February 2020

Episode #280: Subscription Pricing, Part III

What a show! The subscription pricing business model continues to evolve as do our thoughts on the topic.

Here are just a few of the topics and links we helped use to drive the conversation during Part III of our Subscription Pricing discussion.

  • Futurist Dan Burrus distinguishes between hard and soft trends. The Subscription Business Model is a hard trend, and every business is going to have to grapple with it, whether they adopt it or not.

  • Tien Tzuo dropped a “time bomb” on television—and the NFL—in his February 8, 2020 newsletter, titled “2022: The Last Year of Television?

  • You can see the decline in ESPN subscribers here.

  • During segment two and three of the show, we had on previous guest, Justin Lake, @jlaketx (see Episode #245). We discussed how his business is adopting subscription-based pricing.

  • Subscription pricing comes to architecture, at Schimberg Group Architects, calling it “concierge architecture.”

Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits. 

Here are some of the topics and links Ron and Ed discussed during the bonus episode this past week:

Episode #279: Subscription Pricing in Law Firms Featuring Matthew Burgess

Is subscription pricing having an impact on the legal profession? Based on our guest — Matthew Burgess — the answer is a resounding YES!

Let’s Start with Matthew’s Biography:
Matthew Burgess co-founded View Legal in 2014, having been a partner and lawyer at one of Australia’s leading independent law firms for over 17 years. Matthew’s passion is helping clients to successfully achieve their goals. Matthew specialises in tax, estate and succession planning, providing strategic advice to business owners and high net worth individuals, and recognised in the ‘Best Lawyers’ list since 2014 in relation to trusts and estates and in ‘Doyles’ either personally or as part of View since 2015 in relation to taxation. In 2017 he was also nominated as Tax Partner of the Year (Lawyers Weekly). In part leveraging off the skills he has developed working in the SME market space, Matthew has been the catalyst in developing a number of innovative legal products for advisers and their clients. As an author, Matthew is widely recognised as an expert in his field, who constantly creates bespoke revenue related strategies for the growth, management and protection of wealth. Matthew is regularly published in Australia’s leading monthly tax journal, The Tax Institute’s Taxation in Australia (11 articles since 2012) and the leading weekly tax journal, Thomson Reuters’ Weekly Tax Bulletin (20 articles since 2012). He is the author of 23 books, and is a Practicing Fellow at VeraSage Institute.

Here are Ed’s Questions from the Episode:

  • You have an interesting LinkedIn profile, going all the way back to grade school. Give us the Matthew Burgess background story.

  • While you were at Big Law, you read The Firm of the Future and you said it was a two-year journey, what was that process like? Was it a sudden realization, or just over time that you concluded this 18-hours billable per day was nuts?

  • So did you try to change it inside the firm for a while?

  • Was that the build-up over time, or was there one incident that was the coup de grâce for you?

  • Talk to us about the transition, did you have a plan for creating your own firm?

  • You founded View Legal in August 2014. Were you solo or did you have a couple of partners?

  • Before we move on to talk about subscription, I wanted to ask you about one more bullet point under “Our Approach,” since it involves my experience in project management in the IT space, having to do with quality:

    • Old View: Quality is defined by the law firm

    • View Legal: Quality is defined by the customer

  • There are a lot of lawyers, and other professionals, who have a big problem with that one?

  • You were well ahead of even Ron and myself and other thinkers at VeraSage on this whole notion of subscription. One of the things I heard at VeraSage Down Under when I did my presentation on subscription pricing was that it could not work in law. What does subscription mean to you, and how is that different from pure value-based pricing?

  • What other adjustments did you need to make it sustainable for both you and your customers?

  • The whole notion of allowing your price to justify your expenditure of costs in the future, this allowed you to create, from a technological perspective, a better experience for those customers coming on?

  • We might have to combine subscription with something Ron has talked about for years, the TIP Clause.

  • If you to break your revenue down by percentage of subscription vs. standard fixed pricing, can you give me a percentage on that?

  • It’s a dual-gated model, the movie theater popcorn situation?

  • If you look at other industries, such as Amazon Prime, or other subscription models that are out there, are there any that you look to that you’re using to base your future on?

Here are Ron’s Questions for Matthew Burgess:

  • Your “Why” [Purpose] at View Legal is laid out on your website under “Our Approach.” Describe how you came to your Why:

    • “At View Legal our mantra is to build the firm our friends would choose.”

  • Also, “OUR VISION”:

    • “To achieve our vision, we have set out to fundamentally and radically revolutionise access to high quality legal advice, in our areas of deep specialisation – structuring, tax, trusts, asset protection, business sales, estate and succession planning.”

  • In a table below the Vision, you contrast the “Old View” of law firms with that of View Legal, with “significant inspiration provided by VeraSage. Partly adapted with permission of George Beaton, Beaton Capital, 2014.” We could spend the rest of the show on this table, but I just want to ask you about a few of the items.

    • Old View: Bill clients on hourly rates (or various, increasingly elaborate, permutations on the theme) and have no particular interest in client perception of value

    • View Legal: Customers provided up front ‘SPS Guarantee’ – that is service and price satisfaction is Guaranteed with all work undertaken following upfront fixed pricing

  • Explain how the guarantee works and what impact it has had on your customers.

  • When the trigger is pulled by a customer, and you do have to compensate the customer, one of the benefits is you get to fix the underlying problem that happened. Has that been your experience?

  • Having that guarantee does make you more selective about who you take on, doesn’t it?

  • Another item:

    • Old View: Revenue growth the #1 goal

    • View Legal: Exceeding customer expectations #1 goal

  • Another one on this table I just love, since diversity is such a hot topic right now in the professional firm space, you contrast:

    • Old View: Constant focus on the ‘need for diversity’ of gender

    • View Legal: Only focus on diversity of thought

  • And I love this one:

    • Old View: Intellectual property is how we make money and should be guarded jealously

    • View Legal: Intellectual property is how we create trust and should be shared freely

    • From Ron: I love that philosophy because I think Paul Arden wrote this in one of his books: I give away all of my intellectual capital because that forces me to replenish it.

  • View Legal participates in B1G1, 1.2 million+ impacts on your website, as of this morning. Our VeraSage colleague Paul Dunn is involved with B1G1. Describe that, and how it is seen by your customers, team members?

  • You’ve written 23 books. How many of those are children books?

  • One of those books, which I just loved, is The Dream Enabler (2014). Ed and I are going to do a show on inequality, and you point out in there that the most common problem faced by high net wealth families is alcoholism? Is that true?

  • You cite the rule “rags to rags in three generations:”

    • 1st generation makes the money

    • 2nd generation holds or keeps the money

    • 3rd generation loses the money

  • And you quote Warren Buffett: “A very rich person should leave their kids enough to do anything, but not enough to do nothing.” How do you think about inequality? Does it trouble you?

  • You also sent me a copy of your Best Ever 101 Lawyer Jokes [2015], and I love the Warning on the cover: “Content May be Considered Offensive (Particularly by lawyers!).” My favorite joke in there is: How many lawyer jokes are there? And people will inevitably respond with, “Millions, infinite.” No, there’s just one, the rest are true stories. 

Need more information?
This was a GREAT episode, no doubt. We also have another episode on a law firm that uses subscription pricing, #274.

Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

The bonus episode after Matthew Burgess featured……..Matthew Burgess! He was able to stay on with us for an additional hour and it was just as great as the first hour.

Click the “FANATIC” image to learn more about bonus pricing and member benefits. 

Episode #278: Memorable Mentors — Clayton Christensen

We paid tribute to Clayton Christensen as a Memorable Mentor in this episode. Buckle up because his contributions were vast and made a big impact.

Clayton Christensen, R.I.P. [April 6, 1952 – January 23, 2020 (67)]

From Wikipedia:

After graduating from high school in 1970, Christensen matriculated at Brigham Young University (BYU). While at BYU, he took a two-year leave of absence from 1971 to 1973 to serve as a volunteer full-time missionary for the LDS Church. He was assigned to serve in South Korea and became a fluent speaker of Korean. Christensen returned to BYU after completing his missionary service, and in 1975 graduated with an Honors B.A. summa cum laude in economics. Upon graduating, he won a Rhodes Scholarship and spent two years studying applied econometrics at Oxford, receiving an M.Phil. in 1977. Christensen then returned to the United States and moved to Harvard University to pursue an MBA at HBS, which he earned with high distinction in 1979.  He was a professor since 1992 at HBS. He’s survived by his wife, Christine, and 5 children.

His eldest son, stands 6 ft 10 in tall and played college basketball at Duke University, where he was a member of Duke's 2001 National Championship team.

He wrote: Why I Belong, and Why I believe, about his Latter-day Saint faith, and also: The Power of Everyday Missionaries: The What and How of Sharing the Gospel.

In the spring 2010 he had been diagnosed with follicular lymphoma, a cancer similar to that which had killed my father. Immediately after starting to write his book, How Will You Measure Your Life?, with his cancer in remission, he suffered a stroke, and had to learn to speak again, one word at a time.   

Here are some of Ron’s favorite concepts from Clayton:

  • “You should not have an opinion, the theory should have an opinion.”

  • “A good theory doesn’t change its mind. It allows you to categorize, explain, and predict Trying to predict the future by collecting data is like driving a car only looking in the rear-view mirror.”

  • “Conclusive data is available only about the past. If you want to peer into the future, you need a theory.”

  • The appeal of easy answers—strapping on wings and feathers—is incredibly alluring. Ostriches have wings and feathers, can’t fly. Bats have wings, no feathers, great fliers. Flying squirrels have neither.

  • Look for the anomalies in your theories.

  • Investors need to be patient for growth but impatient for profit. Capital that seeks growth before profits is bad capital. Both types occur.  When a good strategy has been found, investors need to change: impatient for growth and patient for profit.

  • Culture in any organization is formed through repetition—it’s like an autopilot, you have to program it.

Here are the books by Clayton we discussed:

The Innovators Dilemma, 1997

  • Andy Grove stood up with a copy at COMDEX “most important he’d read in a decade.”

  • A true disruptive innovation, appealed only to a niche market, appeared less attractive to the incumbent it eventually usurped.

  • Steve Jobs regularly quoted the book, so did George Gilder.

  • The Economist named it one of the six best business books ever published.

Competing Against Luck, 2016

  • This is all about the "Jobs to be Done" theory of creating value.

  • I'm still processing it for professional knowledge firms, as it seems to be more focused on products than knowledge work.

  • I think it's a useful framework, and I'm trying to reconcile with Pine and Gilmore's The Experience Economy value curve, where the top is transformations.

  • Given Christensen definition of a "job" is customer progress, I think they might be talking about the same things. In summary, a job is defined as:

    • A progress that an individual seeks in the given circumstance.

    • Provides a solution where there are formerly inadequate or non-existent solutions;

    • It is more than simply being functional – there are important/emotional dimensions that are often more important than the functional aspects.

    • The cure in the flow of daily life. This is the key aspect – it is not about the characteristic of the customer, product attributes or new technology or trends.

    • Ongoing – it is not about a selling event.

  • The question then becomes, which language is more persuasive. I like transformations (or legacy) rather than jobs, at least for knowledge work.

The Prosperity Paradox, 2019

  • Alleviating poverty is not the same as creating prosperity. We can’t end poverty by focusing on poverty. I was bit surprised by how this book never just says that wealth is the only known antidote to poverty, and how poverty needs no explanation, it’s the natural condition of mankind. What needs explaining is wealth.

  • This book does explain how to create that wealth, by creating market-creating innovations that are sustainable. I believe Deirdre McCloskey, George Gilder, Michael Novak, among others, offer a better theory of how and why innovation occurs (McCloskey’s focus on rhetoric and Gilder’s on an information theory of capitalism, which is the most innovative theory I’ve ever read), at the macro level.

  • This book is more at the micro level, but it’s still a worthwhile contribution. I only wish it would have built a stronger moral and ethical case for free markets.

  • Extreme poverty has decreased from 35.3% in 1990 to 9.6% 2015, 730 million from China alone, 66.6% in 1990 to less than 2%. Yet in Sub-Saharan Africa poverty actually increased, from 1990, 282 million (55% of population), to 2013, 401 million (42% of population).

  • Since 1960, $4.3 trillion spent on developmental assistance in poor countries. Name one that’s developed because of aid? Not one, which I was also surprised the author’s never delved into.

  • I’ve always appreciated Clayton Christensen’s attachment to the importance of theory—there’s nothing more practical than a good theory! He’s also very precise in the words he uses, and in defining his terms, such as:

    • Prosperity: The process by which more and more people in a region improve their economic, social, and political well-being. A country can be rich, but not prosperous (e.g., the resource curse).

    • Innovation: A change in the processes by which an organization transforms labor, capital, materials, and information into products and services of greater value. They create jobs, profits, and change culture (innovation is not the same as invention, something new. Innovations are usually borrowed country to country).

  • Three types of innovation: Sustaining, efficiency, and market-creating

    • 1. Sustaining: improvements to existing solutions on the market. Substitutive in character (Lipton Tea flavors, Camry best-selling Toyota), but don’t represent major growth in economy. Most innovations are sustaining in nature.

    • 2. Efficiency: Do more with fewer resources, usually process innovations. Tend not to create jobs (resource extraction, fracking, fewer inputs, greater output). Both Sustaining and Efficiency free up cash for future investments.

    • 3. Market-creating: create new markets that serve people for whom either no products existed or existing products were neither affordable nor accessible for a variety of reasons.

  • There’s not just one strategy (theory) for development. Japan, South Korea ($200 per capita income 1950s, $27,000 today; high suicide rate, 2.5 times OECD average; highest hospitalization for mental illness), Singapore (60 years ago, 1/5 GDP of sub-Saharan Africa’s), Taiwan, Hong Kong, all developed in different paths, but the common denominator was market-creating innovation.

  • The authors point out that Mexico has been mostly efficiency and sustaining innovations, but a serious lack of market-creating innovations.

  • There are a lot of examples of entrepreneurs who are making a dent in these poor countries with market-creating, from mobile phone networks, electronic payments and banking, health care, food, flooring, and many others.

    • Ultimately, market creating innovators Identify opportunities where there seemed to be no customers. It is difficult to run your ruler over things you can't see. Often, you will not be competing with any existing product, rather you are competing against apathy or nonconsumption.

  • They also deal with infrastructure, which is more a medium for moving value rather than creating it, and corruption. Corruption, like poverty, needs no explanation. What needs to be explained is why some countries have less of it than others.

  • Entrepreneurs are good at identifying nonconsumption, which is the authors’ theory for market-creating innovations. They conclude that “We can solve this problem. Not because we’re eternal optimists, but because we have done it before.”

  • I agree, there’s simply no excuse since we have a much better understanding of how wealth is created. But the focus on the “root causes of poverty” persist, which has always amazed me. What would we do if we learned the “root causes” of poverty? Create more of it?

  • Ultimately, the book recommends a reframing of the problem for developing countries focused on the following five principles, namely:

    • Every nation has a potential for extraordinary growth within it – this is referred to as nonconsumption.

    • Most products on the market today have the potential to creating growth markets when they make them more affordable.

    • A market creating innovation is more than just a product or service. It is a whole system that often pulls in new infrastructure and regulations and it has the capability of creating jobs.

    • Focus on pulling, not pushing to solve problems.

    • With nonconsumption, scaling becomes inexpensive. Once the opportunity is identified in nonconsumption, a business model can be conceived to make a product or service available to a large population of non-consumers, and from there scaling is relatively inexpensive.

  • But the poverty bureaucracy is entrenched, as the great movie Poverty, Inc. explains. Perhaps this book will get more entrepreneurs to innovate rather than simply providing charity. I hope so.

How Will You Measure Your Life?, 2012, Clayton Christensen, James Allworth, Karen Dillon

  • How can I be sure that I will be successful and happy in my career? My relationships with my spouse, my children, and my extended family and close friends become an enduring source of happiness? I live a life of integrity—and stay out of jail? (Jeffrey Skilling I knew of from our years at HBS was a good man).

    • “There are no quick fixes for the fundamental problems of life. I can offer you tools that I’ll call theories in this book. If I had tried to tell Andy Grove what he should think about the microprocessor business, he would have eviscerated my argument. Instead of telling him what to think, I taught him how to think.”

  • Incentives are not the same as motivation.

  • “Is this work meaningful to me? Is this job going to give me a chance to develop? Am I going to learn new things? Will I have an opportunity for recognition and achievement? Am I going to be given responsibility? These are the things that will truly motivate you.”

  • “You have to balance the pursuit of aspirations and goals with taking advantage of unanticipated opportunities. An emergent strategy.”

  • “I’ve had three careers: first as a consultant, then as an entrepreneur and manager, and now as an academic—none of which I planned.”

  • In his Staying out of jail chapter he quotes C.S. Lewis

    • “The safest road to Hell is the gradual one—the gentle slope, soft underfoot, without sudden turnings, without milestones, without signposts. “

  • “God, in contrast to us, doesn’t need tools of statisticians and accountants. No need to aggregate. His only measure of achievement is the individual.

  • “The only metrics that truly matter to my life are the individuals whom I have been able to help, one by one.”

Here are a few other resources regarding Christensen:

Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits. 

Here are some of the topics and links Ron and Ed discussed during the bonus episode this past week:

Episode #277: Free-Rider Friday, January 2020

Why does every Free-Rider Friday just FLY BY! This was a great show with LOTS of topics covered. Click play above to listen and use the show notes below to help guide you along.

Ed’s Topics For Free-Rider Friday

Ron’s Topics For Free-Rider Friday

Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits. 

Here are some of the links Ron and Ed discussed during the bonus episode this past week: