The document discusses characteristics of disruptive companies, including recurring revenue business models, different metrics like retention rate and recurring profit margin, managing churn from the start, meeting market demand, different monetization and customer acquisition strategies, and a relentless focus on customer success through continuous service and experimentation. The presentation is given by Shawn Price, president of Zuora, about how companies can disrupt multi-billion dollar markets by transitioning to subscription-based recurring revenue models.

1. Disrupting multi-billion
dollar markets
Shawn Price
President, Zuora
Email: Shawn.Price@Zuora.com
Twitter: @ZuoraPrice
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2. Characteristics of Disruptive Companies?
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3. The World Has Shifted
Why Buy Products? When You Can Subscribe to Services?
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4. Recurring Revenue Model is Being Rewarded
IPO Acquisition
12x 9x 9x
Recurring
Transaction 6x 10x 6x
5x 3x 4x
Valuations
(Revenue Multiples)
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5. Observation 1:
Business and Operating Model is Different
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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.
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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 Computing
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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 $130
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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%
Margin
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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%
Margin
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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%
Margin
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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%
Margin
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13. Observation 2:
Churn Must Be Managed From The Start
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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
Years
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15. Observation 3:
Meet Market Demand to Maximize
ACV and ARR
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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 content
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17. Compare Disruptors and Incumbents
EMC vs. Box
Old World New World
Is EMC engaging anyone under age 35?
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18. BMC vs. Zendesk
Old World
New World
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19. Observation 4:
Monetization and Customer Acquisition
Strategies are Different
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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 Differentiation
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21. Observation 5:
Relentless Focus on Customer Success
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22. Growth or Customer Success?
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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?
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24. Disruptive Companies Are Built to
Continuously Service Customers
Instrumentation
Free
Trial
Upgrade
to Paid
Renew
Subscription
Add New
Service
Upgrade to
Premium
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25. Parting Words
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26. Innovation = Experimentation
Experimentation Implies Failure
Viable to Valuable
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27. You miss 100% of the shots
you don’t take.
Wayne Gretzky
Shawn Price
Shawn.Price@Zuora.com
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