Innovating in disruption
Every year Forbes announces the top 100 innovative companies in the world, and while most people probably think they would be dominated by the tech sector, technology companies make up less than 15% of the winners.
From consumer packaged goods, to consulting services, pharmaceuticals, retail and hospitality, the gamut of companies that have separated themselves from the pack is highly varied. But nowhere is there a single newspaper or magazine publisher – nope, not even the highly esteemed and often praised, TheNewYork Times.
It’s no wonder the industry is struggling so much in face of continual disruptions in technology and society. They don’t have the strategic, management and cultural essentials to successfully innovate to win.
DNA of high-performing innovators
According to a recent study by McKinsey & Company, innovation is a challenge for most established corporations because they are better at executing rather than innovating and typically succeed by optimizing existing businesses rather than through transformative creativity.
Through interviews, workshops and surveys with over 2,500 executives, McKinsey found eight critical attributes that are inherent in high performers in product, process and businessmodel innovation. High-performing innovators…
1 Believe innovation-led growth is critical and cascade targets that reflect that belief down the organization
2 Invest in a coherent, time- and risk-balanced portfolio of initiatives with sufficient resources to win
3 Have differentiated business, market and technology insights that translate into winning value propositions
4 Create new business models that provide defensible and scalable profit sources
5 Beat the competition by developing and launching innovations quickly and effectively
6 Launch innovations at the right scale in the relevant markets and segments
7 Win by creating and capitalizing on external networks and partners
8 Motivate, reward and organize people to innovate repeatedly
There is no doubt that a few publishers practice some of these behaviors, but too many of them don’t because they are paralyzed by their inability to look beyond their existing installed base of users and innovate to perform management’s fundamental task, which according to business visionary, Peter Drucker, is “to create a customer.” By focusing on attaining value from customers, they lose the ability to create them.
We see this all the time in publishing, where media executives try to hold on to legacy print subscribers with existing products, business models and distribution channels rather than serving the needs of today’s consumer – a consumer they believe is out of touch with the realities of monetizing content, often preferring clickbait listicles over long-form journalism.
Is it hubris or ignorance that causes publishers to draw such erroneous conclusions? I don’t know. But what I do know is that the 100 top innovators on Forbes 2015 list don’t share those sentiments for a second!
Let’s take a look at just one – number 29 on Forbes list: Marriott Hotels.
Now I know that hotels and publishing don’t seem to have all that much in common on the surface, but look underneath the corporate hood and tell me this doesn’t sound familiar…
Start- ups, entrepreneurs and disruptors are basically changing the game before most of us honestly can even learn how to play it. They are honing in on complacency in areas where the consumer has been overlooked or egregiously underserved.”
Matthew Von Ertfelda, VP of insight, strategy & innovation, Marriott Hotel
Sound familiar? Both industries are facing a rise in...
- Millennial and Gen Z consumers who want the opposite of what these traditional businesses are offering
- Non-traditional competition that is eating their lunch
- The sharing economy, which is significantly decreasing demand for their existing products
These mega-trends aren’t run-of-the-mill problems for management to solve. But developing a strategy for massive change is no walk in the park – it requires a fundamental shift in focus and corporate culture at all levels. So, how do companies that have relied on scale for so long compete in a market that is so disruptive? How can they leverage their size and turn it from a liability into an asset?
In the case of Marriott, they:
- Launched their Blueprint for Innovation initiative 3 years ago
- Established the Marriott Innovation Lab in their corporate headquarters
- Became a “People Company” by repositioning itself around technology, innovation and a higher appreciation of guests and employees
- Experiment regularly on innovative ways to transform Marriott brands so they can “create millennial customers”
- Last year, it was also rumored that Marriott may have been considering a partnership with Airbnb that would create a redemption program for its Marriott Rewards members.
And their efforts are paying off. Besides being named one of the World’sMostInnovative Companies in 2015, Marriott…
- Won the Freddie Award for “Best Hotel Rewards Program in the Americas” eight years in a row
- Has been on Fortune’s Best Companies to Work For list for all of the 18 years the list has been in existence; consequently, they enjoy a very high retention rate for employees
- Acquired Starwood hotels (number 93 on Forbes most innovative companies), making the merged company the world’s largest and most innovative hotel chain with a market cap of over $30 US billion
Looking across the pond, innovation continues in the hospitality space at AccorHotels. Faced with disruptions caused by the sharing economy, the largest Europe-based hotel operator has embraced opportunities that come with collaborative consumption and new business models. It recently purchased three direct competitors to Airbnb and HomeAway - Oasis Collections, Squarebreak, and Onefinestay to better serve its customers. These acquisitions are part of a much larger business strategy for the hotelier. Transforming themselves from a provider of rooms and beds into a “travel companion”, the company has been increasing its interactions with guests five-fold and is heavily investing in digital technologies that help them maximize engagement with guests across multiple touchpoints. For example, AccorHotels…
- As part of its PLANET 21 program, made eco-friendly commitments such as encouraging eco-design, promoting green building and choosing sustainable products/technologies (e.g. choosing digital publications over print for guests)
It would be absolutely foolish and irresponsible to fight against any new concept, offer, or services like this, let alone fighting against the sharing economy. This is where the world is leading us. All of those new services are very powerful and very well implemented and executed. You need to embrace it.”
Sébastien Bazin, CEO AccorHotels
- Has committed to invest in 10 innovative start-ups
- Bought an aggregator of e-tickets for trains, buses, museums, events, etc. and integrated those services into their mobile app, instantly providing more local value-added services to their guests
- Was an early partner with the TripAdvisor Instant Booking system and is committed to be available wherever their guests make their travel plans (even on competitor sites)
- Invested in a video company that produces content for young millennials
- Changed the corporate culture by tying managers’ compensation to guests’ perceptions of the brand and properties
- Allows members of LeClub AccorHotels to earn loyalty points by taking surveys and sharing their opinions online
As a result of these efforts, in 2015
- AccorHotels’ profits increased by almost 11%
- Le Club AccorHotels loyalty program grew to ~26 million members and was a four-time winner at the 2015 Freddie Awards
- AccorHotels received 19 accolades at the 2015 HM Awards for Hotel and Accommodation Excellence
DNA of high-performing publishers
When it comes to innovation in publishing there are some media executives who are sticking their toes into the water, such as TheNewYork Times’ foray into Virtual Reality, but the real deep diving is only being done by a select few.
The Washington Post
When TheWashingtonPost was pulled from the ashes in 2013 by Jeff Bezos and transformed from a newspaper publisher into a technology publishing company, many media executives were skeptical about the Amazon Man’s ability to understand the business that took them years to grow up in.
Today those naysayers are eating their words as the benevolent digital dictator proved once again that the secret sauce to success is not about circulation and advertising revenues; it’s about putting people first.
Bezos broke all the rules by…
- Integrating editorial and technology rock stars in the newsroom
- Syndicating content (a sin of the past) from so-called competitors (e.g. BuzzFeed, Huffington Post, etc.) on its website
- Opening up opportunities for people to post their opinions under “PostEverything” while other publishers (traditional and digital pure plays) where slamming the doors on commenting
- Fostering innovation and experimentation in the workforce
- Licensing its ARC Digital Platform for Media platform to others
- Distributing content everywhere their readers are
It’s all about audience
Executive editor Martin Baron recently said that success of ThePost lies in its ability to put readers first; and that newspapers were at the center of the media ecosystem; publishers should not be afraid to fail.
It’s no wonder 2015 was a breakout year for ThePost as it achieved year-on-year growth of digital traffic in Q1 that outpaced all other US publishers. By December 2015, ThePost had done the unthinkable, edging out The NewYorkTimes, by attracting 78.5 million unique visitors – growing its audience by 78% in less than a year, with no evidence of slowing down.
Interestingly, in February this year, the NYT leapfrogged ahead again, making one wonder if the year-end results lit a bit of a fire under The Gray Lady.
In addition to growing audience ThePost is continually launching innovative new products such as, to name a few, … FlexPlay – makes video advertising load faster and more interactive
Bandito – performs A/B tests on headlines and images and automatically pushes readerpreferred versions to the site
PostPulse – determines what kind of stories readers seem to enjoy, based on their reading history
Re-Engage – mobile web recommendation engine (not unlike Amazon’s) that is triggered when readers become idle or start scrolling down the page too fast, offering up suggestions for other Post stories
Under Bezos’ leadership, TheWashington
Post is disruptively transforming itself into a technology-driven, audience-centric media business where “leaders start with the customer and worked backwards.” It’s proven to be a rock solid strategy before for him and odds are the tech titan will make it work again.
As a private company we are not privy to The Post’s revenues or profits and it is highly unlikely that either are what traditional publishers would consider even tolerable. The jury’s still out on when those numbers will start to make sense to us, but given his passion for technology, handsoff approach to editorial and audience-centric vision, I’d put money on this misunderstood maverick.
Star Media Group
I bet you didn’t expect to see this publisher showcased as an innovator in the industry, but they deserve to be here.
Star Media Group Berhad is a Malaysia-based company that started in the publication of newspapers and magazines just like thousands of other traditional media companies. But unlike the others, Star Media Group isn’t waiting and hoping to weather the storms of disruption; they are disrupting themselves by continually diversifying their revenue streams beyond newspapers and magazines to include:
- Multimedia offerings, such as videos and podcasts, photos, SMS for breaking news, blogs, Internet TV and broadcasts of radio stations
- Events, training, exhibitions, interior and thematic business segments
In June 2015, it also launched its Audience Interest Marketing service, the first by a Malaysian media company that connects advertisers directly with their target markets, tailoring online advertising to match the preferences of media consumers.
Because diversification is such a large part of Star Media Group’s strategy for massive global reach and revenue growth, the company rebranded itself in 2015 to better align its varied portfolio of products and services to, as Chairman Datuk Fu Ah Kiow asserted, “Stay in front of change.”
- The Star was the first Malaysia media company to hit the six-figure ePaper subscriber mark and also the first to introduce an app that combined news and video content.
- In May 2015, the publisher registered a 78.2% increase in profits in the first quarter compared to the same period the previous year.
- Despite the economic crisis that occurred in Malaysia in 2015 and the continuing decline of print revenues, the stalwart publisher was able to more than weather the storm. Due to the successes of its non-traditional business lines, Star Media Group increased sales from the previous year and enjoyed profits of ~13%.
- Star Media Group won Malaysia Best Employer Brand Award in 2016.
Are you an innovator
Steve Jobs once said that “Innovation distinguishes between a leader and a follower.” Are you an innovator or a follower? Are you creatively transforming your business or just optimizing it?
If you don’t know, then I highly recommend you sit down and honestly ask yourself if you are practicing the eight essentials of innovation. Rank each of your answers on a scale of one to five and add up your score.
Above 30? Then I’d love to share what you’re doing with our readers in the next issue of The Insider.
If you score below 20, take heart in knowing that you are not alone. Most companies, especially large established ones, don’t easily transform themselves into leading innovators. Shackled by defensive, inwardly-focused bureaucracy, very few are able to commit to continuous innovation.
But it’s not impossible. Start with one small change in mindset – be in the business of publishing, not publications. Then make customer-focused innovation your raison d’être. With those changes in mindset and focus, you can start to recreate your business plan reflecting the eight essentials of innovation every step along the way.
Be not afraid. The risk isn’t in making dramatic changes; it’s in sticking to the status quo.