Transitioning towards the subscription economy - A case study into tech-focused subscription-based business models

Abstract

More and more firms are moving towards the subscription economy. Incentivized by a promise of lucrative growth and a fear of being left behind, it is estimated that by 2023 75% of organizations will in some way work with subscriptions. In combination with business models, the topic at hand is novel in the eyes of researchers, explained by the scarcity of previous research conducted on the topic. This thesis aims to better understand how tech firms can utilize subscription-based business models to enter the subscription economy. Four research questions are introduced, characterized by four subscription-based business model dimensions (value proposition, value creation, value capturing, and KPI) that can be used to guide tech firms in their transition from traditional to subscription-based. The data was collected through existing secondary research followed by semi-structured interviews with actors from two tech firms involved in the subscription economy. The qualitative data was analysed using the Gioia methodology to categorise and code the findings. The research identified nine aspects within the four dimensions that tech firms should consider when transitioning towards subscription, with an added focus on three main pillars. To successfully transition towards a subscription-based business model, it is imperative that tech firms, firstly, focus on gathering and analysing user-generated data. Secondly, they should capture value based on recurring revenue streams over time, compared to one-time purchases. Thirdly, they should employ sophisticated software to handle the complexities surrounding recurring revenue streams while also enabling data collection and analysis of user-generated information that can be used to improve customer and product lifetime value and the monitoring of KPIs.