After scrolling headlines in the  New York Times you head into the kitchen and open todays Blue Apron box to prepare a shrimp risotto before turning on Netflix for an episode of  Comedians in Cars Getting Coffee You may not have noticed but youre now fully enmeshed in the subscription economy The subscription model is a booming field In recent years this market has grown by more than 100 a year increasing from 57 million in sales in 2011 to 26 billion in 2016 Tien Tzuo  says the subscription model is the way of the future In 2008 after nearly a decade at Salesforce Tzuo founded Zuora a software company built to aid organizations shifting to this model In his recent book   Subscribed Why the Subscription Model Will Be Your Companys Future and What to Do About It Tzuo aims to change how executives think about their products and organizational structure in the subscription economy If youre not shifting to this business model now Tzuo writes chances are that in a few years you might not have any business left to shift Here Tzuo  who earned his MBA from Stanford Graduate School of Business in 1998 shares more about why its no longer the era of the unknown customer what it means to transform a business to a subscription model and his views on the value of an MBA You write a lot about the need to change our mind-set Why is this shift difficult Tien Tzuo  Once you get in the habit of thinking this way it becomes easier My colleagues and I often over dinner and wine would challenge each other to come up with businesses that couldnt be turned into a subscription model We tossed out ideas like guitars cement We realized its not about the physical product its about what the customer is trying to do And that inversion of thinking is at the root of everything Using cement as an example you realize that flooring is the actual need Theres a whole revolution of industrial carpets now Theres a service contract you simply pay some monthly fee plus overages usage etc So you can actually subscribe to a floor You call Adobe the company that provided the textbook to inspire others and reference how its revenue dropped drastically after the transition to subscription How do you advise leaders to manage through that pain TT  The fear is if Im selling a guitar instead of taking 400 bucks right now Im taking money over time And so doesnt that destroy revenue If I just flip the switch my revenues would plummet You can actually keep selling your product and sell new digital subscription services like Fender does its Fender Play offers access to online lessons for 1999 a month or if its a complete switch to subscription you can face what Thomas Lah and JB Wood authors of  Technology-as-a-Service Playbook How to Grow a Profitable Subscription Business dubbed swallowing the fish Costs go up and revenue drops but after the transformation to a subscription model is complete costs go down and revenue comes back up We want it to be as inspiring of a story as Adobe is They flipped the switch and revenues were down it hadnt been below a billion dollars in the first quarter in like 10 years But Adobe didnt cut staff commensurate to their revenue They did some adjustments to cost and explained this to Wall Street and gave them detailed metrics Yes the stock dropped when they had their earnings call but 24 hours later after they spent six to eight hours with the analysts things were back up As more businesses move to a subscription-based model should we be worried about privacy with our data TT  Services can monitor your behavior Generally thats a good thing because companies are using that knowledge to create better services for you But once a customer leaves a service a company should just return them the information Its their data Thats pretty black and white tends to work well and is well-aligned to things like the General Data Protection Regulation an EU law that regulates how companies protect citizens private data Advertising may never go away but as subscription services become the norm readers and publishers alike are starting to appreciate the dividends of a direct consumer relationship The behavioral insight that comes with membership plans and paywalls helps media companies move away from empty calories like page views toward more valuable engagement metrics like time spent We like the paid subscription-based business model because we think its a healthy dynamic between the vendor and the customer There should be rules and regulations that the data is the customers data not the vendors Its the advertising model where the vendor thinks Well I think this is our data not your data And my response Why is it your data Its my behavior In  Subscribed  you dive into industries that have done this well namely the  New York Times  with newspapers and Uber with ride sharing and perhaps more surprisingly Caterpillar with construction equipment What other industries can we expect to see in this market TT  One that I am really excited about is airlines Surf Air is called the Netflix of Aviation and members get limitless access to flights for a monthly fee Its an example of building a business by starting with customer wants and needs attacking pain points with a machete and growing a loyal subscriber base There are already subscription-based companies in real estate education finance and pet care The reality is ownership is dead now its really about access as the new imperative In a 2015 piece in  Fortune you said a business school education was worthless and recommended people dont get an MBA Has your view changed TT  Im still waiting for my alumni card to be rescinded just kidding I dont regret going to business school theres a lot of things that you learn Theres an embedded assumption in business today that the goal of business is selling units of their product Its built into how do you do marketing its built into how you do finance And this model is different Anybody whos going to Stanford GSB today Id say its not that lessons in the past are not important but try to understand there are different models The underlying concepts are still the same you still have to have profit and revenues but the time dimension and the customer dimension add more nuances to the overall picture