A Risk Worth Taking

Monopoly Chance“No risk. No reward.”

This truism has been ruminating since we released the Revolutionaries edition of the three-part Recurring Revenue Innovators e-book last week. In today’s ever accelerating, disruptive economy both speed and calculated risk-taking seem necessary for the big win. While smaller, incremental risks can yield results, will the big pay that Wall Street and shareholders expect happen?

Increasingly, traditional box products and main-line companies are betting the farm on new revenue models that just a few years ago would have seemed unthinkable. And there are big payoffs for those that are bold enough to make the leap.

A number of these revolutionary businesses are covered in our final installment of the e-book series. Their success is worth underscoring.

Adobe Inc. decided to do away with shrink-wrapped sales of its Creative Suite of software products in favor of a subscription model. Putting their company and stock price on the line, failure was not an option. Adobe’s switch represents something far more profound than a new way of selling a product, in this case business software. Their transition to a subscription pricing hints at a fundamental shift underway in the U.S. economy: how products and services are bought and sold everywhere. As a result, the company is enjoying new favor with Wall Street. Their stock price isn’t hurting either, doubling over past two years.

Adobe is not alone. Others companies have also defied conventional wisdom and found new ways to package and sell their products. The New York Times disrupted their tradition bound paper product and complemented it with their successful online news business. HootSuite proved the feasibility of the freemium model and is converting their free users into paid users. Pandora pioneered Internet radio, which begs the question “when was the last time you actually bought a radio?”

In the future, we expect to see more of this bold behavior. With the advent of IoT and machine to machine communications, companies will be scouring over the volumes of generated data, looking for unseen usage occasions and ways to monetize it all.

And big pay outs are already starting to happen in unexpected ways. Nest Labs, which personalizes your home heating systems, charges customers $249, which is paid back over time in energy savings. The customer wins with an optimized energy experience that automatically adjusts the heating and cooling to their personal patterns. The resulting data is also a boon for energy companies, who are using it to incent users to reduce consumption during energy “rush hours”. Use less and the energy company gives back a cash reward. It’s a win for all — the energy company that doesn’t want to build more expensive power plants, for consumers who get some pocket change and for Nest that is leveraging their product in innovative ways. And, it’s all resulted in a handsome payoff: if you haven’t heard, Google just purchased the company for $3.2 billion.

Risk indeed does have its rewards.