November 12, 2020
Can Rundles Pass the Overseas Sniff Test?
I woke up this morning and couldn’t stop thinking about Professor Scott Galloway’s rundle. A “rundle” is his mischievous phrase combining two popular business models - recurring revenue (something a consumer or business pays for every month or year. Think Amazon Prime, Spotify and the gym membership you don’t use) combined with a bundle of additional products or services. Amazon Prime added movies and music into their package. Recurring revenue with a bundle. Walla, it’s a rundle. What I was specifically wondering: does a rundle work the same way overseas? Is it repeatable globally? Why am I thinking about this man when I wake up (asked by my wife)?
Before we put the Professor’s rundle to the global sniff test, let’s look at why these business models are so sexy. In two words, they work. Adobe used to sell one-time licenses at around $2,500 until they pivoted and built their Creative Cloud. This is a $45/month price point where the money flows in month after glorious month. Adobe’s share price increased by over 700% since making the change. Markets like rundles.
Peanut butter meet jelly. Chocolate meet peanut butter. Peanut butter, meet pretty much anything. But wait. Peanut butter, believe it or not is not popular everywhere. Can rundles go global?
Take my current home town, Singapore. Amazon Prime exists here. It has limited offerings, but they are growing constantly. They have a few local and regional competitors including RedMart for food and Lazada for everything else. The difference between Amazon and Lazada? With Amazon you may be buying cheap Chinese knock-offs. Whereas on Lazada, you are buying cheap Chinese knock-offs. Singapore is a small market and it would be hard to see any company in this space making a profit here. What's their plan? Can these scale to nearby markets? This is where the big problem with Asia kicks in. The region is giant, wildly diverse and teeming with local competitors, many with giant checkbooks. VCs love an Asia story, but few realize the complexity.
Grab, the company who out-Ubered Uber to win the region’s ride sharing space, managed to create localized services within each of the markets here. Using motor bikes, offering a variety of non-ride-sharing services and rolling out an electronic wallet complete with a growing ecosystem of suppliers. Now they are experimenting with a rundle in Singapore. What’s in their deal? Bubble tea.
Bubble tea is tea with chewy balls in it. That’s the current Singapore rundle. From what I’ve heard it’s very popular.
But we’re not here to talk about chewy balls, we’re here to sniff out foreign rundles.
In some cases, the complexity of the region is a reason itself to create rundles. One of my previous, underpaid, employees set up his own SaaS businesses. But he's not selling software, he's selling sales teams. Yes, outsourced sales teams - Sales as a Service. Rent your own local sales mercenaries who know local markets and can generate revenue. Serious revenue. Bundle in some regional know-how consulting and things get really interesting. Small and medium sized companies won't be able to figure out all the local nuances across regions fast enough. Outsource it. Rundle up.
The lesson here is that recurring revenue is sexy everywhere. Professor Galloway is right. But it is not universally consistent. Localization is the new globalization for many companies.
I’ve said it before and I’ll say it again: building companies globally is complicated. Businesses need to standardize wherever they can and localize when they must.
What will it take for companies operating across multiple markets? Creativity and flexibility and local leadership that knows how to communicate with headquarters. These are traits spoken of constantly but rarely applied. Businesses will need to give more control to local and regional branches and encourage experimentation without losing control. Not easy. Use the jelly from HQ and accept the fact that not all markets like peanut butter. No one ever, ever, ever in Uber’s California headquarters would come up with the idea of bubble team rundles. That’s a sentence I never thought I’d write.
Because recurring revenue models are so successful, expect a tidal wave of new offerings. The downside will be for consumers having to keep track of all these small monthly fees. Perhaps credit card companies can create a rundle where, for an ongoing monthly fee, they keep track of rundle usage. Sign me up for that.