Tien Tzuo > Quotes

“If you’re just managing expectations, instead of creating new opportunities, you’re not doing it right.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“Cisco isn’t just managing a dependable if relatively flat hardware business while it hunts for growth in software and services. It’s embracing subscriptions in a broad, systemic way in order to shift from selling boxes to selling outcomes. Its new cloud-based management services help mitigate the boom-and-bust effects of new product cycles. It doesn’t have to act like a retailer chasing after make-or-break holiday sales in order to make its annual number. Today almost a third of its revenue is recurring, which is resulting (as CFO Kelly Kramer is quite happy to point out) in a short-term hit to its GAAP revenue numbers. Again, standard revenue loss is a good thing. That’s a sign that you are carrying your book of business out into the future.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“Notice how big manufacturing companies like GE and IBM that were on the first list in 1955—and are still on it today—don’t talk as much about their mainframes and refrigerators and washing machines anymore? They talk about “providing digital solutions,” which is an admittedly jargony way of saying that the hardware is just a means to an end. In other words, these companies now focus on achieving outcomes for their clients, rather than just selling them equipment.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“isn’t a vehicle subscription just another word for a lease? Well, no. A lease still binds you to a specific vehicle, whereas a subscription can potentially offer you access to a range of vehicles. “Simply flip between vehicles via the app as your needs change,” says Porsche on its website. You’re signing up with the company, not the car. Another difference: With subscriptions, all the potentially annoying aspects of owning a vehicle (registration, insurance, maintenance) simply go away. With leases, you still have to get your own insurance. Also, many car subscriptions give you the option to subscribe on a month-to-month basis. As Christina Bonnington of Slate notes, “You could theoretically not have a car for ten months of the year when you’re working and using public transit and then get a car subscription for two months when you’ll be travelling more often.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“If there’s one thing I’ve learned from working with all these large manufacturing companies, it’s that this shift can truly drive growth. What happened to the technology sector is going to happen to the manufacturing sector—I’m sure of it. Why? Because IoT allows you to rediscover your customers. It lets you learn what they really want. In fact, I would argue that the only true competitive advantage is your relationship with and knowledge of your customers. Think about it—what’s the first thing your competitor does when you put out a new product? It buys that product on the open market and sends it to the R&D lab, which then proceeds to dismantle it, benchmark it, and reverse-engineer it in a thousand different ways. Your competitors can’t do that with the collective intelligence of your customer base. That’s something that you, and only you, can own. It’s an incredibly powerful advantage.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“you used to be able to do fine just by deploying SAP better than the next guy. That’s no longer the case. Today, IT is where you compete. It’s where you spin up new services, new experiences. It’s where you set up test beds and experiments. It’s where you iterate and scale. It’s where you find the freedom to grow.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“in the technology industry we would call The Life of Pablo a minimum viable product. That may sound like a pejorative term, but a minimum viable product is actually incredibly important. Only after it gets something out in the market can a business gather customer feedback and use this data to iterate and improve in a continuous deployment cycle. The MVP is a defining principle of cloud software development, and Kanye applied it to his music-writing process.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“Do you remember the great “showrooming” scare? Retailers used to be terrified of people coming into their stores, browsing around, then buying cheaper versions from competitors online. After a little market research, of course, they found out that the opposite was true—more people research online first, then head to stores to try out products before they buy them.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“Trains, bike shares, subways, shuttles, and car services are all locked in horizontal competition, but smart partnerships and platforms will help commuters carry their identity across all these networks seamlessly and intuitively.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“After all, competitors can steal your product features, but they can’t steal the insights you gain from an active, loyal subscriber base.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“The Manifesto for Agile Software Development was put together by a group of developers at a ski resort in Utah in 2001. It contains four simple but powerful value comparisons: individuals and interactions over processes and tools, working software over comprehensive documentation, customer collaboration over contract negotiation, and responding to change over following a plan. You can apply these principles to any kind of subscription service. Innovation doesn’t happen in a vacuum. It’s the result of iterating a concept over a period of time. Big “boom or bust” product launches can actually be a recipe for burnout: they result in unhealthy peaks and troughs of productivity and inspiration. The idea is to create an environment that supports sustainable development—the team should be able to maintain a constant pace of innovation indefinitely. That’s the only way to stay responsive, to stay agile.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“We are seeing an evolution toward services rather than physical transactions,” Allison said at our conference. “There’s been a fragmentation of the customer experience. When you bought a car, or you leased a car, that was one interaction. Then as you went and needed service for your car, there’d be a different interaction at the dealership. And for all these years, the cars weren’t connected, so we really didn’t have a view of the journey that you’re on.” Allison is absolutely right about the fragmentation of the customer experience—most of the big auto manufacturers conceded the service aspect of their industry to thousands of dealerships and repair shops a long time ago. Today Ford is actively trying to remedy that. As Allison noted, “FordPass is a portal to a seamless customer experience.” FordPass app users can warm up their cars in the driveway on cold mornings, find and reserve parking spots, schedule service appointments, find nearby gas stations, and make mobile payments. Henry Ford had a famous quote: “If I had asked people what they wanted, they would have said a faster horse.” Today Ford understands that it can’t solve for mobility just by selling more cars.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“Here’s a compelling quote from Scott Pezza of Blue Hill Research on the topic: If you currently sell products that collect some sort of data (or could be retrofitted to do so) and there is someone out in the world who would find that data valuable, IoT is a new revenue source for you. If you sell physical products that degrade or need to be serviced, IoT means you can offer remote monitoring services, or preventative maintenance services—new revenue streams. In the alternative, you can increase the attractiveness (and value) of those products by giving customers the ability to conduct that monitoring and maintenance themselves. If you sell services that could be expanded if you only had access to more data, it’s new money. And if you sell technology to help sense conditions, facilitate secure communications, conduct analysis, manage service provisioning and billing, or forecast and plan revenue—this market is going to need you.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“Here’s the key takeaway—it is perfectly rational for subscription businesses to spend all their profits on growth, as long as their bucket doesn’t leak. Remember, as long as you are growing your ARR faster than your recurring expenses, you can step on the gas. As Ben Thompson of Stratechery notes, “You’re not so much selling a product as you are creating annuities with a lifetime value that far exceeds whatever you paid to acquire them.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“There is at least as much innovation and creativity happening in FT’s acquisition efforts as there is in its exceptional journalism. FT also has a simple but brilliant formula for gauging reader engagement. Borrowing from the retail sector, they score every one of their readers on the multiple of three factors: recency (when did they last visit?), frequency (how often do they visit?), and volume (how many articles have they read?). Low scores indicate churn risks that their promotions group can approach with discount offers. The”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“Every day I see companies run by bright young MBAs going down in flames trying to chase after magical hit products. They can’t compete because they’re built backward: product first, customer second. That order needs to flip.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“The business model for a new Netflix show is fundamentally more stable. It spends about $50 to $60 million on a new season of GLOW or Godless. So how does Netflix justify its spending on a TV show or movie that it doesn’t “sell”? Again, let’s return to that portfolio effect. Regardless of whether a show is successful or not, investing in sharp new content helps Netflix to both (a) attract new subscribers and (b) extend the lifetime of its current subscribers. Those shows don’t go away! Together, they’re increasing the overall value of the portfolio. They are instrumental in driving down customer acquisition costs (as more subscribers sign up) and increasing subscriber lifetime value (as more subscribers stick around for longer). Netflix knows exactly how long it takes for a subscriber to flip from unprofitable to profitable. Spending tons of money on new shows means Netflix is happy to take a hit on the books in the short term in order to increase their profitability in the long run.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“connectivity turns products into services, which allows businesses to build around outcomes, not assets.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“I think we’re in a pivotal moment in business history, one not seen since the Industrial Revolution. Simply put, the world is moving from products to services. Subscriptions are exploding because billions of digital consumers are increasingly favoring access over ownership, but most companies are still built to sell products.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“Cable companies still have a direct pipe into our living room, as well as huge infrastructures and employee bases (Comcast, Cox, and Time Warner employ more than two hundred thousand people). Smarter usage-based billing and cloud-based updates will make their video content services more responsive and valuable. They also have the opportunity to become the operating system of connected homes. In a few years we could be using our former “cable company” to upgrade an alarm service, schedule a new refrigerator installation, or discover we have some loose shingles on our roof.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“more than half of the companies that appeared on the Fortune 500 list in the year 2000 are now gone. Poof. Vanished off the list as a result of mergers, acquisitions, bankruptcies. The life expectancy of a Fortune 500 company in 1975 was seventy-five years—today you have fifteen years to enjoy your time on the list before it’s lights out.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“about $50 to $60 million on a new season of GLOW or Godless. So how does Netflix justify its spending on a TV show or movie that it doesn’t “sell”? Again, let’s return to that portfolio effect. Regardless of whether a show is successful or not, investing in sharp new content helps Netflix to both (a) attract new subscribers and (b) extend the lifetime of its current subscribers. Those shows don’t go away! Together, they’re increasing the overall value of the portfolio. They are instrumental in driving down customer acquisition costs (as more subscribers sign up) and increasing subscriber lifetime value (as more subscribers stick around for longer). Netflix knows exactly how long it takes for a subscriber to flip from unprofitable to profitable. Spending tons of money on new shows means Netflix is happy to take a hit on the books in the short term in order to increase their profitability in the long run.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“Jessica Lessin of The Information says: “I still believe it’s much safer to build a business that doesn’t need any advertising to survive. Doing so forces you to focus 100% on your value to your readers. It’s the only way to make sure that what the news publishers deliver to readers in the future is smarter, more informed and more relevant than in the past.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“IT buyers prefer opex to capex. Historically software companies have preferred capital expenditures (capex) for technology investments, as this afforded them the ability to take advantage of amortization and depreciation of the capital investments over a period of time. But as technology shifts to the cloud, there’s a complementary shift happening in favor of opex over capex. Operating expenses bear the advantage of a pay-as-you-go model for services used with comparatively little to no up-front investment. Not only is this a greater value prop, as a business is getting exactly what it pays for, but it’s also a strategy for freeing up cash to drive growth, and a way for large enterprises to be nimble rather than locked into expensive IT infrastructure that lacks flexibility and often serves as nothing more than a bottleneck for transformation.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“Subscriptions also don’t offer the option to buy when they conclude, which I view as a huge positive—that means that it’s in the carmaker’s interest, not yours, to keep its vehicles in great shape.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“Why can’t I just subscribe to transportation the same way I subscribe to electricity and internet access? But wait, you might say. Uber isn’t a subscription service—there are no monthly fees. I disagree. It sure looks and feels like a digital subscription service to me. Uber has your ID and all your payment particulars, and it employs usage-based pricing so that you pay for only what you use. It knows your usage history (your home, your work, your common destinations) and uses that information to customize its service for you. And thanks to its partnership with Spotify, it even knows your favorite music. Oh, and guess what? Uber does in fact offer monthly subscriptions. Right now Uber is testing a flat-rate subscription service in several cities. Users can pay a monthly fee in exchange for bundles of reduced-rate trips with no surge pricing. In other words, Uber will cut you a deal on rides in exchange for steady business. The company may take a short-term profitability hit, but the goal is to gain long-term customer loyalty in a very young and turbulent market—and this customer loyalty is becoming more and more important as ridesharing becomes a commodity.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“In the old world, you could grow by doing three things: sell more units, increase the price of those units, or decrease the cost required to make those units. In today’s world, you have three new imperatives: acquire more customers, increase the value of those customers, and hold on to those customers longer”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“We’ve had three big ideas at Amazon that we’ve stuck with over the years,” said Jeff Bezos. “Put the customer first. Invent. And be patient.” Another favorite Bezos quote: “I don’t know about you, but most of my exchanges with cashiers are not that meaningful.” The Amazon versus Walmart battle has been framed as ecommerce versus traditional retail, but that’s always been a false dichotomy. It’s about starting with the customer instead of the product. It’s about establishing ongoing relationships. It’s about flipping the script—starting with the digital experience, and then building the store.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“Here’s a question: How many of the charges on your last credit card statement were made without you ever having to pull out your credit card?”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

“And when you finally discover your customers, it changes everything about your company.”
― Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It