By: Steve Terry, Navint Director, Subscription Revenue

One of the big players in the subscription billing space, Zuora, recently held their users conference in San Francisco. The big news this year was the acquisition of automated revenue recognition provider, Leeyo. They also debuted Zuora Central as the answer to the post-ERP, next generation enterprise solution for order-to-cash for the “subscription economy.”

Indeed, there are challenges as companies shift from an item-based economy to one that centers on attracting and retaining Continuous Customers™. This shift points to emerging subscriptions and recurring revenues sometimes hybridized with unit-sales. The traditional divide between the ‘back-office’ and ‘front-office’ is being exasperated. This is increasing the gap between ERP and CRM in the order-to-cash process. The conversations to fix this gap quickly turns to re-architecting the CRM/ERP or filling gaps in technology with CPQ, billing and/or subscription management solutions like Zuora.

Is the ERP system really on its deathbed, as Zuora would like you to believe? Is an “order-to-cash” hub as the post-ERP system enough for all our challenges? Or do we need to start further upstream in the value chain with processes that enable us to innovate, engage, and sell effectively over time? Then choose our technology stack that has both the flexibility AND optimization for serving the Continuous Customer™?

No Single System Can or Should “Rule It All”

Some major ERP players have incorporated subscription management capabilities in their ERP suite through acquisitions, partnerships, or home-grown functionality. This solution is through a billing and/or finance optic. Salesforce has been moving in the opposite direction. They started with CRM to now CPQ functionality to help manage the order-to-cash process from the sales optic.

For recurring revenue businesses, this gap between ERP and CRM is where all the magic happens. We call this the ‘junction box’ where we monetize and serve the Continuous Customer™. While players like Zuora are attempting to bridge the gap, a single source of the truth for all stakeholders—sales, marketing, operations, finance and accounting—is going to still be a challenge because of the order-to-cash optimization fallacy.

The Order-to-Cash Optimization Fallacy

Businesses have spent years—often decades—organizing people, process, and systems for the unit-based economy. We’ve used a transactional sequence of marketing, sales, operations, and finance to optimize our operations, and we’ve done it exceptionally well.

Our historical order-to-cash optimization has a fundamental tenet that no one is talking about: our product/service is already well defined. We know the cost to produce, and we know what the market will bear. We have the ability to sell and serve units efficiently. That traditional notion of product or service is well captured in a SKU. Supply chain management emerged as the linear backbone of the item-based economy because of our well-defined products.

Today, what businesses sell has changed. The core product or service is now only one element of what the customer buys. The other elements purchased go straight to the heart of the business operations, technology, and finance functions. Continuous Customers™ interact with quote, contract, fulfillment, provisioning, billing, and payment processing continuously and iteratively. Our new product is the entire customer experience—not just the physical or digital goods being consumed.

The Missing Piece: Product Ideation

Optimizing the order-to-cash workflow assumes the offer is already baked—the product is well-defined. But to properly serve customers in a continuous relationship, we must productize the entire experience as an offer, not in the transactional lens of product/services, packaging, and pricing. We need to move away from each discrete item and towards dynamic packaging of both products and monetization combinations so that customers can easily connect with multiple underlying products and services.

This level of product ideation, or dynamic packaging, connects the customers’ simple view of their purchase with the internal ability to provide frictionless touch points across sales, service, and billing. The SKU was once a way to connect all the dots together and ERP was built around it. The lack of flexibility to package, price, bundle, and discount continuous product and services has exposed the limitations of ERP and CRM systems. Adaptability within an ERP order process is limited at best. Product catalog proliferation, or SKU Frankenstein, is a common symptom of a business missing product ideation at the front end of the order-to-cash optimization.

Product ideation and iteration must be agile. As a business learns and customers evolve, they can adapt to meet the customer needs with offers that are timely, suitable, and simple from the customer viewpoint. Packaging must be modeled so that new packages can be created to include new organic innovations or to drive value from inclusion of M&A business into the existing customer base.

Are We Moving to a Post-ERP World?

Perhaps eventually, but that does not mean we need or want a new ERP. The need to adapt in our engagement with customers is not going away. It would be tragic to replace the ERP label but fail to address the static mindset that caused our initial problems. So regardless of planning horizon and technology philosophy, companies need to solve upstream of the order-to-cash process to guide practices, systems, and people to the adaptable strategies tuned for today’s realities. This starts with product ideation—the offer—dynamic packaging to connect with the needs of the Continuous Customer™.

Navint is one of the few firms that has a fully-dedicated Subscription Services practice with deep domain experience and a proprietary methodology to help organizations navigate the journey to success with Continuous Customers™. Through every engagement we complete, the Navint team continues to build and refine strategies and methods that enable our clients to successfully cross-the-chasm from past practices to face the opportunity of the digitization era. To learn more about success with Continuous Customer™ strategies contact us at sterry@navint.com.