Disrupting Multi-billion Dollar Markets

2,163 views

Published on

Learn the 5 characteristics of a disruptive company.

Published in: Business, Technology

Disrupting Multi-billion Dollar Markets

  1. 1. Disrupting multi-billion dollar markets Shawn Price President, Zuora Email: Shawn.Price@Zuora.com Twitter: @ZuoraPrice1
  2. 2. Characteristics of Disruptive Companies?2 Copyright 2012 Zuora Inc. | Confidential & Proprietary
  3. 3. The World Has Shifted Why Buy Products? When You Can Subscribe to Services?3 Copyright 2012 Zuora Inc. | Confidential & Proprietary 3
  4. 4. Recurring Revenue Model is Being Rewarded IPO Acquisition 12x 9x 9x Recurring Transaction 6x 10x 6x 5x 3x 4x Valuations (Revenue Multiples)4 Copyright 2012 Zuora Inc. | Confidential & Proprietary
  5. 5. Observation 1: Business and Operating Model is Different5 Copyright 2012 Zuora Inc. | Confidential & Proprietary
  6. 6. Disruption Requires a Fundamentally Different Business Model Subscription Commerce Monetizing Customer Relationships Sell Units Why? Customer in the middle. Pay-as-you-Go Pricing Plans Price Per Unit Why? Flexibility, Editions, Try before Buy. Multiple Orders Over a Lifetime One-Time Orders Why? Add-ons, Upgrades, Renewals. Forced to Pick a Sell to Consumers & Businesses Customer Why? Support B2C, B2B and B2Any. Segment Simple Complex, Interrelated Bookings, Financial Billings, & Revenue Metrics Why? All metrics are connected.6 Copyright 2012 Zuora Inc. | Confidential & Proprietary
  7. 7. The Three Metrics that Matter Retention Rate Recurring Profit Margin Growth Efficiency How much of your ARR less Churn How much does it ARR you keep less Non-Growth cost you to acquire every year. Spend $1 of ACV The metrics for Cloud computing is fairly different from traditional enterprise software. Top 10 Laws for Cloud Computing7 Copyright 2012 Zuora Inc. | Confidential & Proprietary
  8. 8. The Three Key Metrics in Action Annual Recurring Revenue $100 Churn (10) Retention Rate Net ARR 90 COGS (20) G&A (10) R&D (20) Recurring Profit Recurring Profit 40 Margin Growth (40) Growth Efficiency Index Net New ARR 40 Ending ARR $1308
  9. 9. Three Examples 2001 2002 2003 2004 Ending ARR $37 M $70 M $129 M $231 M Growth Efficiency 0.93:1 0.80:1 0.75:1 0.76:1 Renewals 83% 83% 83% 83% Recurring Profit 3% 41% 58% 61% Margin9 Copyright 2012 Zuora Inc. | Confidential & Proprietary
  10. 10. 2001 2002 2003 2004 Ending ARR $22 M $43 M $71 M $105 M Growth Efficiency 2.02:1 1.65:1 1.28:1 1.26:1 Renewals 86% 86% 86% 86% Recurring Profit (27%) 6% 35% 47% Margin10 Copyright 2012 Zuora Inc. | Confidential & Proprietary
  11. 11. 2001 2002 2003 2004 Ending ARR $40 M $73 M $108 M $147 M Growth Efficiency 1.41:1 1.90:1 2.15:1 1.62:1 Renewals 92% 92% 92% 92% Recurring Profit (29%) (16%) 19% 43% Margin11 Copyright 2012 Zuora Inc. | Confidential & Proprietary
  12. 12. Best Practice Model Growth Efficiency 0.75:1 1.26:1 2.15:1 1:1 Renewals 83% 86% 92% 90% Recurring Profit 58% 47% 19% 50% Margin12 Copyright 2012 Zuora Inc. | Confidential & Proprietary
  13. 13. Observation 2: Churn Must Be Managed From The Start13 Copyright 2012 Zuora Inc. | Confidential & Proprietary
  14. 14. The Impact of Churn 100.0 90.0 80.0 Revenue in Millions 70.0 Churn Rate 60.0 5% 50.0 10% 15% 40.0 20% 30.0 20.0 10.0 0.0 1 2 3 4 5 6 7 8 9 10 Years14 Copyright 2012 Zuora Inc. | Confidential & Proprietary
  15. 15. Observation 3: Meet Market Demand to Maximize ACV and ARR15 Copyright 2012 Zuora Inc. | Confidential & Proprietary
  16. 16. Match Buyer Preferences SaaS Cloud Earned loyalty, Try before buy Non reservation, elastic capacity, monetize usage Digital Media Consumer Ad model, Own end-Point, Buy now, subscribe now Direct monetization Telecom No longer a captive market, Acquire content16 Copyright 2012 Zuora Inc. | Confidential & Proprietary
  17. 17. Compare Disruptors and Incumbents EMC vs. Box Old World New World Is EMC engaging anyone under age 35?17 Copyright 2012 Zuora Inc. | Confidential & Proprietary
  18. 18. BMC vs. Zendesk Old World New World18 Copyright 2012 Zuora Inc. | Confidential & Proprietary
  19. 19. Observation 4: Monetization and Customer Acquisition Strategies are Different19 Copyright 2012 Zuora Inc. | Confidential & Proprietary
  20. 20. Monetization Strategies Strategy 1. Promos Revenue 2. Billing frequency Growth Churn 3. Upgrades Lower Customer Defense 4. Add-ons Acquisition 5. Usage Costs Competitive 6. Volume/Tiered Advantage Market 7. Regional Differentiation20 Copyright 2012 Zuora Inc. | Confidential & Proprietary
  21. 21. Observation 5: Relentless Focus on Customer Success21 Copyright 2012 Zuora Inc. | Confidential & Proprietary
  22. 22. Growth or Customer Success?22 Copyright 2012 Zuora Inc. | Confidential & Proprietary
  23. 23. Disruptive Companies Answer 3 Questions How Do We Help You Grow? Do We Make Your Processes Better? Do You Use Our Data to Make Decisions?23 Copyright 2012 Zuora Inc. | Confidential & Proprietary
  24. 24. Disruptive Companies Are Built to Continuously Service Customers Instrumentation Free Trial Upgrade to Paid Renew Subscription Add New Service Upgrade to Premium24 Copyright 2012 Zuora Inc. | Confidential & Proprietary
  25. 25. Parting Words25 Copyright 2012 Zuora Inc. | Confidential & Proprietary
  26. 26. Innovation = Experimentation Experimentation Implies Failure Viable to Valuable26 Copyright 2012 Zuora Inc. | Confidential & Proprietary
  27. 27. You miss 100% of the shots you don’t take. Wayne Gretzky Shawn Price Shawn.Price@Zuora.com27 Copyright 2012 Zuora Inc. | Confidential & Proprietary

×