Home > Articles

📄 Contents

  1. Meta Trend #1: The Customer First Revolution
  2. Meta Trend #2: The Subscription Economy
  • Print
  • + Share This
This chapter is from the book

Meta Trend #2: The Subscription Economy

Why own when you can rent? That’s the sentiment of more and more businesses these days when it comes to acquiring everything from the software that runs your company to the boost in power you need from your wind farm. We believe this shift in mind-set and buying habits represents nothing short of a sea change in the structure of the modern economy, and we rank it alongside the Customer First Revolution as one of the two meta trends that businesses must come to grips with in the coming decade.

We define the Subscription Economy as the fundamental transformation from an economy based on high capital-intensive sales of products into an economy based on services that you pay for as you use them, or as specific outcomes are realized.

The Subscription Economy, as a pervasive phenomenon, is still in the early innings, but its growth is visible all around us and massive disruptions are sweeping through key industries from high tech to transportation to manufacturing. One of the best-known examples is the software industry, which is currently witnessing a major shift from packaged software to “cloud subscriptions.”

If you intend to win the competition for customers, you would be smart to understand why businesses are flocking to the subscription model of doing business, and begin to think creatively about how you can make your own business “subscription friendly.”

The “Cloudification” of Business

A key driver of the Subscription Economy is a critical new business capability we call the “cloudification” of business—a term coined in the book, Ruthless Execution, Second Edition. What does it mean to “cloudify” your business? It means digitizing your products and services and transforming them into an offering—or platform—that is accessed over the Internet. In some cases companies establish a marketplace by “opening up” their product, turning it into a broad platform on which others can add value and new offerings.7 Cloud-ifying your business provides a new way to stay closer to your customer. It has clearly become the third wave of the Internet revolution, in which products and services are put on the cloud for customers to use as needed.

Investment Equations Will Be Radically Realigned

The significance of the cloudification of business is far-reaching and anything but trivial, since many established business models and partnerships will be rendered obsolete. First, it radically changes the investment equation for customers by lowering up-front capital requirements. This has the advantage of better aligning the customer’s investment with the returns. Instead of paying for most of the investment up-front in the hope that it will pay off down the road, now your customer’s investment costs are spread over the life of the solution and are more in line with the incremental benefits they see from your solution year to year.

Switching Costs Don’t Matter Anymore

One of the strongest attractions of the Subscription Economy is this: If you ever find you’re not seeing enough benefit compared to what you’re paying, it’s relatively easy to “unsubscribe” and shop for a new service. What this means is that across many industries a long-standing strategic force and pillar of protection—switching costs—is being marginalized. We’re not suggesting that switching costs are dead. In industries where large and expensive physical assets are involved, switching costs will still be relevant; however, the influence to shape vendor performance and expected business outcomes will significantly increase for customers. Increasingly, industry leaders will need to design new incentives for staying—such as providing a clearly superior customer experience—but the cost or hassle of switching won’t be one of them. Instead, companies will need to develop an ongoing stream of new capabilities to deliver value.

Barriers to Entry Will Crumble

Just as the barriers to customer defection are eroding, so too are the traditional obstacles to competitors invading your turf or creating a whole new market seemingly out of nowhere. A great example is Amazon. The Seattle-based behemoth started off as a bookseller before extending its web platform to include just about anything you wanted to buy on the planet. Then in 2003, while retooling its data centers to improve its Web application, Amazon discovered it could take some of the computing power in the revamped centers and “rent it out” through the cloud.

Practically overnight, Amazon Web Services (AWS) was born, and it swiftly skyrocketed to become one of the biggest forces in cloud services. Netflix, to take one example, now runs its streaming video services over bandwidth it rents from AWS. Forbes magazine recently declared AWS the “largest pubic cloud vendor on earth,”8 leaving entrenched computing giants like IBM, Oracle, and Microsoft scrambling to catch up. In the Subscription Economy, traditional barriers that incumbents depended on to fend off upstarts have melted away.

Products Will Morph into Services

The spreading Subscription Economy will see more products being refashioned as services. Just “taking delivery” of equipment is no longer good enough for customers who increasingly prefer to shift the headache and risk of maintenance and breakdowns to the vendor. That’s why companies like Rockwell Automation—profiled in Chapter 9, “How Rockwell Automation Measures Success”—are reinventing their factory automation products, incorporating Internet of Things technologies so that assembly-line machines can monitor themselves, self-install new software, and preempt breakdowns without ever bothering the customer. It is a far more servicelike experience, saves time and money, and also manages to create a new kind of “stickiness” that dissuades customers from straying to the competition.

A different example is Cisco, which has been the dominant player in the computer networking industry for the past two decades. For years the company’s primary source of revenue had been physical gear like routers and switches that companies install in their data centers. But with more customers preferring to rent computing power, Cisco has begun offering the equivalent of “networking as a service” in which Cisco owns the networking infrastructure, monitors its performance, upgrades it, and adds bandwidth as needed—all from a remote command center. Cisco expects this portion of its revenue stream to continue to grow over the next decade, perhaps soon rivaling its traditional hardware sales.

Delivering Outcomes Will Be Critical

The Subscription Economy, with its “what have you done for me lately” culture, will shine a harsh light on business outcomes. Is your customer able to reduce costs as promised? Get more output out of your machines? Cut downtime as expected? Drive new revenue? The new “as a service” economy puts less emphasis on the particular product you’re pedaling and more on what it can do for your customers. Increasingly, your customers don’t care about your products, but about the business outcomes that matter most to them. That’s why the most innovative enterprises on the planet are focusing on selling and delivering business outcomes. We’ll profile several of these outcomes-centric companies in the pages ahead.

The emerging Subscription Economy and Customer First Revolution will force businesses to take a hard look at how they are currently doing sales, marketing, product development, services, and support. In many cases, long-standing processes will need to be reorganized and transformed. For example:

  • Sales teams will need to shift some of their focus from inking a deal to proving business value to customers. Doing this early on will open up opportunities for additional sales. Teams will need to remain vigilant year-round, especially as renewals loom, and be prepared to show continuing value delivery to minimize churn.
  • In a similar fashion, marketing groups will need to reorient their campaigns around longer-term relationships that require constant nurturing to avoid defections. So marketing becomes less about nurturing leads and more about nurturing relationships. And companies will need to market the advantages of “maturing” with their solutions.
  • Professional services and product development teams will see dramatic changes as well, with a new emphasis on collaboration with customers and business results.
  • Operations and support teams will need to be more proactive than ever before, constantly monitoring key performance data and using predictive analytics and possibly embedded sensors to ensure that the solution is meeting expectations.

Is your business ready to take on the Customer First Revolution? To thrive in the Subscription Economy? In the next chapter, we’ll share with you three key capabilities that we believe are essential to succeeding in the new customer-centric, outcomes-focused, subscription-powered world. These include new skills and processes for listening to your customers to uncover what matters to them; engaging them creatively and authentically to build credibility and loyalty; and finally ensuring that the outcomes you promise are fulfilled—perhaps the most critical but also the most difficult skill to master. Across each of these areas, we will also stress the importance of measuring to accurately define your customer’s challenges and the value you’re delivering.

  • + Share This
  • 🔖 Save To Your Account

InformIT Promotional Mailings & Special Offers

I would like to receive exclusive offers and hear about products from InformIT and its family of brands. I can unsubscribe at any time.


Pearson Education, Inc., 221 River Street, Hoboken, New Jersey 07030, (Pearson) presents this site to provide information about products and services that can be purchased through this site.

This privacy notice provides an overview of our commitment to privacy and describes how we collect, protect, use and share personal information collected through this site. Please note that other Pearson websites and online products and services have their own separate privacy policies.

Collection and Use of Information

To conduct business and deliver products and services, Pearson collects and uses personal information in several ways in connection with this site, including:

Questions and Inquiries

For inquiries and questions, we collect the inquiry or question, together with name, contact details (email address, phone number and mailing address) and any other additional information voluntarily submitted to us through a Contact Us form or an email. We use this information to address the inquiry and respond to the question.

Online Store

For orders and purchases placed through our online store on this site, we collect order details, name, institution name and address (if applicable), email address, phone number, shipping and billing addresses, credit/debit card information, shipping options and any instructions. We use this information to complete transactions, fulfill orders, communicate with individuals placing orders or visiting the online store, and for related purposes.


Pearson may offer opportunities to provide feedback or participate in surveys, including surveys evaluating Pearson products, services or sites. Participation is voluntary. Pearson collects information requested in the survey questions and uses the information to evaluate, support, maintain and improve products, services or sites, develop new products and services, conduct educational research and for other purposes specified in the survey.

Contests and Drawings

Occasionally, we may sponsor a contest or drawing. Participation is optional. Pearson collects name, contact information and other information specified on the entry form for the contest or drawing to conduct the contest or drawing. Pearson may collect additional personal information from the winners of a contest or drawing in order to award the prize and for tax reporting purposes, as required by law.


If you have elected to receive email newsletters or promotional mailings and special offers but want to unsubscribe, simply email information@informit.com.

Service Announcements

On rare occasions it is necessary to send out a strictly service related announcement. For instance, if our service is temporarily suspended for maintenance we might send users an email. Generally, users may not opt-out of these communications, though they can deactivate their account information. However, these communications are not promotional in nature.

Customer Service

We communicate with users on a regular basis to provide requested services and in regard to issues relating to their account we reply via email or phone in accordance with the users' wishes when a user submits their information through our Contact Us form.

Other Collection and Use of Information

Application and System Logs

Pearson automatically collects log data to help ensure the delivery, availability and security of this site. Log data may include technical information about how a user or visitor connected to this site, such as browser type, type of computer/device, operating system, internet service provider and IP address. We use this information for support purposes and to monitor the health of the site, identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents and appropriately scale computing resources.

Web Analytics

Pearson may use third party web trend analytical services, including Google Analytics, to collect visitor information, such as IP addresses, browser types, referring pages, pages visited and time spent on a particular site. While these analytical services collect and report information on an anonymous basis, they may use cookies to gather web trend information. The information gathered may enable Pearson (but not the third party web trend services) to link information with application and system log data. Pearson uses this information for system administration and to identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents, appropriately scale computing resources and otherwise support and deliver this site and its services.

Cookies and Related Technologies

This site uses cookies and similar technologies to personalize content, measure traffic patterns, control security, track use and access of information on this site, and provide interest-based messages and advertising. Users can manage and block the use of cookies through their browser. Disabling or blocking certain cookies may limit the functionality of this site.

Do Not Track

This site currently does not respond to Do Not Track signals.


Pearson uses appropriate physical, administrative and technical security measures to protect personal information from unauthorized access, use and disclosure.


This site is not directed to children under the age of 13.


Pearson may send or direct marketing communications to users, provided that

  • Pearson will not use personal information collected or processed as a K-12 school service provider for the purpose of directed or targeted advertising.
  • Such marketing is consistent with applicable law and Pearson's legal obligations.
  • Pearson will not knowingly direct or send marketing communications to an individual who has expressed a preference not to receive marketing.
  • Where required by applicable law, express or implied consent to marketing exists and has not been withdrawn.

Pearson may provide personal information to a third party service provider on a restricted basis to provide marketing solely on behalf of Pearson or an affiliate or customer for whom Pearson is a service provider. Marketing preferences may be changed at any time.

Correcting/Updating Personal Information

If a user's personally identifiable information changes (such as your postal address or email address), we provide a way to correct or update that user's personal data provided to us. This can be done on the Account page. If a user no longer desires our service and desires to delete his or her account, please contact us at customer-service@informit.com and we will process the deletion of a user's account.


Users can always make an informed choice as to whether they should proceed with certain services offered by InformIT. If you choose to remove yourself from our mailing list(s) simply visit the following page and uncheck any communication you no longer want to receive: www.informit.com/u.aspx.

Sale of Personal Information

Pearson does not rent or sell personal information in exchange for any payment of money.

While Pearson does not sell personal information, as defined in Nevada law, Nevada residents may email a request for no sale of their personal information to NevadaDesignatedRequest@pearson.com.

Supplemental Privacy Statement for California Residents

California residents should read our Supplemental privacy statement for California residents in conjunction with this Privacy Notice. The Supplemental privacy statement for California residents explains Pearson's commitment to comply with California law and applies to personal information of California residents collected in connection with this site and the Services.

Sharing and Disclosure

Pearson may disclose personal information, as follows:

  • As required by law.
  • With the consent of the individual (or their parent, if the individual is a minor)
  • In response to a subpoena, court order or legal process, to the extent permitted or required by law
  • To protect the security and safety of individuals, data, assets and systems, consistent with applicable law
  • In connection the sale, joint venture or other transfer of some or all of its company or assets, subject to the provisions of this Privacy Notice
  • To investigate or address actual or suspected fraud or other illegal activities
  • To exercise its legal rights, including enforcement of the Terms of Use for this site or another contract
  • To affiliated Pearson companies and other companies and organizations who perform work for Pearson and are obligated to protect the privacy of personal information consistent with this Privacy Notice
  • To a school, organization, company or government agency, where Pearson collects or processes the personal information in a school setting or on behalf of such organization, company or government agency.


This web site contains links to other sites. Please be aware that we are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of each and every web site that collects Personal Information. This privacy statement applies solely to information collected by this web site.

Requests and Contact

Please contact us about this Privacy Notice or if you have any requests or questions relating to the privacy of your personal information.

Changes to this Privacy Notice

We may revise this Privacy Notice through an updated posting. We will identify the effective date of the revision in the posting. Often, updates are made to provide greater clarity or to comply with changes in regulatory requirements. If the updates involve material changes to the collection, protection, use or disclosure of Personal Information, Pearson will provide notice of the change through a conspicuous notice on this site or other appropriate way. Continued use of the site after the effective date of a posted revision evidences acceptance. Please contact us if you have questions or concerns about the Privacy Notice or any objection to any revisions.

Last Update: November 17, 2020