One of the things that I find most irritating about media industry 'punditry' is the fact that a lot of the commentators tend to exist in their own little bubble.
There are endless articles written about paywall strategies; CPM rates for online advertising; must-have vs. need-to-have content and whether our current problems will resolve themselves as the economy turns. These are all well and good but only get us part of the way.
To cut to the chase, can we all please agree that we are still only in the early stages of radical disruption of all media businesses?
A radical disruption that has been brought about mainly by the internet & its ability to change media consumption habits and reduce the power of old media models.
If we all agree and start from this point then maybe we can look outside our media world and look at some of the lessons from other industries that have experienced the same disruption in the past.
How did companies in tech, music, transport or telecoms industries cope? Which companies survived and prospered? Which ones withered and died; and what can we learn as a result?
With all this in mind I was particularly interested to hear a keynote from Simon Waldman at Incisive Media Loading... 's E-Publishing Innovation Forum recently. Simon has recently left a senior digital position at The Guardian Loading... newspaper and joined LoveFilm Loading... .
His presentation "Creative Disruption - or OMG! The Internet ate my business" was based on an upcoming book of the same name. I wanted to list a few of the highlights for me and suggest that you pre-order his book (due out in October this year).
Simon started his talk by highlighting that a process of creative disruption is an essential fact of capitalism. He quoted Joseph Schumpeter Loading... from 1939 explaining that a railroad through new country "upsets all conditions of location, all cost calculations, all production functions within its radius of influence; and hardly any 'ways of doing things' which have been optimal before remain so afterwards."
He then asked the audience to replace the words railroad with the internet.
Imagine that a railroad has just been built through our industry. That railroad has opened up the market to a load of previously unknown competitors from other territories - many of whom we have never heard of. It has changed the cost base of doing business. It has reduced the price point that we can charge for what was previously scarce content. It has allowed our commercial customers to do more of their own marketing and provided access to new tools for publishing and distribution.
That's disruption on a grand scale and Simon highlighted 4 possible hazardous reactions to these changes.
It's possible you might recognise some:
- Denial - the numbers are getting fewer but I still hear some senior publishers who refuse to accept that this process is taking place. They talk about a cycle that they have seen before.
- Bewilderment - aka the Private Frazer school - we're all doomed and there is nothing we can do.
- Delusion - OK. So I accept that this is happening to some parts of my industry (maybe controlled circulation titles?) but those trends don't apply to my niche, premium content subscription business. We'll be fine. We're too good to fail.
- Distraction - Yup. I get what's happening, and we'll get on to it, but first I've got a couple of important conferences to promote, we're redesigning a website and then have to do a budget re-forecast.
All of these reactions will get you to only once place - a spiral of pain.
So, what lessons did Simon learn from other industries that have been through these disruptive phases? What should media owners be doing about it?
- Start with change in mind. Right from the top. He highlighted the Fast Forward change programme that Tom Glocer Loading... introduced on taking over at Reuters Loading... to make very clear where the company was coming from and going to.
- Fix the core first. Don't spend time searching for something that is too radical. Lou Gerstner Loading... , the IBM Chairman said that "the last thing IBM needs now is a new vision". His (ultimately company saving) approach in 1994 was to get the company's core business right by adjusting their product mix, working on the cost base and getting the business profitable. That allowed him to generate cash and buy time to move away from the mainframe and into the services business. Smart things come from stable cores. They are very hard to do when you are fire-fighting.
- Look for key adjacencies. Where are the opportunities at the edges of your markets to expand? What do you do better than your competitors and how can you move those skills into new areas? This is something that media owners have generally been good at with brand extensions, taking advantage of new platforms, geo-cloning products to other territories etc.
- Innovate around the edge. You might need to do this away from the main business (anyone up for another Euston Project?) but these activities should be focused experiments to test and feed back into the core business. It was interesting that upon becoming acting CEO of Apple Loading... , Steve Jobs Loading... cut their research and development budget in half but gave a much clearer focus to the spend. They could only develop the iMac/Pod/Phone/Pad after they had reduced headcount by 1/3, sorted out their supply chain and made their desktops profitable.
- Build your teams to enable change - this required a combination of Firestarters, Rockstars and Fixers (combined with great leadership at the helm).
All in all I thought it was a great presentation and provides a good roadmap for anyone wrestling with the changes in the media market.
I look forward to reading the book when it is out in October and cannot help but see a little irony in the fact that Simon has chosen to leave the media industry prior to it being published...
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