What advice would you give someone looking to start their own business?” is by Tien Tzuo, CEO of Zuora.

The first piece of advice I would give anyone starting a new business is to forget everything they learned in business school. Or better yet, don’t go to business school. Why? Because right now we are going through a once-in-a-century transformation in business that is throwing out all the existing rules. And that includes everything that the MBA programs are currently teaching their students. Don’t believe me? Let’s look at how business has been taught for the past 100 years. It is a truth universally acknowledged that the fundamental goal of business is to create a hit product. You then sell as many units of that product, thereby spreading your fixed costs over as many units as you can, and you compete on margins. Well, in my opinionthat’s all worthless. Those days are gone.

If you’re starting a new business today, it’s highly doubtful that you’re selling a physical product on a per unit basis. You are probably launching something online in order to deliver great services, not sell widgets–think of all the new delivery services like Instacart, BloomThat, Washio, or PostMates. This is because the world is shifting from selling products to selling subscriptions, and in the “subscription economy,” companies are focused on generating recurring revenue. So it’s not about the price of the product and the margin. It’s about delivering value to customers, so they don’t want to switch services. But in order to manage this effectively, you’re going to have to do five things, and answer one very important question:

Define subscriber metrics
You’re going to have to think about measuring annual and total contract values, payments and declines, monthly and annual recurring revenue, and relationship retention. Stuff they don’t teach in Accounting 101.

Understand your consumer
People now expect products to adapt to their specific needs. They expect ongoing value and unique experiences. And they’re not as interested in methods as they are outcomes. Stuff they don’t teach in Marketing 101.

Personalize your service
The product economy is dead–products can’t be personalized. A product can’t learn your behaviors and preferences. A product can’t be constantly upgraded, so that it gets better—instead, it becomes obsolete. Stuff they don’t teach in Manufacturing 101.

Customize access
People now define ownership as managing the decline of a physical asset. They’re opting for access over ownership: ride shares, streaming services, and subscription boxes. Stuff they don’t teach in Design 101.

Create a great experience
You have to create services that can learn and adapt based on behavior. Services that can improve themselves autonomously. Services that can be truly customized. There’s no MBA class for that.

And finally, the key question isn’t “What product can I sell?” but rather “What do my customers really want, and how can I deliver that as an intuitive service, rather than a stand-alone product?” Answer that question and you’re on your way.

• by
  
• Tien Tzuo
  

• @tientzuo
  

APRIL 27, 2015, 12:30 PM EDT