Funke, Nikkei share how innovations in management structure drive growth in subscriptions, revenue

By Shelley Seale

INMA

Austin, Texas, USA

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News publishers across the world are trying new innovative ways to organise their teams and manage their work. From cross-functional teams to improved efficiency, some publishers have addressed the way their company works as a whole to improve their models.

In a monthly meet-up of the Readers First Initiative on Thursday, INMA Research-in-Residence Grzegorz Piechota invited guest speakers from Funke Media Group in Germany and Nikkei in Japan to discuss the practical aspects of how they are now organising and managing their teams.

Funke Media Group, Germany

Funke’s group of publishers enjoys 30 million unique users, and a half-billion page impressions.

“In Germany we have quite a good footprint, we are very much focused on German-speaking markets. What we want to share with you is an experiment we did,” Stephan Thurm, chief digital officer, told INMA members.

Like most newspaper publishers, Funke Media Group had the challenge of finding the best organisational model that would allow them to reach their goals.

Balancing an economy of scale with proximity to market were key factors for Funke Media Group.
Balancing an economy of scale with proximity to market were key factors for Funke Media Group.

“We have the challenge to find a good balance between what we do locally and what we do centrally,” Thurm said.

On the one hand, Funke wants the local strength of newspapers with proximity to readers and local networks. On the other hand, the central organisation has a team of digital experts with less complexity and an integrated digital publishing platform.

“These are the two things we want to bring into a balance,” Thurm said.

Like most companies, Funke is organised in a matrix model — but Thurm said this model is less than ideal and is full of conflicts. The central level handles product, subscription, technology, and data — and believes they are the experts and should make the decisions. The approach is more to use the same recipe for all publications.

At the local publisher level, however, they also believe that they know best about what to do in their individual market. They are responsible for their business, their people, and their profit or loss.

“It’s very hard to get the best of both worlds, local and central advantages.”

This creates a challenge of achieving low cost, economy of scale, and proximity to markets.

A new approach

“We had to try something new,” Thurm said. “We decided to make a squad organisation, an MVP project.”

Funke began with one publication to test out the theory, which entailed bringing product IT, subscriptions, and data from the central level together with editorial and business at the local level to form a squad that would work across silos for common goals.

Funke used an "MVP Squad" approach to create cross-functional teams to drive subscriptions and growth.
Funke used an "MVP Squad" approach to create cross-functional teams to drive subscriptions and growth.

Benefits of this squad approach included:

  • Common goals.
  • Quick decision making.
  • Continuous co-working that is fully synced.
  • Common communication channels.
  • Efficient set-up.
  • No fingerpointing.
  • Common success.

The model is efficient, even though its squad members are in different departments and different locations: “So far we have very good results in this project and we are very happy,” Thurm said.

Strong subscription growth

The quick decision-making in the squad led to a strong growth in subscriptions. The squad effects included:

  • Conversion rates of 3x at one publication (NRW).
  • Churn was reduced by 20%.
  • Able to roll-out these changes to other Funke newspapers within four to six weeks.

Reduce ads, reduce churn, increase price

One action that the squad took was to ask subscribers why they cancelled. The team discovered one of the main reasons was too much advertising.

“We decided in this little squad, within two weeks, how can we remove these pain points?” Thurm shared. “We decided to remove 70% of the ads for the subscribers.”

The follow-up question became: If advertising was removed, how could revenue be retained? The squad determined to increase the subscription price by 25% and put a special focus on yearly subscriptions.

This price increase has resulted in virtually no lost subscribers, has reduced churn, increased revenue, and increased the quality of the user experience.

Scaling the model

The next phase was to scale the squad model and bring the results into more publishers within Funke Media Group.

The way they have approached it is to take the prototype to a pilot publisher, see the results and experiment with it, make improvements, and then roll it out to the rest of the company.

Nikkei Group, Japan

Nikkei Group has accelerated digital development at Silicon Valley speed. Speaking from his home in California, General Manager Yosuke Suzuki next spoke to INMA members about his company’s journey.

With a 144-year history, Nikkei’s flagship newspaper has a circulation of two million subscribers in Japan.

The online edition, Nikkei.com, launched in March 2010 and has steadily grown to a current subscriber base of 750,000 with a monthly subscription price of US$40.

With an investment of US$80 million at its launch, the Nikkei Web site was developed by third-party tech companies. Suzuki said that the server performance was good but lacked flexibility. Another issue was that changes took three to six months to make and were costly.

To address these issues, Nikkei moved to in-house development in 2011. The company started with two engineers and now have between 40 and 50 engineers committed to the source code.

“We built our own data platform to manage all the data,” Suziki said.

Objectives and key results

This in-house platform was built using the OKR system — Objectives and Key Results. This system is used by major tech companies like Google and major media companies such as The New York Times. Suzuki shared a slide that showed the hierarchy of how OKR works.

OKR — Objectives and Key Results ◊ is an operating model used by Google and The New York Times.
OKR — Objectives and Key Results ◊ is an operating model used by Google and The New York Times.

Why did Nikkei adopt the OKR model? Suzuki said it was largely due to the huge growth of smartphone use.

“In Japan, the adoption rate of smartphone was 7.9% in 2010. By 2018, the adoption rate had grown to 79.2%,” he said. “Nikkei.com benefited from the growth of smartphone adoption.”

A key result was the focus of resources on their smartphone apps and the Web site.

“Today, more than half of the traffic to Nikkei.com is from smartphones,” Suzuki reported. “Now that we have nearly universal adoption of smartphones in Japan, we can no longer rely on this to drive new traffic and subscriptions.”

The nearly universal adoption of smartphones in Japan led to Nikkei adopting the OKR model.
The nearly universal adoption of smartphones in Japan led to Nikkei adopting the OKR model.

Diversity vs. specialisation

“We needed to generate new ideas to boost and sustain [our business growth],” Suzuki said.

The team wanted to promote a cross-functional work environment. The question became one of putting more emphasis on diversity or specialisation. Factors to consider included:

  • As a general principle, teams with a diversity of talents are better at innovation. Teams with large numbers of members are hard to manage.
  • Teams with a high degree of specialisation are capable of great depth, but they tend to produce internal friction with other specialised teams.

“Since we don’t actually know what we should do beforehand, we need functionally diverse teams to generate new ideas,” Suzuki said.

In 2019, Nikkei reconfigured its old specialised teams into diverse, cross-functional teams and adopted OKR.

“For example, members of our acquisition team, retention team, B2B team, and so on, were combined. We still need horizontal teams like APIs and SRE, however.”

For example, one of the OKR teams that Nikkei.com set up, focused on subscriptions, had several key objectives such as the number of new subscribers and trial users by the end of 2020, an increase in search traffic, improved retention rates and increase in number of articles read.

OKR pros and cons

“It is important to understand some of the pros and the cons of using OKR,” Suzuki said.

Pros include:

  • Each member can understand concrete targets for their work.
  • Generates more ideas to boost general subscriptions.
  • More projects/tries than before.

Cons include:

  • Horizontal teams like SRE are still needed.
  • OKR can be a drag on productivity (usually vertical teams enjoy better productivity).
  • Nikkei keeps some old team structures for migration.

“Team members should understand these pros and cons before embarking on OKR transformation,” Suzuki advised.

OKR is a tool that is used to focus resources on common objectives. It does not improve productivity, and requires more engineers and marketers, but cross-functional teams are used to generate more ideas and challenges, Suzuki said.

“If you are experiencing a challenge in driving growth, where you have to find better ways to achieve breakthroughs, OKR might be a good idea.”

About Shelley Seale

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