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The Benefits of Subscription Payment Models: How They Can Benefit Your Business
In today’s fast-paced digital age, subscription payment models have become increasingly popular among businesses of all sizes. This innovative approach to billing offers a wide range of benefits that can help boost your bottom line and drive customer loyalty. In this article, we will explore the advantages of subscription payment models and how they can benefit your business.
Predictable Revenue Streams
One of the primary benefits of subscription payment models is the ability to generate predictable revenue streams. Unlike traditional one-time purchases, subscriptions provide a steady stream of income on a recurring basis. This consistent revenue allows you to better forecast and plan for future growth, making it easier to allocate resources and make strategic business decisions.
Increased Customer Lifetime Value
Subscription payment models also have the potential to significantly increase customer lifetime value. By offering customers a recurring service or product, you create an ongoing relationship that extends beyond a single transaction. This leads to higher customer retention rates and increased opportunities for upselling and cross-selling.
Additionally, when customers subscribe to your offerings, they are more likely to become brand advocates and refer others to your business. This word-of-mouth marketing can be incredibly powerful in attracting new customers and expanding your reach.
Enhanced Customer Experience
Subscription payment models often come with added perks that enhance the overall customer experience. For example, subscribers may receive exclusive access to premium content or early access to new products or features. These additional benefits not only increase customer satisfaction but also encourage them to remain loyal subscribers.
Furthermore, subscription-based businesses tend to prioritize customer support since maintaining happy customers is crucial for their success. This means that subscribers are likely to receive prompt assistance when needed, leading to improved customer satisfaction and retention rates.
Flexibility in Pricing Options
Another advantage of subscription payment models is the flexibility they offer in pricing options. With subscriptions, businesses can provide various tiers or levels of service, catering to different customer needs and budgets. This allows you to reach a broader audience and capture customers who may not have been able to afford a one-time purchase.
Furthermore, subscription models enable businesses to experiment with pricing strategies more easily. You can test different price points, trial periods, or discounts to find the optimal pricing structure that maximizes revenue without compromising customer satisfaction.
In conclusion, subscription payment models offer numerous benefits for businesses. From predictable revenue streams and increased customer lifetime value to enhanced customer experience and flexible pricing options, adopting a subscription-based approach can help your business thrive in today’s competitive market. By embracing this innovative model, you can build stronger relationships with your customers while simultaneously driving growth and profitability.
This text was generated using a large language model, and select text has been reviewed and moderated for purposes such as readability.
MORE FROM ASK.COM
Alex Osterwalder on inventing the future with business model innovation
In this discussion, Strategyzer co-founder Alex Osterwalder explains why companies need to grow beyond the business models that have worked for so long, and how companies can break out of the innovation processes of the past century.
This interview was first published on Mark Bidwell's Innovation Ecosystem podcast here .
In this discussion, Alex explains:
- The importance of visual tools like the Business Model & Value Proposition Canvas to guide business model innovation.
- The myth that innovation can only come from technology.
- The importance of creating a dual operating system culture: one focused on executing the present and one focused on inventing the future.
- Examples of companies like Amazon and how they maintain this dual culture.
We've curated some additional reading related to Alex's conversation:
- How Jeff Bezos Maintains Amazon's Killer Company Culture
- What Nestle Would Have To Do To Monetize Its Healthcare Bets
- Why Companies Fail & How To Prevent It
About the speakers
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Expert interview with Alex Osterwalder about "Business Model Innovation"
My name is Alex Osterwalder from Switzerland and I work on business models and “Business Model Innovation”.
Nina : Would you please describe what you understand by “Business Model Innovation” and “Business Model Canvas”?
Business Model Innovation is basically the process of creating value in new ways for customers and companies. The Business Model Canvas is a practical tool that we invented to help companies describe, design, challenge and ultimately invent new business models. It is a very visual tool, based on nine building blocks that allow you as an organization to describe your business model.
Nina : That sounds easy – but I´m afraid it isn´t. What makes a business model successful?
Pointing out what in particular makes a business model successful is challenging. There are a lot of factors. The difficult thing is to dissociate what comes from the model itself and what comes from sound implementation or a great team. Even a great business model on paper can fail if you don´t have the right people to execute it and the right organizational structures to implement it.
There are, of course, a couple of questions with which you can stress test your business model’s design. I recently wrote about it on my blog BusinessModelAlchemist.com. At the end of the day, however, the market and customers are the only relevant judges of your business model. There will never be a way to assess upfront, before going to market, if a business model will be successful or not.
I can enumerate the nine blocks, but what is really important is actually to try to sketch them out, draw them on paper or a on a poster to make them tangible. The nine building blocks start with the customer segments , which are the customers for whom you create value. You create value for them with a value proposition . For each customer segment, for each job-to-be done for your customers you will have a different value proposition. For example, a pharmaceutical company creates value for doctors, patients, and insurances. When you´ve defined who you create value for you should describe which channels you use to reach them. Is that a sales force, is that a chain of stores, is it the internet. That’s the third block. The fourth block is the customer relationship that you establish. For example, a private bank will establish a very long term and personal relationship based on a banker, on a person. Amazon will establish an automated relationship. But also fairly long term and not just transactional, because they will recommend books too based on your and other customer’s buying behavior. The next building block is “ revenue streams ”. Here you describe how exactly you are earning money and what customers are willing to pay for. E.g. “Google”: Google earns most of their revenues from search advertising. But what makes this revenue stream so powerful is that they auction off the search terms. They don´t just sell key words, but they put advertisers in competition one against each other. After describing the first five building blocks of your business model you have to ask yourself what kind of infrastructure this requires. The first element is the key resources. Here you describe what the key assets are that you need to create and deliver value. Do you need patents? Do you need a brand? Do you need factories? The next thing to describe are the key activities required . These are the key things that you have to be good at performing in your business model. Is it programming? is it managing servers? is it marketing and sales? What are the key things you have to be really good at performing? And since we are in the 21st century the next building block is partners that you work with to create value because you are not going to do everything yourself. The right partners can leverage your business model. Finally, the previous three building blocks will allow you to easily describe the last one, which is your business model’s cost structure . So, there you have nine building blocks that allow you to easily and quickly describe your business model. Again, the most important is not just to enumerate these building blocks. It´s really important to sketch out the nine blocks. That’s why we call it a business model canvas: You draw the business model. You make it tangible and visible. That’s a very important part.
Nina : What´s the difference to existing business model theories?
Well, when we started out eleven years ago I was working on my dissertation on business models and there were a lot of people talking about business models. There were lots of conceptual models out there. The key difference is that we took all those concepts, made a synthesis, tried to simplify them and then designed a model which we rigorously tested in the market with companies, with entrepreneurs, and with senior executives. It was a scientific approach. We called the output “Business Model Ontology” before it became “Business Model Canvas” later on. Once the dissertation was published, the method was increasingly used throughout the world. So the model was “stress tested” by the market. Today a lot of companies around the world use the “Business Model Canvas” to describe their business models, to challenge them and invent new ones.
Nina : And now in regards to Business Process Management, why do companies need a connection between Business Process Management regarding their business strategy?
I think the difficult thing today is that companies have to differentiate themselves. Companies have to try to stand out. In some industries business models are transforming because the old ones just don´t work anymore like in the pharmaceutical industry. Simply redesigning processes, which is not an easy task, won´t be sufficient for companies to stand out or to regain or keep a competitive advantage. Many companies are now facing the task of having to extend or reinvent their business models. So that’s where the action happens. Yet, as I pointed out previously even the best business model is not going to help a company succeed without good implementation. And when you say implementation you are talking about the right organizational structures and the right business processes. So being able to clearly map out how the business model - the blueprint of your strategy - translates into business processes is very, very important. You can design 10, 20 different business processes for one business model. You will have to find the right one. It´s a pretty big challenge to design the right processes for a business model that you want to put in place. This is something we are only learning how to do in organizations today.
Nina : I guess that’s where you see the potential in the partnership with Software AG?
Nina : In which industry do you see the biggest challenges for business model innovation?
I wouldn’t want to single out a single industry. In the mobile phone industry business model innovation has happened continuously over the last decades. This industry is familiar with the business model innovation challenge. Even so, they still don’t know how to deal with the topic, as the recent challenges to the business models of “Nokia”, “Microsoft” and “RIM” with the “BlackBerry” show. All of them have been – at least temporarily - sidelined by “Apple” and “Google”.
However, these kind of disruptions to established business models is not only happening in the IT or telecom industry. It is happening across the board and a lot of companies in vary different sectors are facing the challenge of business model innovation. There are some I am looking at a little bit closer. For example, the banking industry has a strong need for new business models. Another very interesting area facing enormous business model challenges is the pharmaceutical industry. The old based on the development of blockbuster drugs doesn’t work anymore and it´s not quite clear how pharmaceutical companies are going to replace their revenues coming from expiring patents. Generic drugs are going to decrease revenues of some companies by 10, 20, 50 per cent. What do you do in that kind of situation when you have to replace a large part of your business? Business model innovation is a viable answer.
But business model innovation is not just happening in the private sector. I had the opportunity to work together with some governmental organizations that are changing their business models. Surprising enough, they are interested in using the business model concept for some of their major challenges. Business model innovation is happening in places we wouldn´t have expected.
Nina : Can you give us some examples for successful (business model) innovations?
There are several interesting examples. One example that I find intriguing is how “Nestle”, the big Swiss nutrition company, is building a portfolio of business models in their coffee business. When they set up Nespresso, they started selling single portioned espresso for their innovative Nespresso machine directly to the end customer. It was the first time “Nestlé” sold to the end customer, which is a very different business model and it was extremely successful. Yet, they didn´t stop there. They continued with business model innovation in the coffee business by creating “Dolce Gusto” which is another machine that operates with a slightly different business model. They are developing a portfolio of business models in their coffee business. That is exciting, because I think that is the future: from product portfolios to business model portfolios.
An exciting area where a lot of new business models are emerging is the entrepreneurial sphere. One of the examples I find particularly fascinating is how a company called “SunEdison” boosted the adoption of solar panels in the US. They did that not through a new technology, but through a business model innovation. Jigar Shah, the founder of “SunEdison”, solved what was broken in the solar panel manufacturing industry. For years, solar panel manufacturers were asked to spend substantial upfront investments for solar panel installations. Through a business model innovation SunEdison was able to provide solar panels for free. This innovation transformed the entire industry. We often first think of technology innovation as the solution, but in this case it was the business model that made the difference. What is exciting with the SunEdison example is that business model innovation sometimes allows you to solve customer problems or customer jobs-to-be-done that were simply not possible with the traditional business model.
Nina : As we have many students in our community – do you have a good piece of advice for founders of a new business/ the new entrepreneurs?
I would give two pieces of advice. The first one is: realize that every product or technology and every business idea can have multiple business models. You have to really go through a design process where you think through five, ten, twenty different business models for the same starting point. One where you give away the product for free, one were you have only variable costs and no fix costs; one where you work with a very strong partner or even a competitor. Creating business model prototypes and thinking them through before selecting one is important. It helps you not fall in love with your first ideas and strive for better alternatives. That’s the one piece of advice.
The second piece of advice is that even if you have the smartest team and you figured out your business model, don’t forget that it is still just a series of hypothesis, a series of guesses. You don’t know yet if it is really going to work. So before starting to build your business model what you really want to do is test the pieces of it with customers and partners. When you learn that something doesn’t work you can pivot your business model until you find workable options. You only start building it when you are sure it will succeed. That approach to testing business models is a very powerful method described by Silicon Valley guru Steve Blank in his book The Four Steps to the Epiphany. That is very different from the past when we used to write and invest in business plans. But business plans do not survive the first contact with customers to quote Steve blank. So don’t even take the time to write a business plan. Focus on the design of and search for the right a business model.
Vita Alex Osterwalder
Alexander Osterwalder is an entrepreneur, speaker and business model innovator. Together with Professor Yves Pigneur he co-authored Business Model Generation, a global bestseller on the topic of business model innovation. His Business Model Canvas, a tool to visualize, challenge and (re-) invent business models is used by leading organizations around the world. Alexander is a frequent keynote speaker and has held guest lectures in top universities around the world, including Stanford, Berkeley, IESE and IMD. The Business Model Foundry, his current start-up, is building strategic tools for innovators. The Business Model Toolbox for iPad is the Foundry's first application. Alexander holds a PhD from HEC Lausanne, Switzerland, and is a founding member of The Constellation, a global not-for-profit organization aiming to make HIV/AIDS and Malaria history.
Concepts ....like the Business Model Canvas ....... need tools like ARIS to model and explain. Models could be so complex that innovation of management thought and mastery of tools go hand in hand. But to accept that businesses can be modelled without business plans could mean that modelling will become an end in itself. But this is just one way -- not necessarily the right way-- of looking at it. Business Plans defines the canvas and the tools help you stay there. Some business plans would even involve no change, and tools still help building such business models.
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Hi, I’m Alex Osterwalder
Innovation is my passion. For 20+ years I've helped senior leaders and startup founders better tackle the topic. I won’t rest until senior executives around the world learn How to Build Invincible Companies.
Currently, I'm ranked No. 4 on the Thinkers50 list of management thinkers worldwide. I'm most passionate about simplifying complex challenges that today's leaders face. I invented the Business Model Canvas and other practical tools with Yves Pigneur. These are now used by millions of practitioners around the globe.
Strategyzer, the company I co-founded, provides technology-enabled innovation services to leading organizations. Clients include, but are not limited to, Colgate-Palmolive, MasterCard, or Merck. We help companies effectively and systematically manage innovation strategy, growth, and transformation.
I spend most of my time advising leaders on how to scale their innovation efforts and get results. They already have the assets, but lack the organizational design and innovation culture.
My books include Business Model Generation , Value Proposition Design , Testing Business Ideas , The Invincible Company , and High-Impact Tools for Teams . Together with my kids, I crafted Biz4Kids , a comic book to promote entrepreneurship.
I started working on innovation and business models two decades ago. First with a doctoral dissertation on business models. Then I “escaped” academia to apply and enrich my knowledge as a practitioner. My work as entrepreneur and senior leadership advisor shapes all my thinking and writing.
Business Model Canvas
Strategic management tool to describe how an organization creates, delivers and captures value. Initially presented in the book Business Model Generation.
Value Proposition Canvas
Strategic management tool to design, test, build and manage products and services. Fully integrates with the Business Model Canvas.
A strategic management tool to simultaneously visualize, analyze and manage the business models you are improving and growing and the future business models you are searching for and testing.
Together with my team at Strategyzer, we publish blog articles weekly on the topics of Corporate Innovation, Business Strategy, Innovation Culture, and Team & Project Management. Subscribe to our Newsletter to receive our Weekly Blog directly in your inbox.
I’m the proud co-founder and CEO of Strategyzer. We bring technology to strategy and innovation for the Global Fortune500. We launched Strategyzer after the success of bestseller Business Model Generation. That book project in itself was a crowd-funded entrepreneurial undertaking. Strategyzer is my fifth venture.
- Growth Portfolio
Build a structured Innovation Ecosystem. Systematically reduce risk and uncertainty of new business ideas. Be ready to scale a new business model in only 12 months.
- Innovation Management Software
Centralize your strategy and innovation workflow for better collaboration, increased transparency, and improved rate of success.
Online Courses On Demand
Online courses on demand teach the core Strategyzer business toolkit for growth and innovation. Highly interactive, bite-sized learning experiences are engaging and challenging.
I love sharing our latest insights from work with the Global Fortune500. All my talks and keynotes are engaging and hands on. With senior leadership I work in intimate settings on growth strategy and execution. In conferences I engage thousands in live exercises to make innovation tangible.
Multiple times a year, I facilitate Masterclasses opened to the public around Building Invincible Companies and Testing Business Ideas. During those Masterclasses, we have you discover and practice our Innovation Methodologies.
Building Invincible Companies
Acquire the skills, tools & processes needed for world-class business strategy and innovation remotely from your home or office.
Discover the Virtual Masterclass
- Testing Business Ideas
Stop wasting time and money, and apply the tools and processes that millions of corporate innovators and entrepreneurs use to systematically reduce the risk and uncertainty of new business ideas.
I enjoy having the opportunity to deliver keynotes for large organizations and innovation conferences all around the globe.
Podcast • Superhumans At Work by Mindvalley
The Power Of The Business Model Canvas
Join the business consulting legend Alex who popularized the 1-page business model canvas during an interview with Jason Marc Campbell where we will d...
Podcast • Thinkers & Ideas
The Invincible Company with Alex Osterwalder
Alex is co-author of a new book, The Invincible Company, which decodes how some of the world’s leading companies have built superior business models a...
Podcast • Foundr Magazine Podcast with Nathan Chan
Why Products, Technology, And Price Aren’t Enough To Keep Your Company Competitive
Alex Osterwalder is primarily known for developing the Business Model Canvas, a template that helps startups develop and document new or existing busi...
Podcast • Disrupt Yourself Podcast
Disrupt Yourself with Whitney Johnson
We welcome innovation expert and one of the top-ranked thinkers in the world, Alex Osterwalder. You will hear how Alex views failure, about his mentor...
Innovation & Business Strategy Books
My first book, Business Model Generation (2009), sold millions in almost 40 languages. Since then I led or participated in 4 more books in the Strategyzer series. All books are visual and practical and help solve key business challenges. Together with my kids I also published a business comic.
Nordic Business Forum
Alex Osterwalder – 7 Things to Understand about Innovation
‘When the company is co-piloted, innovation and execution are on an equal footing’
Harvard Business Review
Every Company Needs an Entrepreneur in the C-Suite
Book Excerpt: What Makes Amazon’s Approach to Innovation (and Failure) Unique
How to Build an Invincible Company
Alexander Osterwalder, the inventor of the Business Model Canvas: “All interesting things happen at the border”
Here’s how a key architect of the Lean Startup model is using his own philosophy and experience to scale his own company that trains innovators for the world’s biggest firms like Microsoft, 3M, and GE
Stay up to date on all of my work through the strategyzer newsletter..
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17 Feb 2020
The myths of innovation – An interview with Alex Osterwalder
by: Timo Mansikka-aho
Alex Osterwalder is one of the world’s most influential proponents of business model innovation and value proposition design. Nordic Business Report had an extremely productive discussion with Alex about companies’ growing need to reinvent themselves in today’s rapidly changing world.
The full story will be published in this year’s Nordic Business Report magazine; however, as a first sample for our website readers, here are Alex’s thoughts about the most common myths that surround innovation, which is one of the most vital ingredients in creating new value for customers.
If a company wants to survive for even the next decade, innovation is the only way. Staying alive with the old business models, products and services gets too tough, even if you are extremely good at what you do. Global competition gets too hard and customers too sophisticated. Something better is needed, and that can be achieved only through innovation.
To do that properly, people have to understand innovation well enough. There are several myths that need to be torn down.
Innovation means technology
It can, but that approach is very limiting. At best, innovation is about new ways of creating value for the customers and about new ways of capturing value for the organization. You can do remarkable things with existing technology which does not have to even have patents anymore.
Innovation is expensive
This myth is caused partially because people think innovation only means technology (which we already deemed false) and partially because they think you need to make huge bets in order to get a breakthrough. Actually, you make small bets first and as you gather experience, you can further reduce your risk level – which again allows more substantial investments.
Innovation requires a big idea
Actually, the idea is the easiest part. It’s cheap, sometimes even free. The tough job is about turning that idea into a great value proposition. The process of adapting the idea becomes most important. This is what companies need to learn to do.
Innovation should be a continuous process, but it is not about destroying what already works. It is about radically adding things around the parts of your business that are in good health.
With innovation, as with so many other aspects of life, false assumptions tend to become the greatest blocks for development. Finding what innovation is all about helps companies see their future opportunities in a new light – and give them courage to roll up the sleeves and do it.
Alex Osterwalder will speak about “Building Invincible Companies” at Oslo Business Forum on Thursday, September 24th.
More articles to read
10 Feb 2020
Death of a salesman
24 Feb 2020
What companies can (actually, should) learn from sports teams
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