5 Steps to Build a Disruption Proof Business Model

Guest post from Robbie Kellman Baxter:

In the past few years, we have seen what we thought of as “disruption proof” businesses get disrupted by new and unexpected competitors.  Banks, by Paypal, Venmo, and ApplePay.  Taxis by Uber & Lyft. Hotels by AirBnB.

More recently in the wake of the novel coronavirus, we have seen a second wave of disruption coming from outside forces, rather than competition. Many organizations have been blindsided by the implications of social distancing.  Some of these businesses are proving resilient though, pivoting to new ways of packaging value, going digital, doing delivery, and rethinking the way they can serve their organizations.

Almost by definition, we can’t be fully disruption-proof, but we sure can mitigate risk.

Subscription businesses seem to be among the most resilient of businesses. This resiliences is due to their recurring revenue, but also because of their focus on continuous tinkering to layer in value for the people they serve. Because they are more focused on customer engagement than just on the initial purchase, they are forced to develop agility and flexibility are core cultural strengths.  


If you want to move to a more nimble, recurring revenue model, or even if you just want to enjoy deeper relationships with the people you serve, here are five things you can do.

Step 1:  Set up for Success

The most resilient businesses have a forever promise they make to their customers—it’s like a mission, but completely focused on the customer’s goals and challenges.  If you use a forever promise as your north star, it will guide you through these uncharted waters more effectively than focusing on “quarterly capitalism” and just trying to hit this month’s forecast.

But you need the right culture for this approach, the right metrics (hint, the main KPI isn’t topline revenue) and the right resources.  You need a cushion of cash to allow you to focus on the long term.  You need people on your team with both strategic and operational skills—two very different kinds of people.  And you need leadership that has a longer time horizon so you can invest in relationships.

Step 2: Focus on your Best Customer

If you’re a going concern, you probably have some customers that are better than others.  These “best customers” likely have a greater lifetime value than the “not best customers”.  But there may be other attributes—they use your products regularly and well.  They are not disproportionally more expensive to serve.  And they may be superusers, people who invest their own time, money and reputation for the good of your organization.

For example, they might refer in new customers, or speak at your events, or provide feedback on product direction.  You need to know who these best customers are, and be able to recognize them if you see one in the flesh (or on Zoom…) by asking a couple of questions.  Once you know who they are, you can optimize not just your products, but your whole business—how you market, how you onboard, and how you support these people.

If you know who you’re serving and focus on them, you’ll be way more likely to keep them in a crisis.

Step 3: Make sure your product market (PMF) fit starts at the moment of transaction (and doesn’t end there)

Most organizations understand the concept of PMF.  You want a product that your specific, clearly defined audience wants to buy. You don’t want to have a product that’s got a little bit for each of several markets, but doesn’t “nail it” for any one audience.  And you don’t want to build products just because “you can”. 

But if you’re going for long-term engagement and loyalty, whether you use subscription pricing or not, you need to think about PMF beyond the headline benefit that drives customer acquisition.  You need the engagement features which will deepen the relationship over time, and make your products and services into habits.

And it is your responsibility to continue to tinker with your offering to continue to deliver on your forever promise on your forever promise in the best way possible.  Don’t wait til customers complain or cancel, you need to get in front with continuous improvement.

Step 4: Track Churn Like a Hawk

Churn is when customers leave.  You want to understand why people leave, and why they fail to join too.  If they’re telling you that your product is too expensive, or that they don’t seem to have time to use your products, that’s a nice way of saying that they don’t value them enough to invest time or money.  So try to understand why.  Make a list of these churn drivers, as well as the “failure to launch” drivers of people who are familiar with your offering but not interested, even though they fit your “best customer” profile.  And then focus on fixing them.

Step 5: Use your microscope and your telescope.

Sometimes organizations with the most loyal “disruption-proof” members find themselves with some unique risks, due to this deep engagement.  These organizations tend to use their microscope, carefully evaluating the engagement and happiness of current happy members, at the expanse of using their telescope.  Make sure you spend as much time looking out on the horizon, checking for competitors, changing environments, and new technologies—risks sure, but also opportunities to evolve.  Also look in the other direction, at your prospects, to be sure that prospects continue to find your value proposition, and how you deliver on it, compelling.  The advantage of “members” is that they don’t look for new options—they’ve committed to you, but don’t confuse inertia of existing members with being disruption proof when it comes to attracting tomorrow’s members.

When it comes to disruption-proofing your business, the best thing you can do is focus on taking good care of your best customers first.  It’s the relationships that matter in terms of driving loyalty today, and helping you anticipate what they will need tomorrow.



Robbie Kellman Baxter
is a bestselling author, speaker and consultant with more than 20 years of experience providing strategic business advice to major organizations including Netflix, the Wall Street Journal and Electronic Arts. In the past ten years, her company Peninsula Strategies has advised over 100 organizations on subscription and growth strategy. Her first book, The Membership Economy was an international best seller. Her new book, The Forever Transaction, was released in April 2020. It has been described as a true game-changertaking readers through every step of the subscription business process—from initial start-up or testing of a new model to scaling the operation for long-term growth and sustainability to revamping your culture so everyone works together to optimize customer lifetime value. For more information about Robbie go to https://www.robbiekellmanbaxter.com.

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