Technological disruption is at a pace and scale never seen before. A growing list of technologies continuing to disrupt the media industry is presenting both opportunities and threats to the leaders of companies within it.
Media companies are among the most technologically disrupted organizations in the world today due to technological advances, consolidation, and threats from new entrants from within and outside the industry. Yet, many of the major players continue to be relatively successful despite the ongoing challenges in the business environment.
As a result, many media companies have been resistant to change and slow to adapt to disruptive technologies. Over the long term, however, the status quo will not be a viable business strategy for companies in the media space.
On a fundamental level, what the industry is witnessing with much of this disruption is a shift away from the traditional, linear model of content creation and delivery to one that is based more around the development of solutions. Like Netflix, Hulu and video-on-demand (VOD) are solutions to an unmet customer demand for immediate access to content on the platform of their choice. The trend of turning what used to be products into a solution and then selling it via new and more convenient platforms is meeting customers' demands and is also changing the economics of the sector.
In certain sub-sectors, however, it can be damaging to migrate too quickly into a digital environment. The prime example is the newspaper business. Too sudden a shift to a digital strategy can end up undermining a newspaper company's own market in a world in which news is available through hundreds of other sites for free. At the same time, as evidenced by Blockbuster and a host of other media companies that now serve as cautionary tales, moving too slowly can be equally damaging.
A Shift from Traditional Models
The harsh reality for some media companies is the stark realization that their traditional business models are simply not going to be sustainable for the longer term. For those companies, future success may lie in taking their current cash flow and deploying it toward a shift into an entirely different line of business.
The impacts of disruptive technology can be multi-faceted and hard to pin down. Disruptive technology can act as a driver of change, breaking down old processes and ways of doing things. Its effects, however, are pervasive, requiring business to invest and, plan differently, and in doing so, let go of old assumptions and habits, act boldly, and adapt their corporate cultures to reflect these changes.
The continued digitization of video content, built on a foundation of cloud computing, continues to wreak havoc on traditional business models. Content owners view these technologies as ways to disintermediate traditional distribution channels and offer content direct to the consumer. While all of this is taking place, many of the traditional distribution players are responding by acquiring content providers, pushing smaller bundles on their customers, and embracing over-the-top (OTT) distribution.
The survey revealed an intriguing contradiction among media executives, when it comes to their attitudes about the opportunities presented by disruptive technologies compared with their companies' levels of preparedness. When executives were asked about the impacts of disruptive technology on their organizations and their industry as a whole, the majority of the decision makers expressed optimism. Sixty percent of media leaders believe that disruptive technologies were having a positive impact on their organization, while 68 percent had an opinion that these technologies were having a positive impact on their industry as a whole.
These findings warrant the attention of decision makers in the media industry. The difference between these high levels of optimism and low levels of preparedness is stark and may point to a sort of false optimism among media executives. While many CEOs may be instinctively inferring that where there is change, there is opportunity, the fact that so many of them have said their companies are not yet prepared for those changes tells us that they have yet to identify exactly what that opportunity looks like for their business. This is a sizable risk, as a company cannot adapt toward an opportunity that it has not yet identified.
The cost of inaction and/or inertia is high and, in some cases, can threaten the very survival of the organization.
Areas of Growing Concern
The survey results reveal that to a high degree, media executives' concerns about their own organizations' performance are rooted in competitive pressures – not only from existing competitors from within their industries, but also players from other industries who are now encroaching on their turf.
Further complicating things for many media companies today is the fact that the rapid pace of technological disruption is making it difficult for many of them to catch up once the competition has made its move. More than a third of respondents saw the new technology trend coming too late, while nearly half of respondents could not invest quickly enough to keep up. As a company begins to lose its competitive position in the marketplace, it can be difficult, if not impossible, to regain that lost ground.
This disruption of the traditional value chain is fragmenting audiences and, as a result, advertising revenues are diminishing.
The trends taking place with cloud, mobile, and social media technologies are putting immense pressure on media companies– not only with respect to their economic models, but also in terms of how they are interacting with their customers. This pressure is being felt by companies throughout the industry, from content creation to distribution. Amid these ongoing changes, a significant percentage of executives are fearful that their current revenue streams and operating models will be changed or altogether overturned in the years to come.
Improving the Operating Model
Media leaders are using disruptive technologies as a way to drive improvements in operational performance of their front or back office. According to the survey, decision makers at media organizations are seeing marketing platforms, data and analytics (D&A), mobile devices/applications, and digital payments and currency having the most impact on how they run their operations.
This indicates that decision makers at media companies realize that disruptive technology is a business imperative, but many are finding it difficult to pinpoint exactly which disruptive technologies represent the biggest or most important opportunities or threats to operations of their companies. As such, many of
them might be casting a wide net while they assess the potential implications and/or applications of these various technologies.
What is even more interesting is the manner in which some of the disruptive technologies are changing the way media companies run their operations.
Hedging Their Bets
Making strategic investments in the right disruptive technologies can provide a company with a significant competitive advantage. One of the challenges in a business environment in which technological advances are being made at such a rapid pace is that leaders at media companies have a wide range of technologies to track and understand.
Unsure of what the industry will look like in the coming years, many media executives are making scattered investment choices in order to protect their companies and market share over the long term. It is also worth noting that to an extent, investments are really a trailing indicator of the emergence of a disruptive technology.
Before investments can be made, companies must first go through the process of monitoring, identifying, and building a business case for a given technology before actually deploying dollars toward those technologies. It will be incumbent upon decision makers to experiment, fail fast, and strive to understand what will work for their company and then deploy their investment dollars against those opportunities that are likely to produce rewards while minimizing the risk of their investment.
Being quick to adapt to external changes in the marketplace has always played a key role in business competition. And while there are always exceptions to every rule, in the age of disruptive technology, acting quickly has taken on a whole new degree of relevance in determining the competitive position and ultimate fortunes of many media companies.
In order to create sustainable new revenue opportunities for their companies, media leaders need to be early movers or fast followers that are willing to fail fast. Reinforcing this sentiment is the fact that of those media executives who said disruptive technologies have had a positive impact on their organizations' performance, just over half attributed that success to the fact that they saw the new technology trend earlier than others, while more than a third invested in disruptive technologies at an early stage. In the Industrial Age, first-mover or fast-follower advantage used to mean entering a product line or geographic market before your competition did. Today, when the world is connected and the time it takes to go from a start-up to a formidable competitive threat can be measured in months, that advantage means being the first to exploit and adopt the power of disruptive technologies.
Stages of Disruptive Technology
Table stakes. Table stakes technologies receive high investment and generate strong impact right now. They have reached an initial stage of business maturity, but remain innovative and challenging to master. In the media industry, cloud, mobile, and D&A are now table stakes technologies. These technologies are also often interrelated at media companies.
Strategic. Strategic technologies receive significant investment today in search of strong impact tomorrow. They are high on investment and medium-to-low in terms of impact. In the media industry, there are no technologies that currently fit this description. In the quest for strategic technologies of tomorrow, however, media executives would be well-served to survey the technologies that are currently in the sunrise and nascent categories, such as artificial intelligence, IoT, virtual reality/augmented reality, and so on.
Maturing. Maturing technologies create strong impact but no longer require sizable investment. They now receive low- to medium-investment levels and continue to generate steady value. Social media and marketing platforms would fall into this category. Both are business-critical to most media organizations; however, they no longer require the same kind of investment they demanded in previous years.
Sunrise/Sunset. Sunrise technologies receive medium levels of targeted investment and have begun to generate medium levels of impact as well. Sunset technologies have passed through their era of peak effectiveness and are now seeing declining levels of both investment and impact. In both cases, these technologies fall into the medium investment, medium impact center of the technology value map. In the media industry, they are all sunrise technologies, including digital payments and currency, on-demand marketplaces, D&A, IoT, artificial intelligence, and wearables. Each of these represents a rising area of investment and impact. The impact of IoT remains to be seen – its utilization in media is very specific and at this time there is not a big focus on it within the sector.
Nascent: Future stars. Nascent technologies receive lesser levels of targeted investment and have yet to generate significant impact, yet are seen as potential future stars. In the media industry, these would include technologies such as virtual and augmented reality, 3-D printing, and robotics.
Reshaping Media Organizations
As is the case with any large-scale change to the business environment, disruptive technologies represent both opportunities and threats to established media companies.
For the media company looking to become a disruptor, success is going to require taking a long, hard look at the organization's managerial focus, organizational structure, key performance indicators, and workforce strategy.
A Positive Business Reality
In today's brave new world of disruption, the bar has been raised for the leaders of media companies to evaluate, pilot, and, where appropriate, deploy new technologies in order to adapt to a sector that is evolving with unprecedented speed. Those companies that succeed will do so, in part, because they are able to turn disruptive technologies into strategic competencies, making investments in organizational capabilities that translate technology into customer experience advantages and operational excellence. Disruption is not the future. It is already here. The challenge for many media companies is that no one knows precisely how fast that disruption will occur or how deep it will go in any particular sector.
What is clear, however, is that disruptive technologies will continue to place tremendous stresses on the economics of the media for the foreseeable future. Agility and adaptability will be the defining attributes of media companies that are able to succeed over the long term.