that will build your business. From there, you need to get your plan operational so that it can grow your company as the economy becomes increasingly uncertain (and capital becomes more precious).
Learn how to operationalize your strategy to get from $0 to $1B in ARR/Subscription revenue. MGI Research’s Managing Director, Igor Stenmark and BluLogix’s Chief Customer Officer, Tim Cook will walk through how to identify potential business growth paths for high-volume subscription businesses. We’ll help you “start with the end in mind” to guide your company toward prioritizing requirements and effort around measurable success, including:
- Why revenue growth is more critical than ever right now
- Identifying your growth levers
- Building your growth plan
- Operationalizing your growth plan
- Measuring for success
When you’re done, you’ll have the tools in hand to operationalize your revenue strategy for 2022 impact, and 2023 scale.
Presentation Slides (PDF)
About Our Experts
Igor Stenmark, Co-Founder, Managing Partner, MGI Research
Igor Stenmark is a co-founder and managing partner of MGI Research. Igor brings his 30+ years of experience in entrepreneurial, strategic advisory, investment management, and executive roles in the technology industry to his clients. He serves as a strategic adviser to technology buyers, investors, boards, and management helping them make more informed decisions, enter new markets, optimize positioning, and build lasting value.
Tim Cook, Chief Customer Officer, BluLogix
As Chief Customer Officer of BluLogix, Tim Cook is responsible for spearheading customer successas well as developing and executing the company’s software-as-a-service sales and go-to-market strategies. As a co-founder of BluLogix, Cook serves as an evangelist on the shift to subscription-based billing models from the complex billing structures of yesterday. His extensive telecommunications experience, collaborative leadership style, and operational expertise have been key to influencing companies to embrace the cloud economy.
Kathy: Well, hello everybody. My name is Kathy Greenler Sexton from Subscription Insider. If you are here to learn about five key growth areas for high-volume complex subscriptions, you are in the right place. How do you rapidly grow subscription revenue? Well, for high-volume complex subscription companies, it’s critical to identify growth levers that are going to build your business. From there, you need to get your operational plan going so you can grow your company even as the economy becomes increasingly uncertain and capital becomes more precious.
That’s why I am thrilled today to have two leading experts in this MGI Research’s managing director Igor Stenmark and BluLogix chief customer officer Tim Cook. They will both walk us through how to identify potential business growth paths for high-volume subscription businesses and then how to operationalize them. So welcome Igor and Tim.
Tim: Thank you.
Igor: Thanks Kathy. Thanks for having us.
Kathy: Of course. Welcome to everybody here on the webinar. If you have any questions, please use your chat or the Q and A button at the bottom of the Zoom window to ask your questions. We are monitoring those questions and we will get to them. Even if we can’t get to them by the end of this session, we will answer your question after this webinar. So please do not be shy and ask those questions as we go along.
So a quick thing about Subscription Insider, we are a subscription media company focused on supporting subscription executives like yourself with information to help you run and operate your businesses more profitably. Today’s webinar is an example of one of the many, many things that we do. As a heads up, we have a few things coming up to put on your calendar. Please go to subscriptioninsider.com/events. We have two round tables next week, one focused on strategies for accelerating growth and the other one on fraud and charge back intelligence.
Our next webinar is going to be October 20th and that webinar is focused on why you need to engage your subscribers in banking apps. That’s going to be a very interesting session and I encourage you to put that and register for that as well.
Now, the last thing I’d like to talk to you all about before we get going is Subscription Show 2022. I am hosting that November 9 and 10 in New York and we’ll also be streaming it. We have deep sessions on payments, retention, strategic issues and more that are going to help you prepare the future of your business through many keynotes and networking sessions, as well as a number of breakout sessions, 40 plus sessions for you. So I’d encourage you to go to subscriptionshow.com to learn more.
So with that, I’m going to stop sharing because we each are using our own decks today. While Igor is getting his slides up, I’d like to take this opportunity to tell you a little bit more about Igor and Tim. Igor is the co-founder and managing partner of MGI Research with 30 years plus experience in entrepreneurial, strategic advisory, investment management and executive roles in the technology industry to his clients. He serves as a strategic advisor to technology buyers, investors, boards and management teams, helping them make more informed decisions, enter new markets and optimize positioning and build lasting value.
Tim Cook is the co-founder and chief customer officer of BluLogix. As chief customer officer, Tim is responsible for spearheading BluLogix’s customers success, and as co-founder BluLogix, Tim serves as an evangelist in the shift to subscription based billing models away from complex systems and structures of yesterday. So welcome Tim and Igor. Igor, take it away.
Igor: Thanks Kathy. Thanks for having us here again. Good morning, good afternoon to those of you joining us from various parts of the world. My name is Igor Stenmark. I’m a research analyst with MGI Research. We’re going to talk about growing a business in the context of complexity. So running a business is complex, growing a business is much more complex. Growing a complex business, that’s kind of a horse of a different color and requires quite a bit of thought before you embark on something like that. Sometimes we want to say don’t try this at home, get professional help.
So we’ll spend a few moments, I’m going to share with you a few ideas and concepts that we have developed with MGI Research for how you can both contain complexity, identify complexity and manage complexity as a risk factor in pursuing your growth plans.
First, a very brief introduction to those of you who may not be familiar with MGI Research. We’re independent industry analyst firm. We focus on enterprise business software and we have a particular focus in the area we call monetization, which covers anything and everything that touches the financial transaction. We serve three primary constituencies. We work with technology buyers, helping them make hopefully better decisions faster, cheaper, less risk. We work with technology suppliers, providing advice to them in how to grow their businesses.
We also work with institutional technology investors. In the course of any single year, we talk to hundreds if not thousands of different companies and we have a product line that is noted for being very structured and very quantitative in its approach.
So let’s just quickly get an overview of what are important topics to focus on if you’re thinking about growing a business in a complex environment. So what is complexity, especially when it applies to monetization and billing specifically, and why does it matter? Where does it come from? Whatever sources of that? Why does it arise? Is it a threat or an opportunity? How do you practically deal with complexity? Complexity is a fact of life, and if you are embarking on a growth plan, you better learn how to manage that.
So let’s talk about some definitional items. First and foremost, what is complexity and how does it evolve? So it’s not uncommon for us to hear both our clients and people in the industry talk about complexity as really this massive collection of different dimensions, different vectors of complexity and change, such as if you start with something simple, you can add up more aspects and more attributes to a complex system, and all of a sudden just the collection itself makes things very complicated.
It’s one thing to sell things in one currency, in one price, in one… Sorry. Let’s go forward here. So one product, one price, one currency, pretty simple, one channel. Maybe you’re running a simple box of the month, great. Now, suddenly you introduce multiple price plans, things get a little bit more complex, multiple channels. You have maybe a partner who is selling on your behalf and they want to use your billing system to affect the transaction.
When you begin to sell in multiple countries and in multiple currencies and where a lot of new issues would come to the table. When you have multiple products and you multiply the previous complexity by two or three or whatever number of packages you have. When you introduce in multiple product bundles, maybe physical and digital goods together. Maybe you’re selling a piece of hardware, maybe a consumer device which has some software and has some services attached to it. So you can see how just this collection of different things can make things more complex.
But in reality, complexity is really when you combine those different things and all of a sudden your total system begins to behave in ways that cannot be predicted just by superimposing all these different things together. Now, if you take a linear sum, arithmetic sum of all the components, it doesn’t account for all the complexity that you deal with. As a result, what we see often is in complex environments and complex businesses, whether you are in physical business, in digital business, complexity in billing, complexity specifically can increase almost geometrically.
Many companies are just not prepared for that. So it is a fact of life, it’s going to happen. The difference between those that are going to succeed in this endeavor and those that are going to stay average is going to be how prepared you are and how realistic you are about expectations. I’ll give you another simple example.
So seller and buyer, life is wonderful. Seller sells goods and services, buyer provides payment. Very easy. When you have to add a quote to that process, buyer says, “Well, give me a quote. I want to see a detailed, line by line of what we’re going to get and I want to get it run through approval cycle.” Then eventually, seller issues an order. Order is essentially an orchestration list of making things happen, how to provision certain goods and services, physical or digital.
An invoice gets issued. Customer says, “I don’t understand your invoice. I’m not going to pay it until I understand it. Explain it to me.” There’s a contract which defines kind of a rules of a road, the behavior above buyer and seller, how pricing will evolve and change over time. There at is a subscription, which is an ongoing relationship, it’s not just a fixed 9.95 per month. Then where are services that need to be delivered on top of whatever goods are provided to implement and that makes the entire process much more complex, because all of a sudden you have to, as a seller, you have to invoice based on completion of services delivered and certain things don’t become revenue until such things happen.
Add to that, that the buyer may not be just a single unit organization, but maybe we have multiple divisions and they’re all buying from you. You as a seller may have multiple divisions as well. I mean, it’s not uncommon to see even a medium size company with 40, 50 different organizational units. If you get into large Fortune 500 or Fortune 100 companies, you’re talking about thousands of divisions with maybe 40 or 50 of them big enough to be a Fortune 500 company themselves.
So you can see how complexity can mushroom very quickly and it is something that we always recommend to companies keep your eye out for that because if you don’t pay attention to that, when you start asking questions, why things don’t work or why you have so much friction or why you have revenue leakage in your system, this is partially the answer why.
Where does complexity come from? I think I kind of already set the stage for that, but it can come from variety of sources. Don’t need to take you for every one of those things here, what look like a vision test, but it can be product complexity, it can be payment complexity. If you have B2B or B2C, there’s a big difference in that, how you sell, what your sales motion? What is the regulatory regime? Do you have to collect taxes? At the point where you sell or at the point where something may be installed or used? How does that change over time? How complex is a seller? What kind of reporting and invoicing requirements they have?
So there’s a lot of different ways, and I think it’s important to have a map and a view, kind of a radar, to look out for complexity before it hits you. Be prepared. On top of that, there’s a little thing called change. So everything is wonderful once you identify everything, as Mike Tyson used to say, “Everybody has a strategy until we get punched in the face.” Change is something which will happen. As change accelerate, especially if you are in a highly competitive business where change is constant, you need to be kind of cognizant of the fact that some of this aspects of the complexity landscape will evolve and you have to react to that.
So change comes from things like acquisitions. You buy a new company, new product, you introduce your product, you have organizational change inside. Or even as simple as somebody saying, “Well, you are now a Series C venture backed company, we want do a financial audit on everything.” Be ready for that. How do you do that? How do you sort of provide the auditors with the details down to line items and copies of invoices and proof of fund actually hitting your bank.
So is complexity always a risk, a threat or is it sometimes an opportunity? Well, both. It’s clearly a source of friction. It’s clearly something that can either slow you down, make things more expensive or even torpedo your plan. But it can also, if you are good at managing complexity, that is a huge opportunity, because not everybody’s going to be able to do that. If they’re not able to do it, but you can, that can set your company apart from the average. If you are able to give the customer what they want in terms of frictionless invoicing, lots of detail, real transparency to build trust with the customer, that’s a real advantage. Being able to react quickly to changes in the market, that’s a real competitive leg up.
How do you deal with complexity? Well, rule number one, simplify. You may not be able to get rid of complexity, but what you can do is to try to take complexity down into its component parts and really figure out how you can define very atomic kind of structures to capture to abstract complex concepts like what’s in your product catalog, how is it organized, what are the pricing and rating models, what are the payment models, before you combine them into this larger offer type documents and object.
So in practical terms, in our research practice, we deal with this complexity item pretty much every day. When a company of any size, medium or large, calls us up and says, “We need help selecting monetization platform or defining our strategy,” one of the first questions we ask them is, “How much volume are you putting through your system? How complex are your revenue contracts, your revenue economic relationships with your clients?” Based on where we are in that universe, we can sort of position and kind of try to match them up with possible solutions that meet their requirements. Anyway, that’s our story. I’m sticking to it and I’m happy to pass it back to you Kathy and Tim.
Kathy: Thank you, Igor. Feature creep is always something along with change when you’re implementing complex systems and teams. So very, very informative. So Tim, why don’t you take it away on operationalizing a number of this.
Tim: Sure. Thanks, Kathy. Thank you, Igor, that was great as always. I’m going to be talking about the five key growth levers. So the opportunity side of that complexity. If you can tackle some of these things and at least plan for them, that could be a real competitive advantage, as other competitors in the market may be challenged with these things and it might be holding them back from a growth perspective.
So the first one is adding sales channels. So really, partners are, especially as things change, partners can be very valuable and really critical for high complex subscriptions. While software manufacturers are really good at building flexible, agile software, or manufacturers in general are good at building product, they don’t necessarily have domain expertise in multiple verticals. Oftentimes, products and services are created for a single vertical. So managing a network of partners becomes difficult without automation.
Keeping track of where a transaction is initiated, what partner is associated with that transaction requires some level of partner hierarchy and partner enablement to ensure visibility throughout the hierarchy of partners. There’s multiple different types of partners. You may have reseller partners that are buying by the truck and selling by the box and those are very complex partners to manage because, especially in a subscription space, the manufacturer is responsible for fulfilling the order to the consumer, but the reseller may be collecting the revenue.
So how do you sort that out? We say white label partners where the manufacturer might be generating an invoice, but it has the partner’s logo on there, manufacturer’s still the payable so you don’t have to sort out where the revenue goes. The agent is probably another model that’s very common where really once the sale is made, the agent is out of the transaction altogether. These are more commission type models, both white label and the agent.
But in addition to enabling a partner channel, there’s also direct sales which has changed dramatically over the last decade. Direct sales today needs to be able to dynamically generate a quote within minutes, and then have the customer be able to log into a portal and view and accept that quote in realtime or near realtime. Then on the customer side, customers really need to be able to self-manage their subscriptions, especially maybe not for the initial even purchase, but for things like just adding more users.
In the B2B space, this is most common, or just upgrading a plan or suspending users that have left the business. That really needs to happen 24 by seven. Customers today don’t necessarily want to have to engage with a customer service representative to get these kind of administrative tasks taken care of, but it’s important that they’re captured accurately because there’s revenue associated with all of these types of transactions.
So onto the second growth lever. The second lever is really adoption of a global strategy early on. It goes without saying that support for multicurrency, multilingual is important from day one. As the market evolves, it evolves very quickly and you really don’t know where your next opportunity might be and you want to be prepared to capitalize on that.
So we’re seeing some very interesting reporting scenarios for countries with central tax authorities that you really need to be prepared for. That’s somewhat of a nuance. Also, around the compliance piece, that is an important consideration as well as GDPR. So really being prepared for those aspects. Additionally, larger companies have multiple business entities with separate finance, GL and reporting structures. So you really need to be able to plan for how the revenue is going to come into the organization and be able to support a global corporate hierarchy in order to be able to scale subscriptions globally.
Onto the third key growth lever here, plan a standardized roadmap. Standardized I want to emphasize because really creating a standardized roadmap requires the ability to create the product one time and isolate the product variable with a product catalog and create price variables with price plans. So separating your product catalog and your price plans is really important to scale. We often see customers create sometimes hundreds of variations of the same product to support billing variables like billing frequency, billing currency, discount schemes, multiyear.
So to avoid this, develop a detailed product roadmap ahead of time, separate your product catalog from your pricing plans and think about how to grow your products from five to 10 customers to 100, sequence solutions for a rollout ahead of time. Also, in standardizing around price plans, instead of having to create… As customers demand discounting, try to work around some predefined discount schemes or discount options. That way, if you change your pricing at the price plan level, the discounts flow through, versus changing the prices at the order level for every single customer, which still is important to be able to support. But it’s always easier if you can standardize your pricing around price plans and discount schemes that are predefined.
So onto number four. So one of the keys acquisition that we’ve seen is really integrating the acquired company or acquired product line into your current tech stack. We see four primary opportunities for integration. The first one is quoting. So often, solutions like CRM are used to support quoting functions for sales teams. This makes a lot of sense as quotes relate to opportunities and forecasting opportunities is key function for sales leaders. But it does create a problem in that when it comes to order management, as often the quote catalog and the order or product catalog are separate.
So if you have one system for CPQ and another system for billing and both have separate catalogs, how do you sort out being able to take that quote and convert it to an order and maintain some integrity between the quote and the order? You do that really by kind of defining where you want to have your product catalog’s single source of truth, and then using APIs or SDKs to synchronize that source of truth across multiple platforms.
So the other opportunity for integration is around ERP. So quoting ERP is the second one. Most companies we work with already have a billing platform. It’s called an ERP. That handles traditional one time transactions very well. However, if you think about what ERPs do well, it’s supporting processes around standard gap principles. While there are gap components to subscription billing, the process for automating the “cash for subscriptions” is different than the standard one time “sales order, purchase order, fulfillment payment” that we’re also used to in traditional transactions.
That’s really what ERPs were built to manage. So with this in mind, it’s important to be able to exchange transaction data between a billing platform and your ERP at the general ledger level as well as revenue data to exchange revenue data for revenue recognition purposes, as subscriptions are difficult, especially if they’re seasonal, to manage outside of a billing platform for rev rec.
The other opportunity for integration is with charging data, often we encounter companies that employ a team of resources to capture data through the quote to cash process to get invoices generated by the end of the billing period. So all of this is manual entry and these manual processes then generate activity for a whole another team that must address the credits and adjustments due to the billing errors inherent in the manual data entry. So this really kind of creates a cyclical problem that just never goes away.
We recommend having the ability to consume external charging data using a mediation engine that can capture data for multiple sources and normalize that data for charging. So integrating data sources through file exchange or API really is necessary for scalability and having a centralized mediation engine that can take data from your acquisitions of companies or product lines is a real important part of integrating these businesses into your existing business processes.
So the other opportunity here is with customer portals. So oftentimes as organizations mature through the monetization maturity model, their customers and partners demand more transparency in the transactions and self care for purchasing products and upgrades. Sometimes, companies start off with portals that provide relevant data about products and services, or maybe a portal already exists for ticketing our customer support. Integrating into an existing customer portal or having the flexibility to start with a payment portal that can be enhanced with other customer management functions is another important opportunity for scale and growth and another requirement for it to be considered when acquiring a new company or product line.
Okay. So onto the key number five here, avoiding market disruption by being agile. So we know that as the economy fluctuates one way or the other, what tends to be the trend and continues to be the trend is that B2B capital expenditures continue to get hit hard. So the CapEx expenditures are going down. Offering products and services based on consumption really allows companies to spread out their expenditures and better align with resource requirements as they scale up or down. So consumption and usage type pricing and billing, yeah, that’s going to be critical to navigate through some of these economic turmoils as companies are looking for more flexible options.
The cost of acquiring customers is continually increasing. We’re seeing some really interesting new growth strategies that reduce that. So especially around the concept of product led growth, where customers choose to consume a product in realtime based on how the product is used. This ultimately lowers the cost of sale. So it may be that they start off with a core product and you open that product up for them to use as they choose to and then you charge them based on use. This really does drive down really any interaction that a customer might need to be able to use more of your products and services and ultimately pay more.
Competitive pressure, so the ability to react quickly to pricing and packaging changes by competitors. Massive increases in demand, so scaling without adding additional human resources. Compliance, where we are today may not be where we are tomorrow. The dynamic nature of subscriptions, buyers are always looking for a way to better align consumption with their business needs and cashflow. So being prepared for these is always important, but more important in the near term.
So operationalizing your growth plan. Really understanding where you are, taking a self-assessment as to where you are in your own monetization maturity and really how to evolve to the next level versus taking too much too quickly. Everybody tends to look at where they ultimately want to be and really don’t realize the steps that it took to get there. We really recommend looking at, we have a monetization maturity model that we use, identifying where you are within the path of your maturity and just kind of what are the next steps, instead of trying to push things too fast.
Define a clear business case with pre-established stakeholders. The subscription process is very disruptive to legacy business processes. It’s really important to have broad buy-in and ownership, and that probably is one of the key things that we see that actually creates problems. The technology’s there and it works and its great, but it’s usually the business processes and the stakeholders and change management that is the hard part of this and ultimately the most challenging.
So agility is critical. You need it without compromising your way. For enterprise companies or firms launching as a service or subscription from an existing product portfolio, complexity’s a given. Plan for growth. Subscription is growing as markets demand it. Assume you’re going to grow that part of your business either at market rate or hopefully substantially more. Ensure that the systems you select can grow with you. These are just some recommendations, some high level recommendations.
Finally, just a little bit about BluLogix. We have a platform called BluIQ. It’s a SaaS subscription management and billing platform purpose built for B2B enterprises who are looking to take advantage of today’s subscription revolution. Automating complex recurring billing subscription management quote to cash and revenue analytics. BluIQ enables companies to quickly scale, unlock new revenue opportunities and monetize new innovations quickly across any combination of subscription as a service or consumption based business models.
So BluIQ integrates with your existing tech stack, giving you the benefit of configurable out of the box functionality with no lengthy, complex and costly customization required. In fact, BluIQ can be delivered in less than 90 days. Kathy, back to you.
Kathy: Okay. If you can stop sharing and then we can just all be here. So we are here to take your questions. So it’s that time of the webinar. Igor and Tim, of the five growth lovers, agile is one that really hits home. I know so many of the companies that I talk to, and there’s a few online today, I think they know that they’re not agile. They have a stage of business where maybe Frankenstein is the proper way to characterize their tech stack and they know they need to modernize, but how do they get from point A to point B because that’s hindering their ability to be agile? How do you cross that chasm? I’m sure you’ve never seen this before, either one of you.
Tim: Igor, why don’t you go first? I’ll follow up.
Kathy: You’re on mute, Igor.
Igor: So one place to start would definitely be before you embark on the journey, make sure you know where you are. So start with a self-assessment, understand where you are, how long do certain things take, not only in terms of creating new opportunities, new initiatives, but even just managing change for your organization. Is it because you don’t have the right resources perhaps, or maybe you are relying too much on outside systems integrators in some cases? Whatever causes and whatever drivers that really make a company not perform fast enough, at least not at the average level.
So I think starting with self-assessment, figuring out how companies, the best-in-class in your industry and your sort of economic bracket, how well do they perform? What is that desirable territory? So if you characterize, let’s say it takes you maybe 15 days to close the books every reporting cycle, and best-in-class companies can do it in three days and average is seven, how do you get at least over the average? Then what does it take to get to the best-in-class? What sets apart the best performing companies from the average? So I think it’s clearly should start with some level understanding and benchmarking. Tim, what do you think of that?
Tim: Yeah. I think we see agility from maybe two standpoints. One is that just the ability to create new products, new bundles, new pricing, I mean, all that’s just kind of a given. But the other part of agility that we’ve seen that’s quite interesting is that, and we’ve kind of run into some constraints here, I think the industry as a whole is that our platform, as well as other software platforms as a service, is really kind of built to operate somewhat one way. I mean, there’s a lot of customization that can happen in configuration and so forth.
It’s based on the software architecture that was built behind it. Oftentimes, that simply doesn’t match up with a large enterprise’s way that they want to do things. So I would suggest that looking at things like SDKs and APIs that offer more flexibility in how an investment in a platform like ours could create more agility as the business evolves and grows is probably something that is coming down the road, maybe not quite here today, but certainly something to consider as you move through the maturity model.
Kathy: When you look at the different growth levers, Igor or Tim, does it matter what type of subscription business you are, or is it more of a phase of business to know where to focus? Should everybody be focusing on going global, for example, versus their tech stack to get the growth levers moving? What do you suggest? Because we have multiple different types of business models and recurring on the call and I’d love to understand where you think they might need to focus.
Igor: So if any company would have any kind of a recurring business revenue model, one of the key things to focus on is engagement, reducing the friction with the customer but also engaging with customer. That goes beyond just having the right tools and the right process in place. You need to have a strategy and a plan and probably need to have people that have seen this movie before. Because without engagement, there’s no retention. Without retention, there is no business. So I think that’s absolutely critical. Everything else is also very important. But engagement and retention, those are the two absolutely essential elements for making this a success. Nobody’s going to value your business at 20 times revenue unless you have real retention, real engagement.
Kathy: Great. Tim?
Tim: Yeah, I would suggest that things like globalization and some of the other growth levers that you may not feel that they apply today, it’s really hard to get halfway down the road and start over again if you don’t consider these things in the onset. So they may not be a strategy, but considering all of these complexities and growth levers and how to deal with these complexities is really important from day one.
Kathy: I’m just paraphrasing some questions here, if I’m a company that’s eCommerce or maybe I’m a hardware company that wants to move into recurring, what are some of the key things that I need to consider? I might be an expert in other things, but recurring is certainly unique. What are the landmines they really need to think about as they move into recurring? Igor, you want to go first?
Igor: Maybe Tim should give it a shot.
Kathy: Tim, [inaudible 00:20:23]. Okay.
Tim: Sure. Thanks. Thanks, Igor. Depending on the product, thinking through the product catalog well in advance and really thinking about… Think in terms of just like we used to think in terms of a hardware product roadmap, what every version is going to look like, think about that in terms of subscription as well. So what is my product going to look like from day one? What is it going to look like six months from now? What is it going to look like a year from now? Plan for that product roadmap ahead of time would really, and it’s going to be different based on what types of products they are, but that would be a primary suggestion that I would have.
Igor: I can add a little bit to that. I mean, we see a lot of hardware businesses trying to transform themselves in the way you describe, Kathy. It’s pretty challenging because we have typically a hardware business of its own set of financials and its own process and its own set of billing tools. If one, that’s good. Maybe it’s more than five, more than 10. When we have a services business that supports that and when we are trying to introduce new recurring revenue models on top of that. So in totality, that begins to look more and more like the chart we shared with you earlier today.
So it’s important in this context obviously to focus on people, process, tools, product, as Tim describe, and figuring out what tools will be needed really make the success from a business standpoint, not only now, but in the near future, 24, 36 months out. Hardware companies oftentimes are very challenged of that. You have maybe a $5 billion hardware business to try to turn it into as a service business and you’re taking a hit in revenue. But when you have the issues and challenges with revenue recognition and having multiple billing systems and not being able to do it globally, as Tim described, so there’s a lot to think through.
Kathy: Definitely a lot to think through. I’d like to talk and ask you a question about requirements. I’m sure, Igor, you’ve seen companies that their features and their functions were based on whatever their tech stack allowed. This gets back to the agility. What I’m hearing from Tim and what I’m hearing from you and I’m seeing in some of the questions here is how do I know what I don’t know so I’m not stuck at the end of the day with something we’re ultimately not happy with. It seems to me that the business requirements are going to be a foundation to that. Can you comment on that?
Igor: Yeah. I think you want to kind of focus on your key use cases and key use case scenarios and orient your whole evaluation process towards that. We often get approached with companies saying, “Come help us run a clean evaluation process,” and they have a laundry list of maybe about a thousand line items in their eval model. That’s a Spruce Goose, that plane isn’t going to take off. You need to focus on things that are really usable and implementable, things you’re going to actually put to actual use in the next 24, 36 months.
And really focus on scenarios and talk to suppliers, engage with them, work with them to try to kind of generate examples of what can be done. That becomes a measurement process. How quickly can we do it? Are we reacting well to this? Do you like working with them? Because chances are you’re going to be working with that supplier for a long time. The length of average contract in the United States is longer than the length of average marriage. So think about that.
Kathy: Good advice. Tim, what’s your perspective on that?
Tim: Yeah. I’m not sure I could beat that advice. but I think that one of the things that, I think Igor hit it, but where we see success is where when customers come to us with a clearly defined business case and not technical requirements, but business requirements, let us figure out how we’re going to solve the business problem with our technology. Just what is the business requirement? Then also too, what is the process? From end to end, we say quote to cash or quote to invoice, whatever, but what is that full process from end to end?
Having that document and having a real understanding is that the process current state will enable us to much more clearly define what a process future state might be because we don’t want to break everything. We really want to integrate into the process has been there for a while, be minimally disruptive.
Then the other part of it would be is be prepared for some in depth workshops. Really, just things like data migration, I mean, things like price plans, things like taxes or rev rec. Really, these things can get into my minute detail, and I’m going to go back to stakeholders, making sure that those stakeholders have participation in this process at every level is really important in defining clear requirements, which ultimately results in a good execution.
Kathy: I think that’s great advice, Tim. So we’re getting towards the end of our time here. I don’t see too many questions here. I’d like to kind of wrap up with one final question for both of you, which is getting to the starting line. When you’re starting to de-complex that complex business for growth, where’s the best place to start? I think we might have already talked about it, but what is your recommendation on the best way to start this journey?
Igor: I would say have a clear business plan and prioritize not only what you’re going to do, but drop things you’re not going to do. We see also often companies trying to enter a new line of business or a new geography and they have a laundry list of maybe 10 different things they want to sort of accomplish. Realistically, you’re not going to get there. You’re going to do two, maybe three in a good day. So optimize for those top three and then you can be average or slightly better than average in an average seven. But have a clear plan, priority and know what you’re going to do, and even more importantly, what you’re not going to do. I mean, technology will fall into line. Find good partners that you can work with, maybe they’ll solve the problems for you.
Kathy: So good. So good there, Igor. Great, great advice. Tim?
Tim: Yeah. I would suggest somewhat the same thing. Define what your minimally viable product is going to look like and get a quick win and go from there. Don’t try to do everything overnight. We’ve had customers come to us with, “Here’s our product catalog.” It happens to be 10,000 items. We’re redefining the product. We need to kind of define what that minimally viable product might be and we want to make sure that we get this up and running quickly and then we can move on from there. So that would be my recommendation for starting points.
Kathy: Well, thank you. Tim and Igor, thank you so, so much for your time today. It’s been really informative. For everybody here on the call, thank you for your time. Just so you know, any open questions we will follow up with. We will be sending out a replay link later today so you’ll be able to look at this on demand. Then for anybody who’s interested, here’s a fact, 20% of your customers are canceling in banking apps. So we’re going to be exploring that on October 20th. Head on over to subscriptionsnsider.com/events to register for that webinar. Please check out Subscription Show 2022 at subscriptionshow.com. We’ve got some amazing content to help you scale your businesses there as well. So with that, thank you all for your time today. Until next time, take care.