As digital transformation continues to take hold across a wide range of industries, forcing chief executives to rethink, and in some cases entirely upend, their organization’s traditional business models as well as the transactional manner in which they engage with customers.
As organizations embark on their own paths, the manner in which revenue is generated from their customers for services or products is likely to change. For example, those accustomed to one-time transactions may now need to adapt to subscription-based relationships. Industries where simple subscriptions have been the typical model may need to navigate more complex and customized engagements.
As the changes occur, the leadership of these companies are likely to develop a renewed appreciation for back-office, revenue management systems that, let’s face it, are often thought of as mundane and administrative. Some might come to realize that existing systems for managing revenue relationships with their customers are no longer capable, sufficient or relevant and have become a roadblock to success.
While the CEO may not, in the past, have been overly concerned with or involved in back office systems, they now should be. Having a modern and capable platform could determine success or failure as these companies become more service-oriented and rely more heavily on usage-based revenues.
With this in mind, these are the industries where CEOs will most likely to find themselves needing to address a changing revenue relationship with customers:
From AT&T to Verizon to Comcast, the giant telecommunications companies continue to move from being communications service providers to digital service providers. No longer are these companies satisfied with simply being a conduit for content – they are moving to being content providers in their own right. They are offering an ever-changing array of content, from entertainment in B2C applications to business software in B2B, across complex price bundling and an assortment of packages, all of which their existing billing systems cannot support. The digitizing companies will require the type of revenue management system that can operate effectively alongside the legacy system while also providing the company with the ability to manage potentially ever-changing subscription models to ultimately monetize the new content service offerings.
“ Having a modern and capable platform could determine success or failure as companies become more service-oriented and rely more heavily on usage-based revenues.”
A dramatic transformation is already under way in the automotive industry, with manufacturers like Ford, Volvo and Toyota having introduced a range of new mobility services from on-demand vehicle access to ride sharing, with the promise of more to come. In doing so, traditional car manufacturers are now taking an ownership stake in the relationship with the customer, one that used to be owned primarily by the dealer or financing institution, delivering these new services within a subscription model. The move to this new model and ongoing direct interaction with the customer not only flips the OEM business model on its ear, but also necessitates the presence of the types of subscription management platforms many probably have never had, one that can properly invoice and capture new recurring revenue stream the services are generating.
The subscription-based model has long been a mainstay in the publishing industry. For decades, subscribers have paid a set monthly fee to have a print newspaper or magazine delivered to their front door. Even as publications went digital, the flat-fee subscription model was simply extended to the new digital environment. But the publishing industry has endured hard times due to increased competition and downward pressure on advertising revenues. As a result, publishers forced to creatively identify new revenue opportunities have introduced multiple pricing tiers, customized bundles and premium content to attract new subscribers and retain existing ones. In many cases, existing platforms are not flexible enough to adapt to the new subscription formats, meaning that today’s publishers will surely need to modernize the back office.
For manufacturers of expensive medical devices such as MRI machines, CAT scanners, ultrasound machines and the like, the nature of a transaction had been fairly straightforward. Hospitals, or other medical facilities with the means, would purchase the desired machine from the manufacturer or dealer as they would anything else. Soaring medical costs, however, have prompted healthcare facilities managers to cut expenses. Additionally, market saturation has left manufacturers with fewer customer targets, forcing device manufactures to rethink how they can derive revenue from their stock. Instead of selling machines outright, they are now supplying them to healthcare facilities and charging for use – e.g., pay-per-scan – via a subscription model. This is a new paradigm for medical device manufacturers, most of whom probably never before had to manage subscription-based customers. The success of this new model will largely be dependent on a existence of a platform capable of managing a whole new type of transaction.
The continued emergence of the connected car, among a host of other trends, has dampened the desire for traditional car ownership, especially among Millennials and urban dwellers. The diminishing number of car owners means an equally diminishing number of customers for automotive insurance providers. Recognizing the potential threat to revenue, automotive insurers are introducing new products and pricing schedules based on an entirely new set of variables, such as miles driven or driving behavior. The presence of connectivity and telematics solutions inside the car means that insurance companies can dynamically adjust rates for good drivers. But in most cases, they won’t be able do any of it with their existing systems, which have no ability to “flex” into these new models. They too will require a modernized platform that can capably handle more complex and numerous subscriptions.