Last year, we started banging the drum about the need for software companies to place a Chief Monetization Officer—we call it the CMzO—within their senior management ranks. Our argument then, and even more so now, is driven by the dynamics of how software today is sold and delivered, the availability of data on how individual customers use and gain value from software, and the impact those factors can have on company performance, sales, and valuation. In short, software monetization has become so complex and intertwined, and so relevant to the company’s success, that a high-level executive with a sole focus on it is now necessary.
Read more about the need for a CMzO, the reasons why these needs are best met with a dedicated CMzO, and the importance of a CMzO for software investors.
While reactions to this CMzO call-to-action covered the range from enthusiasm to cynicism (not everybody loves change, right?), most of the software leaders we heard from wanted to learn more about how a CMzO role would be structured, and its fit within the rest of the organization.
Five Areas of Focus for the Chief Monetization Officer
Ultimately, the CMzO should be the keeper of the business model; the executive who will oversee how it is set, adjusted and optimized, and integrated into all areas of the company. Here are some of the key elements of the CMzO’s role:
- Put the monetization system in place – The CMzO will lead the company through the process of establishing a comprehensive monetization model. This involves deep dives into how customers use and derive commercial value from the software and how that varies for different types of customers, as well as the company’s competitive environment and sales infrastructure. The model must address each of the three core elements of software monetization:
- Licensing: The metrics around which products are sold (e.g., number of users, transactions); what’s included, payment terms and timing.
- Packaging: How products, features and services are configured and offered to customers.
- Pricing: The amount to be paid, along with parameters for discounting and other incentives.
- Build a monetization team – The nature of the software industry requires monetization models to be dynamic, able to adjust as product features, market conditions and customer needs evolve. The CMzO must build the capacity—including the people and tools–to monitor, analyze and adapt to these changes.
- Mitigate risk as the model changes – A critical role for the CMzO is to ensure that changes to the monetization model do not lead to unintended negative consequences. The monetization team must develop the capacity to simulate and test changes so that potential issues can be identified in advance.
- Forge alignment throughout the organization – One of the key reasons for software companies to establish a CMzO position is to have a platform from which monetization objectives can be driven through the entire company. When monetization is a subset of another functional area, it is much harder to resolve conflicts between the monetization strategy and narrowly focused interests. For example, when monetization is under the domain of the Chief Revenue Officer—as it currently is in many software companies—it is difficult to control out-of-model discounting when the CRO is also beholden to that quarter’s revenue goals. The CMzO will collaborate with all departments to ensure everyone is aligned with the adopted monetization model.
- Establish priorities within the product roadmap – A prime example of the need to align all departments with monetization objectives is found in product development. Often features or enhancements are designed into the software based on customer requests, competitive advances or even a developer’s desire to bring a cool idea to life (a software CEO friend of mine called this the “Neat Sh*t Syndrome”). While these can be critical inputs, the CMzO will apply real use data and customer experience research to ensure the product roadmap—and the cadence of new releases–is guided foremost by monetization objectives. This not only enhances corporate performance, but also keeps the code base from becoming bloated with non-productive features.
Is your company ready for a Chief Monetization Officer?
As the concept of a Chief Monetization Officer gains traction, the gap between high-performing and average-performing companies will widen, an outcome that will not go unnoticed by software investors. From monetization strategies and your sales team to data insights and data teams, a CMzO can make a positive impact on more than just revenue. Software companies can help themselves by seriously considering the CMzO role within their organizations—sooner rather than later.