Why pub­lish­ers need to self-dis­rupt and be rein­ven­tors

The Insider - - EDITOR'S -

In early 2018, Mck­in­sey & Com­pany pub­lished an ar­ti­cle on why dig­i­tal strate­gies fail. It’s a very in­ter­est­ing read and I highly rec­om­mend you take a look at it when you have time to re­ally di­gest it all. One of the pit­falls they talk about is how com­pa­nies mis­un­der­stand dig­i­tal eco­nomics. This in­fo­graphic be­low epit­o­mizes that. It’s a pic­ture that paints a thou­sand very wor­ri­some words for legacy me­dia (the in­cum­bents) in the dig­i­tal age.

Ac­cord­ing to McK­in­sey's re­search, dig­i­tal:

Creates, more value for con­sumers on av­er­age than for busi­nesses

• Be­cause it has inverted the tra­di­tional power fun­nel

Drives “win­ner-takes-all” eco­nomics

• In­cum­bents who as­sume mar­ket share will re­main sta­ble, and niches de­fend­able, do so at their peril

• Re­wards those who move first and some su­per­fast fol­low­ers

• Or­ga­ni­za­tions that de­velop a learn­ing ad­van­tage, scale up plat­forms, and in­vest in AI at a much faster pace, al­low them to “skate to where the puck is head­ing”

Will turn all in­dus­tries into ecosys­tems — no one is im­mune

• Only 3% of in­cum­bents have adopted an ag­gres­sive plat­form strat­egy in their in­dus­try; whereas seven of the 12 largest com­pa­nies (by mar­ket cap) are ecosys­tem play­ers

So, if you’re not a peo­ple-first busi­ness and a first mover (or su­per­fast fol­lower) look­ing to adopt an ag­gres­sive plat­form strat­egy, then your or­ga­ni­za­tion’s fu­ture is at risk.

But, be­ing at risk and be­ing dead are two dif­fer­ent things. There’s still hope. Re­search shows that es­tab­lished play­ers that self-can­ni­bal­ize and dis­rupt their sta­tus quo can be highly com­pet­i­tive in a dig­i­tal world and tip the bal­ance in their fa­vor. McK­in­sey calls them “dig­i­tal rein­ven­tors”.

“Revved-up in­cum­bents cre­ate as much risk to the rev­enues of tra­di­tional play­ers as dig­i­tal at­tack­ers do. And it’s of­ten in­cum­bents’ moves that push an in­dus­try to the tip­ping point. That’s when the ranks of slow movers get ex­posed to life-threat­en­ing com­pe­ti­tion.”

McK­in­sey&Com­pany 2018

Be part of the 3%

To be a dig­i­tal rein­ven­tor doesn’t mean need­ing to de­sign some­thing brand new. One of the great­est rein­ven­tors of our time, Steve Jobs, was a mas­ter at rein­vent­ing what al­ready ex­isted (in­side and out­side Ap­ple) into some­thing that changed the world — the iPhone.

Nike CEO, Mark Parker, took Jobs’ “Innovate the old” ad­vice when he seized the reins of the iconic brand in 2006 and has been re-in­no­vat­ing its 31-year-old Air Max shoe brand ever since. In 2012, Nike over­took Ree­bok as the most valu­able ap­parel brand in the world and has never lost the ti­tle.

So don’t throw out the baby with the bath­wa­ter, as they say. Start by look­ing at the unique value your

or­ga­ni­za­tion has (from peo­ple’s per­spec­tive, not your own) and use it to rein­vent your­self. This, I sur­mise, would in­clude qual­ity con­tent (and its cre­ators) and unique peo­ple-first ex­pe­ri­ences you of­fer (or could of­fer) that would de­light au­di­ences. And bravely di­vest your­self of ar­chaic busi­ness mod­els, cul­tures, or­ga­ni­za­tional struc­tures, and modes of pack­ag­ing and de­liv­ery that are past their “best be­fore” date.

Then do what Steve Job’s did and look at what oth­ers have done al­ready and see if it makes sense to add their innovations to your rein­ven­tion strat­egy. Be pre­pared to ac­quire as­sets and purge in­side that which has no value to peo­ple.

But be­fore do­ing any­thing, eval­u­ate your­self and your busi­ness in terms of your readi­ness to rein­vent.

In the pop­u­lar busi­ness book Rein­ven­tion: Ac­cel­er­at­ing Re­sults in the Age of Dis­rup­tion, au­thors Cra­gun and Sweet­man as­sert that the abil­ity to rein­vent is the “price of ad­mis­sion to play in to­day’s global game of busi­ness”; it’s one of the most im­por­tant com­pe­ten­cies to mas­ter in the 21st cen­tury.

They of­fer an in­ter­est­ing as­sess­ment work­sheet which can help point out if you or your or­ga­ni­za­tion suf­fer from one of the “six deadly blind­folds” that keep com­pa­nies from see­ing and ex­e­cut­ing the way for­ward. I hope you’ll take the time to fill out this work­sheet be­cause, as much as unique qual­ity as­sets are the foun­da­tion of suc­cess­ful rein­ven­tion, they aren’t enough. Or­ga­ni­za­tions must be led by change agents that em­body what it means to be a dig­i­tal rein­ven­tor. This is per­haps the hard­est nut to crack be­cause those at the top now may not be the right peo­ple to rein­vent the busi­ness.

Ac­cord­ing to McK­in­sey, ex­ec­u­tives in me­dia, tech­nol­ogy, and telecom­mu­ni­ca­tions be­lieve their cur­rent rev­enues are at the high­est risk from dig­i­ti­za­tion. It’s hard to ar­gue with that given how, over the past 20 years, we’ve wit­nessed the un­re­lent­ing with­er­ing of prof­its and rev­enues in our in­dus­try at global scale.

One would think that that as­sess­ment would spur more me­dia ex­ec­u­tives into becoming rein­ven­tors, but that has not been the case.

The net gain in rev­enue growth that has been can­ni­bal­ized by pub­lish­ers’ dig­i­tal adaptations of core prod­ucts and ser­vices has re­sulted in paral­y­sis, leav­ing many me­dia com­pa­nies tread­ing wa­ter and un­der­in­vest­ing in dig­i­tal.

Mean­while rein­ven­tors, who are much more likely to di­vest lines of busi­ness made ob­so­lete be­fore the full ef­fect of dis­rup­tion was felt, make bolder in­vest­ment moves and longterm dig­i­tal ac­qui­si­tions.

What it takes to be a rein­ven­tor

In McK­in­sey's Oc­to­ber 2017 sur­vey, only 15% of in­cum­bents said they had pur­chased new dig­i­tal com­pa­nies that would be strate­gi­cally im­por­tant. Some ac­qui­si­tions, they knew, wouldn’t add to their short-term rev­enues, but would in the longer term.

For com­pa­nies that are not yet rein­ven­tors, which are the ma­jor­ity in our in­dus­try, there are a few things they can do to kick start the trans­for­ma­tion to be­ing one.

1. Start by in­no­vat­ing new busi­ness mod­els through the dig­i­ti­za­tion of core busi­nesses and the in­no­va­tion of new dig­i­tal ones. Dip­ping ones’ toe into the wa­ter (like just con­vert­ing sto­ries from printed edi­tions into dig­i­tal) won’t work. It has to be a much deeper dive. It’s not go­ing to be easy, both from a cul­tural and core com­pe­tency per­spec­tive, to make fun­da­men­tal changes, espe­cially those changes that start at the top.

2. Boldly ex­per­i­ment and eval­u­ate new tech­nolo­gies. You don’t have to be the first to adopt them, but main­tain­ing a “wait and see” ap­proach for too long will likely leave you be­hind the rev­enue curve. Re­mem­ber, dig­i­tal re­wards those who are first-movers and some su­per­fast fol­low­ers.

3. And fi­nally, be de­ci­sive in mak­ing in­vest­ments. Risk aver­sion is a death sen­tence in the dig­i­tally-dis­rup­tive world in which we now live — where new tech­nolo­gies move at ac­cel­er­ated speeds.

In my ar­ti­cle, AI and the fu­ture of jour­nal­ism, I talk about how com­put­ers are dou­bling their ca­pa­bil­i­ties ev­ery 12-18 months. Ac­cord­ing to Ray Kurzweil, in ten years, tech­nol­ogy will have im­proved 1,000 times from what it is to­day.

That’s hard for many of us to in­tuit, in­clud­ing me, but the law of ac­cel­er­at­ing returns is get­ting faster. If one were to be­lieve Kurzweil (which many do, in­clud­ing gov­ern­ments and the largest com­pa­nies in the world), in 30 years, the pe­riod of http://www.sin­gu­lar­ity.com/charts/page17.html “The http://www.sin­gu­lar­ity.com/charts/page17.html Sin­gu­lar­ity” will oc­cur.

This is the point at which tech­nol­ogy will be a bil­lion times more ad­vanced that it is to­day — the time when

“bio, nano, ro­botic, and com­puter tech­nol­ogy is so rapid, so ad­vanced, and so pro­found that to­day's lim­ited un­der­stand­ing does not al­low us to de­scribe, within rea­son, what life will be like.”

Now, I’m not try­ing to be an alarmist, but the fu­ture re­ally is now. There is no choice but for us to act, and act as­sertively, about where we go from here.

When I at­tended FIPP’s Dig­i­tal In­no­va­tors Sum­mit in March 2018, I heard some­thing at https://www.youtube.com/watch?v=oamqElJgdls&in­dex=15&list=PLKn­rTqP8tOncW5WkQvJDBP891HYJrRcbn&t=0s the panel on piv­ot­ing to reader https://www.youtube.com/watch?v=oamqElJgdls&in­dex=15&list=PLKn­rTqP8tOncW5WkQvJDBP891HYJrRcbn&t=0s rev­enues (30:29) that gave me pause. It was the most silo-break­ing busi­ness model I’ve ever heard from an in­cum­bent in our in­dus­try. And it gave me hope for a fu­ture where the in­dus­try could fi­nally work to­gether for a fi­nan­cially-vi­able fu­ture.

“Other in­dus­tries [mu­sic, video] only suc­ceeded with flat fees across all brands or the whole port­fo­lio. Like Spo­tify and Deezer, you get all mu­sic, with Net­flix and Ama­zon video you get al­most all videos.

“But in news me­dia you still sub­scribe to one brand. Yes, you get all the news, but only one brand.

“We al­ways dis­cuss if there is room for some sort of dis­rupter (and it might not come out of the pub­lish­ing in­dus­try by it­self) but maybe there's room to make a real mass me­dia model.

“There needs to be some­thing in the fu­ture which is $10 a month allin. But we as pub­lish­ers are not open enough to sup­port that. We are al­ways try­ing to keep con­trol on the user data, try­ing to keep con­trol of our news. And so I'm not sure if it will hap­pen, but it would be the ba­sis for a re­ally mass me­dia paid con­tent model."

Ste­fan Bet­zold, MD, BILD Group, Ger­many

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