Media design and innovation Lucy Kng 12 October

Media design and innovation Lucy Küng. 12 October 2016 © Lucy Küng (www. lucykueng. com) @ Kueng. Lucy

Overview 1. Dynamics of technology transitions 2. Business model reinvention – 2 options 3. Fuelling innovation - what needs to happen at the core? 4. Unleashing untapped creativity 5. Key takeaways Lucy Küng. Lucy. kueng@lucykueng. com. 2

Learning Outcomes • Understand the dynamics of technology transitions and why they de-rail even the smartest organisations • Understand two basic approaches to business model reinvention • Understand how to organise projects to maximise creativity • Understand the organisational dynamics that can unwittingly block innovation Lucy Küng. Lucy. kueng@lucykueng. com. 3

1. Dynamics of technology transitions Lucy Küng. Lucy. kueng@lucykueng. com. 4

• Why didn't Sony invent the i. Pod? • Why did Nokia fail to master smart phones? • Why didn't Microsoft invent Google? • Why didn't Google create Facebook? Lucy Küng. Lucy. kueng@lucykueng. com. 5

Media industry owes its existence to technological advance 1910 s silent film 1920 s cinema, radio 1930 s talkies (‘Jazz Singer’, 1927) 1940 s colour film, LP’s, tape recordings, stereo (‘Fantasia’, 1940) 1950 s black and white television, television networks, 1960 s colour television, compact cassettes, multi-track recordings (‘Pet Sounds’, 1966) 1970 s teletext, VCR, Cable television (US), Sony Walkman 1980 s PC, Internet, World Wide Web, CD’s, satellite TV (Europe) 1990 s Netscape Navigator, digitalisation, broadband, fibre optic infrastructure

Media frequently wrong-footed by technology transitions Hollywood studio model collapses Newspaper ad. revenues drop from 90% to 60%, and to 20% by mid 1960 s in UK Television 1940 s 1950 s Music industry’s business model collapses Multi-volume encyclopaedia business model collapses CD Rom Childrens’ comic business collapses 1960 s Internet 1970 s Lucy Küng. Lucy. kueng@lucykueng. com. 7 1980 s 1990 s

Despite its history, the media never has reacted well to technological change • 1920 s. Studio managers reject sound recording (“Who the hell wants to hear actors talk”, Harry M. Warner). • 1940 s. Hollywood sees TV as threat not growth opportunity (“People will soon get tired of staring at a plywood box”, Darryl F. Zanuck). • 1970 s, 1990 s. Music industry tries to block sales of home audio tape recorders and blank CDs, then seeks levy on their use. • 1984. Hollywood asks US Supreme Court to outlaw VCRs on piracy grounds. • 2002. Music industry sues Napster for copyright infringement. Lucy Küng

Technology transitions per se are not the problem Lucy Küng. Lucy. kueng@lucykueng. com. 9

The problem is the hidden hurdles inside organisations Lucy Küng. Lucy. kueng@lucykueng. com. 10

The more successful the company, the higher the hurdles Lucy Küng. Lucy. kueng@lucykueng. com. 11

Market transitions usually follow the same pattern Technological Discontinuity Period of ferment Technological Discontinuity Series of incremental Innovations New dominant design Period of ferment Incremental Innovation Dominant Design emerges (Adapted from: Tushman and Anderson, 1986; Tushman and Smith, 2002) Lucy Küng. Lucy. kueng@lucykueng. com. 12

Leading companies seldom master market transitions Lucy Küng. Lucy. kueng@lucykueng. com. 13

Doing the right thing in existing markets can set you up to fail in new ones Lucy Küng. Lucy. kueng@lucykueng. com. 14

Success breeds complacency • Leaders stay on top by ‘perfecting their recipe’ • Success validates their formula. They get more focused, and more confident • Market transition starts in corner of their industry. Seeds of permanent shift are sown - but changes are peripheral at first • Market leaders don’t pay new developments enough attention. They continue to put prime focus on existing products and competencies (which are still delivering bulk of business) • New market establishes itself, based on different products, premises and competencies, and has new leading organisations • ‘Old leader’ must make late entry - expensive and often unsuccessful (Source: Abernathy and Utterback, 1978, Tushman and Anderson, 1986, Christensen, 1997) Lucy Küng. Lucy. kueng@lucykueng. com. 15

Adapt or decline – the Internet is strategic inflection point for established media industry Profitable New growth (with adaptation) Inflection point Old Without adaptation Source: Burgelman, R. A. and Grove, A. S. , ”Strategic Disonance”, California Management Review, Winter 1996, p. 6 Time

Netflix enroaches on HBO Source: http: //avondaleeam. com, based on company filings Lucy Küng. Lucy. kueng@lucykueng. com. 17

Lucy Kueng (www. lucykueng. com) 18

Again, why are disrupters so dangerous? • Establish foothold at low end and then move up, eating away at incumbents’ customer base • Aren’t burdened with legacy businesses’ expensive overheads • Profitable on lower margins • They have the luxury of focus - invest only in what’s critical for the disrupted world Lucy Küng. Lucy. kueng@lucykueng. com. 19

Backdrop - continual evolution of content models Mass Media (1950 s onwards) Niche Media (1980 s onwards) § e. g. public broadcasting, national papers blockbuster movies § e. g. MTV, CNN, Discovery Channel, niche radio stations § Portmanteau content geared to broad general markets ! Markets fragmenting, consumers aging Social Media (2000 s onwards) § e. g. Facebook, You. Tube, Twitter § Content focused on specific issues for particular market segment § Interactive, consumergenerated, emphasis on contact and community § Continued growth from serving smaller segments § Vigorous growth, strong appeal to younger consumers Lucy Küng. Lucy. kueng@lucykueng. com. 20

Technological change continues to drive change Broadband networks ‘anytime anywhere’ Mobile broadband (via wireless ubiquity) ‘anytime anywhere’ two-way over greater area Storage and processing expand get cheaper More devices internet and video enabled three screen On-demand video content feasible for mass markets Lucy Küng. Lucy. kueng@lucykueng. com. 21 Content stored in clouds or network servers in multiple formats Content can be delivered to any device on any network

The media industry has progressively expanded over past decades Social/mobile Digital/online Apps, Facebook, Google Website Apps, streamed, You. Tube On-demand Niche Print supplements Niche channels Mass Print newspapers TV channels Print Broadcast For audiences, an amazing increase in choice, for media organisations, more complexity and stretched resources (lucy. kueng@lucykueng. com; @kuenglucy)

Classic media now overshadowed by ‘hyper-scale’ by digital platforms Challenges: scale, control of distribution, relationship with audiences, “not being in control of your destiny” Source except BBC and NYT: finance. search. yahoo. com. Data accessed 17 February 2016. BBC: BBC Annual Report. NYT Yahoo Finance 4. 2. 2016 Quote: Scott Rosenberg cited in New York Times 17. 4. 2916: http: //nyti. ms/1 q. Agy. Qt) (lucy. kueng@lucykueng. com; @kuenglucy)

How it was - the ‘Hit Model’ Lucy Küng. Lucy. kueng@lucykueng. com. 24

‘Hit Model’ Basics • ‘The greater the investment and planning, the greater the success’ • Resources focused on handful of ‘killer’ products • Rolled out on as many platforms as possible • Centralised product development and marketing • High risk, high return • Dependence on few products • Can throttle creativity Lucy Küng. Lucy. kueng@lucykueng. com. 25

Alternative approach - ‘throw mud at the wall’ • Increase odds of success by increasing number of attempts • ‘Cream rises to the top’ - especially in an era of viral media and social networking • Spread new product investment thinly • Experiment first in adjacent fields • Fast prototyping, fast go/no go decisions, always capture learning • Surprisingly widespread Lucy Küng. Lucy. kueng@lucykueng. com. 26

Not everything Google touches turns to gold Lucy Küng. Lucy. kueng@lucykueng. com. 27

How do leaders of legacy media organizations view the past few years? Lucy Küng. Lucy. kueng@lucykueng. com. 28

©Lucy Kueng lucy. kueng@lucykueng. com 29

Media leaders blame two factors Speed and complexity of environmental change – esp. technology Legacy phenomena – assets, processes, skills, mindset Lucy Küng. Lucy. kueng@lucykueng. com. 30

The right skills suddenly become ‘wrong’ “you’ve probably got a team which is expert in managing that traditional cash cow, but they don’t have the skills and experience to work in a new digital world. … no one wants to be told that they are the past ” ©Lucy Kueng lucy. kueng@lucykueng. com 31

Where do mental blocks come from? “lot of people at the top of it had lived through a 20 year monster boom, and therefore were quite resistant to the idea that the whole thing might be coming to an end. ” “Managing the retreat is exquisitely difficult because the underlying things are still profitable” ©Lucy Kueng lucy. kueng@lucykueng. com 32

Financial community had mental blocks too “it’s very difficult for existing organizations to take on the new world … if you are a public company, you’ve got to destroy your profitability, you’ve got to invest vastly more of your money, you’ve got to stop giving dividends, and you don’t get forgiven for those things. ” ©Lucy Kueng lucy. kueng@lucykueng. com 33

What was your biggest mistake? “I always say that if I could go back ten years, . . . , I would not be saying, ‘The Internet’s going to be big’. . . what I would really be saying is, ‘Your business is going to be more screwed than you can even conceive now. Your worst case scenario is just a scratch’. It is quite easy in a creative organisation to conceive of how things are going to get better. It’s very difficult to acknowledge that our model is broken” ©Lucy Kueng lucy. kueng@lucykueng. com 34

The one thing leaders in the future must understand “I am genuinely astounded by how the DNA of these businesses doesn’t get technology” ©Lucy Kueng lucy. kueng@lucykueng. com 35

So what is the solution? Lucy Küng. Lucy. kueng@lucykueng. com. 36

2. Business model reinvention – 2 options Lucy Küng. Lucy. kueng@lucykueng. com. 37

Option 1. Serial Pivots Lucy Küng. Lucy. kueng@lucykueng. com. 38

“a pivot. This is absolutely canonical startupese” (Antonio García Martínez, Chaos Monkeys, 2016: 51) Lucy Küng. Lucy. kueng@lucykueng. com. 39

Buzz. Feed: “realise how it’s different, and take advantage of it” Core product tech business to content business (2006 -2008) Into news (2012), video (2013) Core organisation Full stack vertical integration “make your own, build your own” Network integrated model (publish on different platforms and focus on getting data back) (c. 2015) To intelligent network (multiplatform, multi market) composed of autonomous nodes that share data/learning Quote: Chairman Ken Lerer, April 2016, http: //recode. net/2016/04/12/buzzfeed-revenue-advertising-2016 -facebook / (lucy. kueng@lucykueng. com; @kuenglucy)

Option 2. Completely Separate Old and New Businesses Lucy Küng. Lucy. kueng@lucykueng. com. 41

Why separate? • Only 9% of businesses are successful in the face of disruption • Of that 9%, 100% have a separate business unit • Dual transformation is the only way to go – de-couple the businesses Lucy Küng. Lucy. kueng@lucykueng. com. 42

Dual transformations at Deseret News and Deseret Digital Media Transformation A. Reposition core print business (C. ) Create capabilities exchange for resource sharing Lucy Küng. Lucy. kueng@lucykueng. com. 43 Transformation B. Create separate disruptive digital business

Transformation A: The Crocodile • Make print business profitably self-sufficient • Figure out where you can be the best in the world and invest in it “You can’t do everything. I am getting out of everything I’m not best at” • Editorial focus on 6 key areas (all connected to Mormon faith and the family) • Pull costs out of commodity news (news and sports) and invest where you will can be the best (‘story cost accounting’) • Launched new Sunday paper for national audience (get more from legacy assets) • Costs cut by 42% to compensate for reduced revenues (57 FT, 28 PT staff laid off, inc. editor and publisher) Lucy Küng. Lucy. kueng@lucykueng. com. 44

Transformation B: The mammal • ‘New life form’ – the growth engine that over time will receive an increasing share of resources • Digital only, not digital first • Designed to exploit disruption and has own staff, processes, culture, financial targets • Hire ‘digital DNA’ (people with ‘e-commerce in their bones’) • Combines ‘old’ company websites with range of new digital businesses (deals, auctions, reservation products, digital agency etc. ) • Content creation around 6 key themes: skeleton staff curates stories from other media, crowd sourced content Lucy Küng. Lucy. kueng@lucykueng. com. 45

C: The Capabilities Exchange • Coordinates resources shared between companies (brand, content, marketing expertise, customer data etc. ) • E. g. Deseret Connect – CMS that produces community based content for both platforms • Protects boundaries– each should operate as if it alone was responsible for future of company • Ensures legacy business doesn’t ‘stomp on the camel’s nose’ – meddle with new business • Ensures new business doesn’t bleed resources from legacy print business (pays licensing fee for content) Lucy Küng. Lucy. kueng@lucykueng. com. 46

“the path ahead does not involve merging the crocodile and the mammal cultures, but maintaining them separately” “You have to be differentiated. Invest where you can be the best in the world … the failure to choose is a choice to be mediocre” “sixty to seventy percent of my job is culture … I’m doing two different culture changes, I am not doing one”

Fundamental Question: What job needs to be done? • We don’t want a specific product, we want a problem solved. These needs are consistent, even if the solutions change. • If you pinpoint the job, and nail it by integrating all the dimensions involved, you will be very hard to dislodge. • If a new technology creates a better solution to a job than the one that’s there at the moment, then consumers will probably adopt it. • If consumers will go after it, then money can be made with it, and new players will enter the space. Then you need those solutions too. Lucy Küng. Lucy. kueng@lucykueng. com. 48

Jobs to be done for news • . . . You have 1 to 15 minutes to kill, commuting or waiting, and want to fill it up with something • Commuter newspapers do exactly this job (designed to fill 20’ minutes empty time, available free when and where needed) • … You need to appear smart and well-informed, even if you are not, in a hurry • Quick newsfeeds over a smartphone do this job perfectly A traditional newspaper can and has done these jobs, but is not ideal (bulky, heavy, inserts fall out, leaves print on fingers…) – risk of disruption high Lucy Küng. Lucy. kueng@lucykueng. com. 49

What job do your customers really want done? Is/could someone else do it better? Lucy Küng. Lucy. kueng@lucykueng. com. 50

3. Fuelling innovation - what needs to happen at the core? Lucy Küng. Lucy. kueng@lucykueng. com. 51

“The difficulty is not so much developing new ideas as escaping the old ones” (J. M. Keynes) Lucy Küng. Lucy. kueng@lucykueng. com. 52

How to escape the old ideas Lucy Küng. Lucy. kueng@lucykueng. com. 53

Throw mud at the wall and see what sticks Lucy Küng. Lucy. kueng@lucykueng. com. 54

Build portfolio of low cost experiments • Increase odds of success by increasing number of attempts • Quick and dirty experimentation - fast, cheap, release as beta and discard/adapt quickly if doesn’t gain traction

“Our implementation strategy is ‘do and learn’. Try and do it fast, try and do it cheap. Try and do it quietly. Chuck it out. Learn. As long as you learn from your mistakes, or your failures, it’s on the training budget, and that’s fine”. Lucy Küng. Lucy. kueng@lucykueng. com. 56

Try more, fail more, learn more – blah, blah? Lucy Küng. Lucy. kueng@lucykueng. com. 57

Not everything Google touches turns to gold Lucy Küng. Lucy. kueng@lucykueng. com. 58

Create low profile innovation teams • Give them a clear mandate and get out of their way • Start with organic growth opportunities in adjacent fields • Build on either product or market expertise Lucy Küng. Lucy. kueng@lucykueng. com. 59

Give innovation teams autonomy • To focus on new ideas without worrying how they might fit with current ones • To ignore processes that are vital for the parent inappropriate for a new business • To take risks, get things wrong, to change direction mid-stream • To allow markets to build gradually, to let word of mouth take off Lucy Küng. Lucy. kueng@lucykueng. com. 60

Example: New US Edition Australian Edition Digital agency Brand partnerships Market Blogs Podcasts Journalism/photography courses Conferences Professional networks Same Product New (Process visual based on concept fro m Waldman, 2010)

Watch out for hidden hurdles to innovation • Complex approval procedures that don’t suit simple experiments • Performance metrics that don’t capture new trends and markets • Culture that makes a big deal of failure • Anything that stops good ideas getting to the right ears Lucy Küng. Lucy. kueng@lucykueng. com. 62

4. Unleashing untapped creativity systematically Lucy Küng. Lucy. kueng@lucykueng. com. 63

Creativity has three core ingredients Creative. Expertise thinking skills + (knowledge of (problem solving field) skills) + Intrinsic motivation (‘flow’) Lucy Küng. Lucy. kueng@lucykueng. com. 64 = Creativity!

Intrinsic motivation is critical • In flow state we are really fired up by a task and enjoying it (big clue: lose track of time) • We are thinking far more flexibly and can handle much more complexity • This reaction is very personal (‘intrinsic) and can’t be generated on request Lucy Küng. Lucy. kueng@lucykueng. com. 65

Intrinsic motivation is influenced by the work environment • Explicit requirement for creativity from senior management • Well-designed project mandate (a ‘stretching but doable’ challenge) • Adequate resources - esp. time and money • Diverse mix of skills and expertise in the project team • Enough autonomy (Adapted from Amabile, et al, 1994, 1996) Lucy Küng. Lucy. kueng@lucykueng. com. 66

HBO Original Programming Division Lucy Küng. Lucy. kueng@lucykueng. com. 67

How HBO ensures a strong creative pipeline t of dcas 5% roa 2 r b de ive rks n U rat wo pa net m co Explicitly demands creativity Core mandate “to be good and different” Entire strategy based on “differentness” Sets clear creative Challenge Clear, deliverable and inspiring: ‘series that will gain creative approval and commercial success’ Provides adequate resources Funding substantial, but not over-generous Long term commitment to projects and writers Provides autonomy for creative teams Teams have creative freedom within tightly controlled operation Distinct HBO identity, fiercely independent from TW Low bureaucracy “ideas aren’t not nibbled to death by ducks” Lucy Küng. Lucy. kueng@lucykueng. com. 68 5 -y for ear c key ont cre ract ati s ves

HBO‘s new product development • Rejects pilots with test screening approval over 75% – Anything so acceptable to the ‘conservative masses’ is unlikely to be edgy enough for HBO – Accepts shows that may initially confuse audiences • Alan Ball on how HBO differs from the networks: – Wants shows that are different, unique, that don’t look like something we’ve seen before – Gives notes, but notes are smart and come from one or two people who know what they are talking about – (networks’ notes are written by around 10 people, can be contradictory, and aim to make a new shows more like existing successful ones) – Intense relationship with viewers via social media *Interviewed on Front Row, BBC Radio 4, broadcast 19 March 2010 Lucy Küng. Lucy. kueng@lucykueng. com. 69

5. Key Takeaways Lucy Küng. Lucy. kueng@lucykueng. com. 70

Four tech transition truisms 1. Mastery of current environment is no guarantee of mastering future ones (in fact, the reverse normally applies) 2. It’s not the strongest that survive, it’s the most adaptable. Natural selection applies to business models too, adapt or die. 3. Media industry has huge amounts of untapped creativity (find ways to liberate it) Lucy Küng. Lucy. kueng@lucykueng. com. 71

Three tips to boost your own creativity • Try more – Creativity is a function of sheer productivity • Fail more – ‘the opportunity to begin again more intelligently‘ (Henry Ford) • Network more – You are only as creative as your social network – Don’t build a massive network, but an efficient one – Boost weak ties - bridges to worlds you don’t know, ideas you haven’t already heard Lucy Küng. Lucy. kueng@lucykueng. com. 72