Evolve or Die – John Hagel on the Future of Media at TechCrunch Disrupt 2010
I just had the opportunity to watch a fantastic panel from TechCrunch Disrupt 2010 titled Evolve or Die: The Evolution of Music, TV, and Publishing. This panel discussion can be viewed below:Vodpod videos no longer available.
The panel is moderated by Michael Wolf (who does a very nice job BTW). Participating in the panel are:
- Sarah Chubb – Then-President of Conde Nast Digital
- Fred Davis – Founding Partner, Code Advisors
- John Hagel – Co-chairman, Center for the Edge @ Deloitte
- Avner Ronen – CEO, Boxee
But for me the highlight is absolutely John Hagel, whom I actually hadn’t heard of before. Hagel is co-chairman of Deloitte’s Center for the Edge, a center created to help executives make sense of profound shifts in the competitive landscape. He has co-authored with John Seely Brown The Power of Pull How Smart Moves, Smartly Made, can set Big Things in motion, and is a contributor to the Big Shift blog, along with John Seely Brown, at the Harvard Business Review site.
I’m going to quote several powerful segments from Hagel during this panel, along with comment form Sarah Chubb of Conde Nasah. These comments speak to profound changes traditional media companies are currently facing.
The transition from a product-centric to a customer-centric mindset
Here’s John Hagel providing his thoughts on how traditional media companies are transitioning to the digital world:
I think there’s definitely opportunity for the large companies to still make a go of it. They’ve got extraordinary assets to deploy in terms of relationships, brands – relationships both with audience and with creative talent.
So I think the challenge is just understanding the changes that are going on. And part of the issue, from my experience, is that the changes are just so fundamental that it’s no longer about skills, it’s not even about economics, it’s really about basic assumptions about what is required for success. And when you get to that level it becomes very challenging to make the transition.
I would say one of the key transitions for large media companies is to move from a “product business mindset” to a “customer business mindset”. And I think most media companies when I talk to them would say “Of course we’re a customer business; that’s our franchise.”
On the other hand, there are some basic questions you can ask that quickly put that into question. One is, “If customers are your focus, who has the power within your organization? Is it the product people? Or the customer people – the executives that own customer relationships vs. the executives that own product development?”
[By Customer People, I mean] people that are really focused on building relationships with customers – ongoing relationships focused on getting to know these audiences not just as segments, but as individual audience members. Who has the power? When there’s a conflict that emerges in the organization, who wins?
Second question is “How do you measure profitability?” If audience is so important to you, do you measure profitability based on product profitability or audience profitability? Most media companies still are very focused on product profitability. A fundamental mindset shift required.
Finally, brand promise. What’s your brand promise? Is your brand promise “Come to us because we have extraordinary product?” Or is your brand promise “Come to us, because we know you as an individual audience member – again not as a segment, but as an individual audience member – better than anybody else, and you can trust us to bring together the right media content resources for your needs.
And I think that’s kind of the shift really necessary to make this transition. And I think that’s where the large media companies are still struggling.
Later in the panel, Sarah Chubb elaborates on the same theme, and the role that audience engagement through social media:
It actually does go to what [John Hagel] was saying about moving from a product-centric point of view to a customer-centric point of view, which is certainly a transition that our company has been going through.
We are in the audience business. The quality of your audience, and the level of engagement and how good you are at monetizing that, determines how profitable you are, and long term how healthy your business is.
There’s monetization and value in the audience relationship with the consumer revenue stream. And if you’re very good at selling and packaging and marketing, which we tend to be, there’s the advertising revenue stream as well.
Social is critical to that, because what “social” has taught us is, even if you’re in an authority position – and many of our magazines like a Vogue or Architectural Digest are – the conversation that’s going on as a result of that authority position is maybe more important than your point of view. It’s at least equally as important.
Chubb also poses an interesting question around what role in the company “owns” the responsibility for the social media relationship with audiences:
Well and that’s another ownership question, right? Who owns the social media relationship? Is it the consumer marketing department? Is it the PR department? Is it the Editor of the magazine? And that’s a rich conversation.
The Future Profitability of Traditional Media Businesses in the crossover to Digital
Moderator Michael Wolf beings a segment in the discussion by posing the following question:
There’s a lot of discussion in what we’re talking about – this idea of “crossover”. And it’s certainly what’s on the minds of a lot of media executives, which is that there’s a moment at which the very profitable business model of today becomes one which, in the intermediate period, may not be all that profitable. Where do you all see the crossover?
Hagel’s response is provocative:
I believe over time what we’re seeing in the media business – and it will accelerate – is an unbundling of media businesses into 3 different types of businesses: (i) product businesses, (ii) customer businesses, and (iii) infrastructure businesses.
Profit historically has been in the product business. I think over time it will be in the customer business and the infrastructure business. Those economies of scale, economies of scope become huge generators of profitability.
It’s going to be a very difficult transition. And I think to [Avner Ronen’s] point about the competition of content and quality content, there’s more and more content competing.
So if you are a product company, you’re going to be competing in a more and more fragmented world. And a world where it’s harder and harder to sustain position based on product superiority. There’s going to always be some more creative talent out there that comes after you.
So that’s the challenge for a very large company that’s been a product business historically. How do you cope with that fragmentation and difficulty in sustaining, and if possible how do you make the transition to one of those two other business types?
When Wolf asks Sarah Chubb how she’s managing this transition at Conde Nast, here’s her reply:
The one sort of visual I would use is that you have many, many, many too many plates in the air at the same time, right? So you have an existing, very profitable, very solid and cash-generating business that is in transition. And where to take the value out of it, and leverage the value without losing what’s generating the cash at the moment.
And one of the things that we think we’re going to see happen is the importance of brands – to your point – there’s so much stuff out there, we know that our brands are valued.
That doesn’t mean the way they’ve been embodied forever will continue – you know, 10 years from now will still be the thing throwing off the cash. We’re actually are urgently looking at everything we possibly can to figure out where the value is in those brands, to add adjacent products, to create new products.
You know, what is it about that relationship with the Vanity Fair brand that makes people want to embrace it? And are there 10 other things that you might want to buy from me that tap into that passion that you have for the brand?
And what that requires from us as a large media company is to be ruthless about past feelings and past ways of doing things much, much faster than we’ve ever been. And we’ve learned a lot from the Web. So as much as I wish the CPMs on the Web were anywhere close to what they are in print, and it’s much harder to make serious money without enormous scale online …
We’ve learned so much from Epicurious and Wired and Reddit, and even from the sites that we have for our magazines that are relatively smaller that we think it’s happening fuel the evolution into faster and hopefully more profitable things. And you’ll see products from us for the phone and for the new devices that come out that will compete with the iPad, and we love the iPad. You’ll see more things from us that are faster turnaround, that are maybe less than the cost of a subscription, but tap into that passion that people have for the brand.
Summing up …
Some very interesting insights shared in this panel. Also some really good thoughts on the role of social games in the future of media.
Before I wrap up this post, while I’m trumpeting the horn for John Hagel, I also enjoyed the following 3-minute clip from Hagel speaking at 14th Annual Wharton Leadership Conference.
He address an important concept from his Power of Pull book, which is knowledge stocks vs. knowledge flows. Anyway, I find Hagel to be an interesting “big-picture” thinker.