FRAMEWORKS / MODELS
Modern Business Works
Authored by: Amy Konary and Andy Main
The current macroeconomic environment is in a stage of long-term uncertainty, which is posing a number of challenges for enterprise leaders. According to the International Monetary Fund, expectations for growth are being adjusted due to the lasting impacts of the global pandemic, the ongoing war in Ukraine, and persistently high inflation in major markets, all of which increase the likelihood of a worldwide recession.
In this environment, businesses seek sustainable growth sources that capitalize on investments in digital transformation, foster direct customer relationships, and help them achieve their innovation objectives. Increasingly, they are modernizing their value propositions, business models, and go-to-market strategies for the 21st century, with customer relationships at the core.
Today, customers prefer to subscribe to the outcomes they want, when they want them, rather than purchasing a product with the burden of ownership. To be successful in this Subscription Economy®, you need an approach to doing business that is both customer-centric and future-proof. We call this Modern Business.
During our recent Subscribed Executive Summit, Zuora’s Subscribed Institute collaborated with executives and partners to explore what it takes to do Modern Business today — with a vision to improve the way business is conducted for the benefit of people, companies, and the planet. Combining this partner and customer feedback with our own experience, we’ve learned that to grow and scale into a Modern Business, you need:
- The right organizational structure. Orchestrate and optimize operations, roles, and initiatives for every monetization model.
- The right technology. Connect the enterprise architecture with enterprise-grade scale, speed, and security.
- The right business model. Engage subscribers based on rich customer data and use customer lifetime value (CLV) as your north-star metric for how you measure your business.
But, how do you know what these are? We will be exploring each of these components in a series of upcoming insights, but here, we delve into how to achieve the right organizational structure for your business.
Modern Business Works
Many businesses try to pursue change by making isolated updates to existing systems and processes, but this narrow view often fails to bring about large-scale organizational shifts or new offers into the market to innovate the business. The majority of the organization may exist in silos, with confusion and unclear governance, roles, and responsibilities. Delivering on the original vision can take longer than needed — or doesn’t happen at all. In the end, many companies fall short of the true offer potential and promised value.
Through our targeted research and collaborations, we have identified the obstacles that may stand in the way of successful business transformation and the proven methods of overcoming hurdles, to arrive at the right operating models that will power innovation and growth for your business. To begin the transformation journey, businesses need a proven approach, or roadmap, that can be used to assess existing Modern Business offerings or recalibrate strategies for the next wave of transformation.
We call this roadmap Modern Business Works, which consists of:
- The five design principles of Modern Business
- The Modern Business operating model blueprint
- Applying the Journey to Usership™ to become a Modern Business
“When you take on the role of a transformation agent, you need to give people a vision — a flag, as I like to say — and some methodologies for how to get there, and you’ll be amazed at what a team can accomplish.”
–Rowan Prior, Senior Director Revenue Operations, Formerly: Vimeo, Deloitte, LivePerson
The five design principles of Modern Business
As an executive leading your organization on this journey, you know that transformation needs to happen — but what is the proven path to success?
Modern Business Works is built around five foundational design principles:
- Prioritizing data-driven decision making
- Operating with agility
- Focusing on customer value first
- Empowering fast change
- Networking your organization
Image: In contrast to more siloed traditional business organizational structures, modern businesses use more predictive analytics, are more customer value driven, enable greater internal networking, function cyclically instead of linearly, and empower more speed and agility.
Prioritizing data-driven decision making
You’re blind without the right data. If you don’t have insights into consumption patterns — or how your customers are using your product — you really don’t know your customers. With the right data, you can better understand customer needs and make constant adaptation based on real-world feedback. This predictive, data-driven decision making can help unlock new offers for the right customer at the right time.
Creating agile operations for innovation
Once the unmet customer needs and changing market demands have been identified through data collection, your organization needs the flexibility to execute change. And because customer demands are constantly changing, the ability to move quickly is critical to create new offerings, and formulate new strategies. Short feedback loops and a system for evaluation and improvement are crucial.
Focusing on customer lifetime value (CLV) first
Taking a truly CLV-first approach means crafting offerings oriented towards outcomes.
Modern businesses are constantly asking themselves, What are the outcomes our customers expect from us? And, they’re continually evaluating how well their products and services are delivering against those expected outcomes. Conversely, they’re also looking at their existing products and services to identify value delivered that may not be monetized and asking, Why?
CLV orientation is truly a two-way street. Businesses can make a dramatic shift in their relationship with customers — and grow revenue — with business models designed to create and capture value for customers first, and all stakeholders as a result.
“If you can come up with your customer needs that have never been met yet and occupy that white space in the market, then you’ll innovate.”
–Andy Main, former Global CEO Deloitte Digital and Former Global CEO Ogilvy
Empowering fast change
The importance of this principle scales with the size and complexity of your business. Nothing else matters if the right people aren’t empowered to make their own decisions. Real transformation requires empowering the right people to have the influence or direct decision-making authority that enables your organization to move fast, adjust investment priorities, and identify the appropriate trade-offs.
Networking your organization
Who owns and contributes to the Modern Business Works?
The organizational structure of a Modern Business is optimized when it’s made up of high-performing, collaborative, and integrated teams with shared accountability. The goal is to break down unnecessary silos by expanding responsibilities and broadening focus. For example, a traditional CFO should begin to think like a COO and a CTO needs to be thinking about the product.
Modern Business operating model blueprint
Unlike an organizational chart, an operating model is a blueprint for success — the basic organizational architecture that makes it possible to execute strategy at the enterprise, business unit, and functional levels. The right operating model will enable hierarchy and networks within an organization to co-exist to help break down silos, create teams across different functions, and deliver the value that shareholders expect from large companies.
Full integration is not possible or recommended for all organizations. Leaders must identify the blueprint that works best within their industry and then find the balance between the tower and the square, in order to obtain the optimal level of integration.
- Functionally separate business unit. Standalone Modern Business unit with autonomous teams and infrastructure. Examples include: Alcatel Lucent and Cisco (circa 2007).*
- Center of excellence. Center that concentrates Modern Business capabilities and coordinates across business units to provide tools and services. Examples include: Visma and Philips.*
- Embedded cross-business unit team. Shared services and technology stack. Dedicated roles embedded in each business unit, coordinated by a central team. Example: Honeywell.*
- Fully-integrated. Modern Business process, tools, and practices are common across most of the business. Examples include: Zoom, Asana.*
*Business examples based on Zuora best estimate. Subject to change.
Any one of the four operating model blueprints can be the “right approach” for an organization. It’s also possible that operating model needs will change as the company changes. For example, an organization that acquires a company with a Modern Business approach might run that as a functionally separate business unit to start. As the company aims to modernize other business units, it may transition to a center-of-excellence model, incorporating practices and tools across the organization.
While movement from left to right is plausible, the opposite direction is equally feasible. For example, a company might launch its Modern Business initiative as an embedded cross-business unit team. However, if the company’s traditional culture hinders the progress of the embedded team, they might relaunch as a functionally separate business unit.
“Groups are often trapped in a linear thought process, but if you can disassemble a problem and put it back together in a new way that resonates with people, they forget the old linear thoughts and get on board.”
—Rowan Prior, Senior Director Revenue Operations, Formerly: Vimeo, Deloitte, LivePerson
Applying the Journey to Usership to become a Modern Business
At Zuora, we’ve worked with thousands of businesses and studied millions of data points across the world’s leading companies. We’ve seen patterns of success, pitfalls to avoid, and lessons that other companies can learn from. We’ve compiled all of these learnings into a guide that outlines the stages your company will go through and the areas you need to focus on to reach the holy grail of business success: long-term customer loyalty and sustainable, predictable revenue growth. This is the Journey to Usership — a framework that provides the data, expertise, and tools that will guide you along the path to becoming a successful Modern Business.
As companies move along the journey, we’ve learned that there are several stages that must be considered:
- Launch. Identify ambition, business model, offers, customer outcomes, and roadmap
- Optimize. Focus on agility, flexibility, and visibility
- Scale and lead. Scale and optimize Modern Business and engage customers with relevance as you grow
Learn more about these stages: The Journey to Usership Whitepaper
What are the next steps?
Modern Business Works, along with the Journey to Usership, reflects the experiences of others who’ve gone before you, elucidating what to do — and what not to do — on the path to successful business transformation. No matter which stage you’re in, what industry you’re in, or where you’re located, the strategies and tactics we’ve covered can help guide you along the path to becoming a successful Modern Business.
Join us as we continue evolving how the world does business — in ways that are better for people, better for companies and ultimately better for the planet
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Modern Business design principles
- Prioritizing data-driven decision making can provide a foundation upon which the other principles of Modern Business Works can be built.
- Once data is captured and understood, business processes must allow for the agility to execute change.
- Customer lifetime value (CLV) should be continually reassessed and used as key guidance in the development of new offers, strategies, and marketing.
- Moving fast to experiment and make changes means empowering the right people to become catalysts for change.
- Foster collaboration, innovation, and networking to help break down unnecessary silos, change mindsets, and broaden roles.
Operating model blueprint
- Enable hierarchy and networks within an organization to co-exist to help break down silos by choosing the right operating model.
- Leaders must identify the blueprint that works best within their industry and then find the optimal level of integration.
Applying the Journey to Usership
- Apply the proven Journey to Usership strategy and roadmap.
- Assign roles and determine corresponding initiatives and outcomes for each focus area.