v12golfcart
While any sentence-long description will be an oversimplification, I think fitting everything under the sun in a "1st way" is counterproductive. If all we're talking about is how they succeed with Ron's components in mind, then there are at least a few ways.
I see the the need-being-met thing as a spectrum. The more unmet the need is, the less likely competition is a problem at that moment, so just solving it is sufficient (who knew having a car was actually a 'problem' versus purchasing transit from 'a' to 'b'?)
I've also seen that sometimes a product that focuses on a niche and does it REALLY well is better (for that niche) and NOT cheaper, but they succeed too (e.g. Veeva).
Sometimes a product that focuses on the lower end of the market is cheaper and not better (i.e. functionality) but ppl underestimate the long-tail of non-users. (maybe like Gusto vs. traditional payroll providers or RelateIQ vs. Salesforce)
On acquisitions, I've heard that acquihires usually make little-to-no money for the investors. But as beambot also mentioned, the business could be acquired for hard tech that, even if no customers/bizmodel, some other business would find value in having (maybe like Facebook>Friendfeed or Linkedin>RunHop). But to reverse engineer that from day 1 I imagine would be even harder than building a product to an unmet need haha. You don't know if the bigger co is working on it internally or if they'd scoop up somebody else. Wonder if this was Meerkat's plan, gone awry <-- speculation. ¯\_(ツ)_/¯.
It's true that we pay more for stuff now vs. perpetual licenses (it's prob a book's worth of material, but "opt-out is better than opt-in" and Houshalter's point on chunking are most of it). But in exchange, companies have the ability to invest that greater profit to a greater degree in innovation, so in the long-term we, customers, should get more out of it than we lost in dollars.
First an observation: Adobe's decision to increase profit secularly (i.e. beyond any accounting nuances at the time of switch) by switching to subscription is actually TWO decisions. 1) the switch in revenue mechanism itself and 2) the decision to NOT invest the additional profit.
#2 is the crux of my point, but the "to a greater degree" thing is a 1+1=3 effect:
"more profit" is straightforward because subscriptions increase dollars in, often more than making up for any churn. That cash could be invested to accelerate innovation. It's 1-to-1 apart from timing issues (queuing "yearly up fronts" :D)
"to a greater degree" - this is the special part. It is easier to spend more when predictability is higher. Or put another way, volatility is the enemy of spending to the "hilt". So companies like Netflix can spend (for our sake) more to the hilt when you have a tighter distribution as to where the hilt could be (vs. perpetual products which have poor visibility). Just ask any marketing person or sales person about how easy it is to spend in channels when attribution isn't a problem. BTW I define hilt as "as much as necessary to stay ahead of threats of competition/churn"
But yes, the company does have to choose to do this. Some are more relentless for their customers :). I just heard about the www.relentless.com thing lolz...
Quick aside: I saw this sick chart that compared 12-month lifetime value between Dollar Shave Club (subscription) and Harry's (previously per unit). Even though Harry's has always been branded as a more premium product, DSC made more money by the 12th month (even after churn). It's easy to forget that monthly click -_-