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John Deere

Crawl Before You Run: Getting Started with Subscription Models

April 2, 2021
Even if you have not started yet, there is still time to play in the digital space.

Over the past five years, the subscription economy has transformed many business sectors. Media, music, entertainment, and news are just a few examples of sectors that have flourished with new subscription business models and have grown through the recent COVID crisis.

But subscription models are not just for “those industries.” The B2B and industrial worlds are now starting to focus more and more on how they can leverage recurring business models and subscriptions in general—some notable examples include Caterpillar, John Deere, Hilti, Honeywell, GM, and 3M.

Research for my upcoming “Industrial Subscription Economy” book reveals that many firms across manufacturing verticals and geographical regions have started with subscription models. Given that one-time transactions are fading, manufacturers are recognizing the need to transform and capture the growing profit potential of recurring business models.

However, making this shift is no easy feat. Industrial companies experience two main challenges: They do not know how to get started, and they struggle to fully monetize their investments.

What do you do first? What is the first move internally and externally? If you have not started yet, there is still time to play in the digital space. If you have barely started or only scratched the surface for the past two or three years, now is the right time to accelerate.

Consider the following statistics:

Half the battle is to get started. It is not too late to do so. It is in fact the right time for a business model reset. 2020 was the wakeup call for many large industrial groups. We moved from an era of “digital fad” to one of “digital impact”. The COVID-19 crisis has changed the game. The need for short-term impact and for sales growth in the context of depressed demand levels is now greater than ever. If you are behind in your digital journey, the bad news is that you will not be first to market. The good news is that you can learn from others and benefit from the numerous insights publicly available.

There are four key considerations to keep in mind when considering subscription business models and how to get started on the road to usership.

1. Get started and gain maturity using a roadmap approach and the right sequence of subscription-based innovations.

2. Remember, there is a fair amount of internal preparation and “socialization” internally before going outside and bringing customers and distributors on board. Crawl before you run!

3. There are six types of digital offerings and ways to monetize to drive recurring revenue growth. You need to list these opportunities for your firms and prioritize them based on financial impact and ease of implementation. Do not start with the most difficult subscription innovation. Leverage quick wins to start learning how to design and manage subscriptions.

4. Benchmark industrial use cases from companies like Caterpillar, Honeywell and Toyota that have successfully made the shift from products to services. They can offer a lot of quick tips and recipes for success.

Join us for more insights and best practices on an IndustryWeek webinar on April 22, 2021. I will be joined by Rich Becker, an expert in industrial subscriptions from Zuora, to discuss these four considerations in greater detail and to share real-life examples.

Stephan Liozu is founder of Value Innoruption Advisors, a consulting boutique specializing in industrial pricing, digital business and pricing models, and value-based pricing. Stephan has 30 years of experience in the industrial and manufacturing sectors with companies including Owens Corning, Saint-Gobain, Freudenberg, and Thales. He holds a Ph.D. in management from Case Western Reserve University. He has written several books, including “Monetizing Data” published in 2018. His next book, the “Industrial Subscription Economy” is due out in fall 2021.

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