3 issues to resolve before switching to a subscription business model

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In my role at CloudBlue, Fortune 500 companies often approach me for help with solving technology challenges while shifting to a subscription business model, only to realize that they have not taken crucial organizational steps necessary to ensure a successful transition.

Subscriptions scale better, enhance customer experience and hold the promise of recurring and more predictable revenue streams — a pretty enticing prospect for any business. This business model is predominant in software as a service (SaaS), but it is hard to find an industry that doesn’t have a successful subscription story. A growing number of companies in sectors ranging from automotive, airlines, gaming and health to wellness, education, professional development and home maintenance have been introducing subscription services in recent years.

Legacy companies accustomed to pay-as-you-go models may assume shifting to a subscription model is just a sales issue. They are wrong.

However, businesses should be aware that the subscription model is much more than simply putting a monthly or annual price tag on their offering. Executives cannot just layer a subscription model on top of an existing business. They need to change the entire operation process, onboard all stakeholders, recalibrate their strategy and create a subscription culture.

While 70% of business leaders believe subscriptions will be key to their future, only 55% of companies believe they’re ready for the transition. Before talking technology, which is an enabler, companies should first address the following core issues to holistically plan and switch to a recurring revenue model.

Get internal stakeholders involved

Legacy companies accustomed to pay-as-you-go models may assume shifting to a subscription model is just a sales issue. They are wrong. Such a migration will affect nearly all departments across an organization, from product development and manufacturing to finance, sales, marketing and customer service. Leaders must therefore get all stakeholders motivated for the change and empower them to actively prepare for the transformation. The better you prepare, the smoother the transition.

But as we know, people naturally do not like change, even if it is for their own good. So it can be a formidable task to secure the cooperation of all internal stakeholders, which, depending on the size of your company, could number in the thousands.

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