To kick off the first day of the INMA World Congress in Washington, D.C., David Rogers, author of The Digital Transformation Playbook, displayed a graph he said would probably be familiar to the audience. Research from the latest release of Mary Meeker’s Internet Trends Report showed the relationship between the percentage of time spent in media and the percentage of advertising spend in media.
While interesting, Rogers said he believes people are looking at the wrong slide. He is more interested in the relationship between ad spend on those who create content, versus media companies that use and distribute that content on their own platforms.
“It’s not money moving from one channel to another, but from one business model to another,” Rogers said.
Platform-based business models are succeeding because they are connecting people, he added.
“I would say that if you are in the business of creating content and not simply connecting people to it — and if your business model is based primarily on ad revenue — that you need a new business model,” Rogers said. “And it doesn’t matter if you’re Marie Claire or BuzzFeed or Huffington Post. You’re all in the same boat, and that boat is digital transformation.”
Digital transformation can seem like a daunting process, but it can be defined with one question: How does any business started before the Internet need to adapt, need to evolve to adapt to grow in the digital age?
“That is a very different question than ‘How do a create a great story? How do I build the next Uber?’” he said.
News media companies should not get caught up in technology, he cautioned. Technology is why industries across the world have to change, but their own technology choices are not the important part of the transformation process.
Rogers outlined five domains of digital transformation companies should consider as they reassess their own business models: customers, value, competition, innovation, and data.
1. Customers: Media companies are in a long-term shift from a mass market model, which was all about distribution, targeting, and economies of scale. Today, Rogers said, they are in a completely different environment.
“Thinking about all your customers, your audience, those out there who you reach, who you hope to reach, are all out there connected,” he said. “And therefore our role is not sending something out to them, but how do we create value and connect them?”
American pizza company Domino’s has re-evaluated how it can be relevant at multiple audience touchpoints. At one time, the value Domino’s offered was a guarantee of a pizza at your door in 30 minutes or less, or it would be free. Now, the company has transformed so customers can reach the company to order pizza across multiple platforms.
“You can text an emoji of pizza and they send back an actual pizza,” Rogers said.
Rogers shared a quote from Domino’s chief executive officer Patrick Doyle that reflects this shift: “We are as much a tech company as we are a pizza company.”
2. Competition: In the past, defining competitors and partners was simple. It could be based on similar product, location, or service.
“Competition is much less defined by industry boundaries,” Rogers said. “We are competing and partnering with the exact same companies.”
While seemingly competitors, Rogers said Google has been paying Apple US$1 billion a year to be the default iOS search engine.
Hotels have historically had clear competitors as well. Now, Airbnb is disrupting the industry. Airbnb’s founders did not start out with the intent to create a company, Rogers said. They just wanted to solve a problem. They platform they built simplified communication between people.
“Eight of the 10 biggest companies started in this era started with a platform business model,” he said.
3. Data: In the digital era, the capabilities and potentials of data are where industries can transition previous success of mass audiences to better connect with the individual.
Rogers pointed to casino industry loyalty programmes as an example. Companies like Caesars are looking at the power of this data in a completely different way.
“And it’s becoming a dynamic part how they’re managing in real time their relationships with the customer,” he said. “Just like media companies are now shifting from thinking about a specific wall or gate or how many articles you can see. Not just dynamic pricing but dynamic gating as well.”
Customer lifetime value is becoming a crucial part of their strategy. If a customer who visits during conference season is losing, the casino can make a real-time decision to offer an unexpected reward. This can have a measurable return on investment.
4. Innovation: How companies handle innovation must evolve to keep up with the rapid pace of change in the current business environment. Creating a business plan to manage risk is too slow and can be full of assumptions.
“What we’re finding is an approach to innovation that is much more effective in this environment, and it looks much more like a series of rapid experimentations,” he said. Rogers said the final solutions boil down to speed and simplicity.
“You say: What is the quickest, simplest way we can actually get some customer feedback? Getting customer response is crucial,” he said.
5. Value: When evaluating value, Roger said companies should avoid asking how a change will impact business. They should instead ask how they can create value for the customer. One step further, companies can also ask: “How might this help me build my net business?”
The Metropolitan Museum of Art in New York City created “The Hip Hop Project,” a music streaming app that pulls lyrics from songs and searches its collection to create a visual experience for the user.
Rogers quoted Sree Sreenivasan, former chief digital officer for the museum, who said other museums are not the Met’s compeititon, but rather Netflix and Candy Crush. While Sreenivasan said the museum is fighting for attention, Rogers said he argues they are fighting for relevance: “I would argue that every business should be fighting to be as relevant to your customers tomorrow as you are to your customers today.”
Rogers emphasised that companies do not want to become dinosaurs, like Blockbuster or Kodak, unable to adapt to change. When preparing to release a version of encyclopedias on CD-ROMs, priced around US$200, Microsoft launched Encarta for free. Since then, Britannica has successfully pivoted and is just as profitable as it ever was: “But for goodness sakes, if Encyclopedia Britannica can transform, then certainly you can, too.”