The rise of digital subscription businesses has revolutionized the way we consume products and services. From entertainment to health and wellness, people want tailored experiences that can be delivered right to their phones or inboxes. But a looming global recession, unstable markets, rising inflation and cost of living has caused many people to cut back on subscriptions, prompting companies to focus on retention over acquisition.
Our conversations with more than 20 leaders in consumer subscriptions organizations over the past few months underscored the need for this strategy change, but also shone a spotlight on the internal impact these shifts have on priorities, organizational structures and leadership. In this article, we explore key actions leaders need to take now to ensure their teams are able to capitalize on this strategy shift instead of being hampered by it.
Models Matter: Should You Centralize, Decentralize or Both?
While centralized structures are often the most cost-effective and have a clear leadership structure, most digital subscription companies need an element of decentralization to be competitive today. Innovation and entrepreneurship tend to thrive in decentralized environments, where leaders feel and act like empowered owners and have the freedom to make decisions quickly and take necessary risks.
However, there are a few caveats to decentralization. When there’s a wholesale shift in strategy (e.g., the change from acquisition to retention), functional teams can suffer if they don't have a voice in large-scale organizational decisions. Additionally, decentralization also often means there is duplicate work and positions. The willingness of a company to accept this duplication of effort depends on whether the primary focus is on growth or profitability. For companies focusing on growth, it’s more likely this duplication is part of the trade off in rapid scaling. For those focusing on profit, the cost of duplicative work is likely less palatable.
Our Take: Make the most of the model you have in place.
Before making a shift to a different organizational model because of a strategy change, take stock of what is working and where you can improve. It may turn out that you don’t need to make a structural change, but instead you could work on developing employees’ muscles around communications and creating clarity across decentralized teams. Leaders can also focus on building cross-functional rituals to ensure communication is intentional and deepens relationships across teams.
How Many Reorganizations Is Too Many?
If you’re asking this question, you may have already reached the limit your current leaders and workforce can handle. Reorganizations in digital companies happen rather frequently, triggered by personnel changes, mergers and acquisitions, new business priorities and market expansion. However, even for the most agile employees, frequent reorganizations can take a toll. Employees who are part of companies that reorganize every six months or every year may experience burnout and stress among their teams, as they are expected to deliver results on their current projects while also implementing new operating models and ways of working at the same time. This high level of stress and expectation can erode employee morale over time, leading to burnout and disengagement from the purpose and outputs of the organization.
Our Take: Prioritize your employees’ wellbeing during transitions.
A finding from one of our recent studies across generations and roles in the workplace found that employees value their physical and mental wellbeing above all else, including compensation. While you may not be able to limit your reorganizations, consider offering your employees relevant additional perks. This could include paid time off for additional professional development or mental health days for recharging or simple ideas like eliminating internal meetings on Friday afternoons. It’s also important that people feel heard when it comes to voicing their frustrations. Leaders need to actively listen and take stock of company morale. An environment that constantly feels unstable and employees who feel underappreciated will undermine productivity and engagement, potentially leading to an increase in talent turnover.
Business Shifts Require Leadership Changes
As subscription businesses shift from focusing on acquisition to retention, they need strong functional leaders across the critical areas of product, data, marketing, engineering and others, who are aligned across the company’s goals, strategies, and decision-making processes. For example, your Chief Marketing Officer, Chief Product Officer and Chief Data Officer should operate in lockstep, with data at the core of driving both product development and product positioning. Bringing the strengths of each of these teams together creates a powerful cross-functional trio able to understand the business’ strategy from multiple angles and add context from each of their functions. For this deep alignment to be successful, these leaders must also possess high emotional intelligence, comfort with ambiguity and approach every challenge with the mindset of the customer.
In addition to being strongly connected across functions, these functional leaders should have a voice at the very top of the organization, with access to the CEO and the board when applicable. This is extremely important when new strategies and products are being considered. They will have the business insights that are critical to making informed decisions.
Our Take: Functional heads must be more connected than ever.
This doesn’t mean endless WhatsApp and Slack messages at all hours. What it does mean is intentional time for connecting on shared leadership priorities and establishing agreed upon rules of engagement and a decision-making framework. Then these leaders must translate this shared passion for connection to their teams, which will result in higher employee morale and will benefit the business with greater alignment across functions. This collaboration may take some time to build, especially if your company is accustomed to frequent reorganizations. The teams you work with may shift and you need to devote time to building trust in these new relationships. It may also be a time to consider team coaching to help build stronger alignment across functions.
Subscribing to Excellence
Digital subscription businesses that change customer strategy without considering their organizational structure and people may find themselves in danger of being canceled—first by their employees and then by customers if they lack the talent to fulfill customer needs. Leaders must remember that customer centricity shouldn’t come at the cost of their employees; businesses that thrive know that to build customer loyalty they need to build employee loyalty first.