A “How To” of Recurring Revenue Innovation

Becoming a Recurring Revenue Innovator - A "How To" GuideThree and a half years ago I was working for a FTSE 100 global company. I had a fancy title, Global Software Director, Billing Solutions, and I was responsible for deploying and managing software solutions to support billing for our diverse global business units. As a business, we were growing rapidly through acquisitions, and each acquisition came with a new billing ‘opportunity’. We had everything under the sun from spreadsheets to 25-year old home-grown legacy solutions to ‘state-of-the-art’ on-premise software packages, so I thought I had seen just about everything. It turns out I was wrong.

In December 2010, my boss approached me about an ‘opportunity’ to support the development of a new business platform that would be used to deliver products into new geographic markets and also into underserved existing markets. Thankfully, the product manager in charge had the foresight to approach billing as an integral part of the business strategy. Too often billing is an afterthought, and when that’s the case, the end result is often less than optimal.

To make a long story short, we ended up selecting and deploying a SaaS billing solution. This was a surprise to just about everyone involved. While we had decided to include SaaS offerings in our evaluation, noone thought at the outset that any of these products were mature enough to support our requirements. A few months back I wrote an article for Billing & OSS World describing that project and some of the key lessons learned as we went through our vendor selection and deployment process. Some of the things we did were fairly innovative (at least for us), and we wound up winning an Information Week 500 Innovator Award in 2013 for this project.

That project was an eye opener for us. We had been in recurring revenue for a long time and our products fit pretty well into traditional subscription and pay-per-use models. Nothing new for us in terms of business model – we had been there, done that, and we all owned the t-shirt. Along the way, I had learned some of the tricks and pitfalls (often the hard way), but this project seemed to bring lots of past lessons into sharper focus. Lessons like:

  • The business opportunities available through new consumption models
  • The value and priority of customer relationships in the recurring revenue world
  • Packaging and pricing to drive customer retention and up-sell
  • Business capabilities needed to optimize the value of each customer relationship
  • The absolute necessity to integrate business systems
  • The iterative nature of success

As I’ve continued to look at other projects and companies and industries, I’ve noticed something interesting. When we talk about innovation, we tend to think about the next great thing. But it seems that more and more companies are focusing on distribution and consumption as the springboard for innovation.

Unless you’ve been living under a rock for the past few years, you’re aware of how Netflix changed the way we consume video with their subscription mail order and online streaming models. What you might not be aware of is the way that Phillips is creating the same kind of disruption in the medical equipment field, applying a pay-per-use vending-machine style approach to devices like MRI machines and CT scanners. Phillips is not the only one. Tim Clark from FactPoint Group has compiled several of these stories into a resource called Recurring Revenue Innovators. It’s a fast and interesting read, and highlights the variety of opportunities available.

As a companion piece to Tim Clark’s work, I’ve produced Becoming a Recurring Revenue Innovator: A “How To” Guide. I’ve outlined an innovation process from idea through implementation, providing you some things to think about at each step along the way. Hopefully you can avoid some of the hard lessons I’ve learned. You’ll see that the basic idea framework for innovation doesn’t change, but your focus does change. You’ll need to look at your business a little differently, add or expand some operational capabilities, and maybe upgrade portions of your technology stack. And you’ll need to do it quickly to stay ahead of your competition.

Since completing that project I mentioned above, I’ve moved on to bigger and better things – helping other businesses with the strategies and tactics necessary to support disruptive consumption innovation. If you had told me three years ago that finding a billing solution for that new business unit was going to change the direction of my life and career, I would probably have laughed at you – maybe the same way that Wayne Huizenga (Blockbuster) laughed the first time he heard about the business plan behind Netflix.

What if the next great thing for your company isn’t a new thing at all? What if it is, instead, a new way to distribute and consume something that you already make or sell? The truth is, recurring revenue models and the technologies that support them are changing the world we live in, creating new business opportunities and opening up new markets for all kinds of products. The opportunity is ripe for the taking. For me, that’s the lesson I hope to capitalize on.

Bob Harden