Everything that can be digitalized is being digitalized. The media sector has been one of the first to face the changes demanded by digitalization. For many other sectors, however, the same digital transformation still lies ahead.
By sharing our experiences and lessons learned with other sectors, we can help others have an easier and quicker development journey when it comes to digitalization. The media sector has had to deal with digitalization quickly. Few sectors have been through the wringer of the digital transformation in such a way that their value has increased, and usually the biggest winner has not come from within the sector, but from outside of it.
By sharing our experiences and lessons learned with other sectors, we can help others have an easier and quicker development journey when it comes to digitalization.
I have observed three typical transformation strategies:
1. Let’s do something digital.
The organization is not changed significantly, and new elements are built up on top of existing business operations without changing basic assumptions.
A good example of this from the media sector is digital versions of newspapers. No one has seen significant success by packaging existing print products into digital versions sold in application stores. I myself have been in meetings in which the argument has been made that the cover is our most important asset, and that putting digital versions cover-first onto digital channels will surely lead to success. It won’t. The rules of digital business operations are often even opposite from those of traditional business operations.
2. Let’s separate the digital completely from traditional business operations.
This kind of strategy is behind the success of Schibsted, for example. Schibsted did not subject its new business operations to the same principles, organization and expertise as its traditional operations. Instead, it has made significant investments in completely new, separate operations. This kind of strategy is a significantly quicker and more efficient way to generate new business operations, because this way the new operations can freely create their own operational models that benefit from digital principles.
This kind of strategy is a significantly quicker and more efficient way to generate new business operations.
The challenge with this type of strategy is what will happen to traditional business operations after ten years. Additionally, the skills and capital gained from traditional business operations are not taken advantage of. Implementing the kind of strategy used by Schibsted means you also have to get an early start, at a time when traditional business operations are still producing enough profit to make the necessary investments for new operations possible. You can’t afford to use this strategy once you reach the panic stage.
3. Let’s transform our traditional operations as part of the digitalization process.
This is the most demanding of the transformation strategies, as it requires the most in-depth changes in the organization, in expertise and in business models. Transforming traditional business operations does not lead to a quick profit. Instead, completely new operations are built based on using the assets gained from traditional business operations in a new way. At my workplace, Aller, we have chosen this strategy.
Transforming traditional business operations does not lead to a quick profit.
Toward a change in traditional business operations
At Aller Media, our company strategy is to develop from a strong consumer media outlet into the most desired partner in creating content. Our transformation is based on our 140 years of expertise as a consumer media outlet, combined with the latest digital competencies.
In our digital strategy, we are building new business operations on top of our existing capital in the areas where we are highly skilled: consumer sales and marketing. Our strongest and most important capital in Finland is the over three million consumer relationships we have created through our traditional business operations. For our traditional operations, they are worth their weight in gold.
We are building new business operations on top of our existing capital in the areas where we are highly skilled: consumer sales and marketing.
A very typical setup in digital transformations is that the heart of traditional operations is protected until the very last moment. What kind of crazy person would go and cannibalize it? This is the reason sector operators have not been the biggest winners in the digital transformation, and why the majority of operators have chosen the first strategy, “let’s do something digital”.
Companies do not want to make the large investments needed for the second option once traditional business operations have already taken a downturn, and they don’t dare to touch the core of their traditional business. Startups coming out of nowhere don’t have these fears. Instead of worrying about protecting existing operations, they go directly to thinking about the most sensible way to engage in new ones.
A very typical setup in digital transformations is that the heart of traditional operations is protected until the very last moment. What kind of crazy person would go and cannibalize it?
Selling newspapers to consumers through different channels is the true heavyweight division of consumer sales. The organizations that have been successful in doing this have had to develop exceptionally good ways to identify and make use of target groups. In making their changes, these organizations have had to push the efficiency of marketing to the extreme.
The same thing has happened to us at Aller Media. We have built our new marketing services while relying on the strengths of our business operations, consumer sales and marketing. For this reason, we are also able to offer our customers an unprecedented results guarantee, which has generated a lot of buzz in the sector.
Why do we consume our own resources?
We have taken on the digital transformation with a strategy that will change our company’s traditional operations: we took a risk a year ago and opened up our most sacred possession – our more than three million consumer relationships – to our corporate customers. At the same time, we are using our outstanding expertise in consumer sales and marketing to benefit our B2B customers by offering them turnkey marketing solutions with guaranteed results.
We took a risk a year ago and opened up our most sacred possession – our more than three million consumer relationships – to our corporate customers.
At the same time, we have broken down the silo mentality between digital and print media. Our CEO, Pauli Aalto-Setälä, has implemented an organizational innovation in which he quickly transformed our poorly functioning, business unit-led organization into a single business unit. The world looks very different when you think of the whole organization as a single business unit, wherein new operations can take advantage of the capital gained through traditional ones – and vice versa. At the same time, all players in our organization have the same goals.
Dismantling the silo mentality dividing print and digital media, or old and new, leads to product innovations. In February 2016, we launched our new Refinery (Rikastamo) technology and marketing service, in which our three-million-strong consumer base is connected to real-time online behavior data. Thanks to our skills, we can serve all of our own areas of operation, as well as numerous operational needs of our customers.
Combining the online and offline worlds also means we can provide better service than before through multi-channel solutions. Human understanding is at the core of our strategy. The consumer does not view his or her world from a silo perspective, divided according to the channels of different providers. He or she is the same while reading a brochure as while surfing the net.
Combining the online and offline worlds also means we can provide better service than before through multi-channel solutions. Human understanding is at the core of our strategy.
Why are the communications for these channels designed in different places and produced according to different parameters and by different operators? The individual-oriented target groups and associated multi-channel marketing services make it possible to serve and speak to people holistically and logically through all channels.
At the same time, our traditional operations benefit from our strategic changes. The fears of being cannibalized were all in vain. Naturally, our own consumer sales and marketing is also more profitable than before, thanks to the new real-time benefits.
Direct marketing and online development in the face of new challenges
Another area that has been looming as a threat in the media and marketing sector is programmatic buying. This causes tensions between the direct marketing organization and developers of online business operations. The change is taking place independently of us media houses and is the result of digitalization.
This causes tensions between the direct marketing organization and developers of online business operations. The change is taking place independently of us media houses and is the result of digitalization.
The biggest fear in the sector is that programmatic buying will eat away at the value of inventory. At the same time, sales representatives are afraid that programmatic buying will eat away at traditional commissions. These fears lead people to continue to view marketing based on the conditions of traditional business operations, in which leftover inventory, which cannot be sold through direct marketing, is pushed outside of one’s own sales organization.
If you only keep the best-priced products in the hands of direct marketing and sell the leftovers in the clearance bin, the prices of the clearance bin will remain low. We have not yet been able to view programmatic channels as a new way to do business, one with a lot of possibilities.
If you only keep the best-priced products in the hands of direct marketing and sell the leftovers in the clearance bin, the prices of the clearance bin will remain low.
Who knows what’s going to work
When it comes to new business operations, the most challenging thing is that at the starting stage, there are only possibilities and risks. When traditional operations take a downturn, executive groups are faced with a panic over how to get new, equally large profits flowing quickly.
Faced with new challenges, no one knows, however, what will continue to work well and what won’t. When you have tried a bunch of new ideas and discovered that turnover is not growing as expected, it’s easy to feel defeated and develop an aversion to new things. Estimates of the potential of new business operations should not be taken as guarantees of profit. At the start of a new stage, it is not possible to make solid profit estimates. There are only possibilities and risks.
At the start of a new stage, it is not possible to make solid profit estimates. There are only possibilities and risks.
I was recently at a Google event listening to research results from Boston Consulting Group on the lessons of programmatic buying. When we contemplated why the Netherlands was ahead of other European countries, a difference in experimentation cultures was brought up.
Instead of concentrating on developing big plans and strategies, one should concentrate on conducting well measured experiments. If an experiment doesn’t work, it’s no big deal. It’s a natural part of the process. Experiments are repeated for as long as it takes to find a new, working solution. When experiments are loaded with business goals and the pressure to succeed, companies try to force their continuation rather than daring go move on quickly enough. One phrase kept floating around in my head that sums up the theme very well: “who knows what’s going to work”.
Instead of concentrating on developing big plans and strategies, one should concentrate on conducting well measured experiments. If an experiment doesn’t work, it’s no big deal. It’s a natural part of the process.
No one knows yet which digital strategy works best. My most important advice for all business sectors in their digital transformations is: start early.
Once it starts, the change in operating environment is very swift, and profits often drop faster than expected as digitalization occurs, whereas growing and transformation of new business is often slower than expected. In a situation where old profit flows are drying up and new sources of profit do not exist yet, the focus shifts from transformation to the fight for survival.