Subscribed Keynote Address: The Eighty Trillion Dollar Jump Ball  

By Tien Tzuo April 12, 2016

Watch the full video of our Subscribed 16 Keynote address or read on for a summary.

A century ago, the world was facing the dawn of a new commercial era. Previously, you would visit your local grocer or your local baker, and get a personalized service from someone that you knew. But a new concept called mass production was being introduced, made famous by Henry Ford and The Ford Motor Company in the early 1900s.

Imagine thousands of workers heading in and out of factories; product after product moving down an assembly line. This was the dominant business paradigm of the 20th Century.

For the past 100 years, we have been taught that the primary goal of our companies is to ship more units: more laptops, more cars, more pens, more CDs, more phones.  And because all these products are standardized on assembly lines, they come off the assembly lines virtually identical. As the saying went: “Any color you want, as long as it’s black.”

This is not the world we live in today. Today, we live in a digital world. When we need something — to work, to play, to get from point A to point B, to connect with each other — we expect a digital experience. An experience that knows our preferences, that adapts to our changing needs, and that gets better and better over time.

As consumers, we love this new digital world.  But what are the implications for the companies that we run? You’ve probably seen the statistic: since 2000, over half of the Fortune 500 companies have disappeared. Poof. Gone. Vanished, as a result of mergers, acquisitions or bankruptcies.

In 1955, the life expectancy of a Fortune 500 was 75 years. But if you are a Fortune 500 company today? Well, you have fifteen years left to live.

Why is this happening? Because in this new digital world, the old business model of shipping products is no longer working. What is the path forward?

Well, let’s look at those who survived the mass extinction.

Let’s look at GE, who was number four on the list in 1955. In 2005? They’re still number four. When we think of the old GE, we think of light bulbs, dishwashers, refrigerators. Products. But what does GE call itself today?  A digital company that is also an industrial company. GE has reinvented itself from a product company to a digital services company.

Let’s look at IBM.  They were number 61 in 1955, and number 24 in 2015. Most of us think of IBM as selling computers – mainframes, minis, workstations, PCs, laptops. But what does IBM sell today? Cognitive Data Services. What’s that? Well, it’s Watson. IBM has reinvented itself from a product company to something much more.

The best Fortune 500 companies have redefined who they are, and shifted away from the product economy: NCR, McGraw Hill, XEROX, CBS. How about the new entrants into the Fortune 500? How about Amazon, Google, Apple Facebook, Salesforce?

Two years ago, Andy McAfee from MIT spoke at our Subscribed Conference and called these companies “platform” companies. What he meant is that each of these companies establish  relationships with their customers.

Think about it. Each of us has an Amazon ID, a Google ID, an Apple ID. We use those IDs for more and more of our professional and personal needs. This is why these companies are the fastest growing part of the Fortune 500.

Now, how about the new disruptors, the next wave — Uber, Netflix, Spotify, Airbnb, Box. These companies came in and took everyone by storm. They invented completely new markets, new business models, new technology platforms. They did this by using digital technologies to create brand new experiences for us that are slowly taking over our lives.

What’s going on? Whether you are a thriving Fortune 500 company, a new entrant to the establishment, or an up-and-coming disrupter, what’s the common thread? These companies realize that we now live in a new digital world. And that in the digital world, it’s no longer sufficient just to design and ship products.

The modern digital consumer expects a very different experience. An experience that gives them the outcome they seek, without the hassles of product ownership. An experience that is customized and personalized, that watches their behaviors, remembers their preferences, and adapts to their needs. An experience that evolves, gets better and better, continuously delights.

Success in the new world requires every company to design a new subscriber experience that delivers outcomes. Music experiences, not songs. Entertainment experiences, not DVDs.  Transportation experiences, not cars or planes. Energy experiences, not power equipment.

And at the heart of the Subscription Economy is the idea that, as businesses, we need to stop treating customers as someone whose sole purpose is to buy our product.

We can build much healthier businesses, create stronger strategic advantages, accelerate or reignite growth, if we rethink our customers as subscribers. The world GDP stands at $80 trillion dollars, and all of it is up for grabs.

Welcome to the Subscription Economy.

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