The trials and tribulations of traditional media are well documented. For a humorous look at the issues, take a look at this parody video created by Terry Kawaja at GCA Savvian; it will make you laugh or cry, depending on what you do professionally. Despite the humor, it got me thinking about some pretty serious stuff; in particular a conversation I had with a senior strategy executive at a major newsprint operator a little over twelve months ago.
This executive – who is no longer with the company – worked on the digital side of the business and was conducting outreach to venture investors who had made digital media investments. His goal was to understand how venture investors would construct a frame for the problems faced by the newspaper industry. In the process of learning about the frame, he hoped to find a roadmap to solutions to the problems plaguing the sector.
Rather than give a rapid-fire answer, I began probing him with questions; I was trying to suss out the assumptions that a newspaper operator makes in running the business. It took about twenty minutes of back and forth to get to the core assumption: that the creation of content and the distribution and monetization of content are inextricably linked. If you think about it, this assumption pervades much of media. Newspapers, for example, created content and distributed it through a single local distribution channel; the print form of the paper. In the world of even 20 years ago, this was a fairly valid assumption. The logical consequence of this assumption is that newspaper operators built vertically integrated businesses, including writers, editorial, print production, distribution, and advertising sales. Success was dependent upon controlling all of these aspects of the business.
So what happens when an external force (like the Internet) tears apart a core assumption, completely invalidating it in the process? It depends on the implications of the assumption being invalidated. In this case, the Internet ripped apart the need for content creation to be vertically integrated with content distribution and monetization. Quality content wanted to be distributed and monetized through any means possible. Get the content to the user wherever they are. Whether that consumer is within the footprint of your local delivery boy or not was irrelevant. Syndicate massively, break the content apart if you have to, turn over the monetization to those better suited to monetizing content this way. Likewise, the distribution side of the newspaper business should have wanted to bring the best content to the consumer, no matter who created it. Think personalization, verticalization, etc.
But what did you see newspapers do; well, they replicated their vertically integrated approach on the Internet; create a website, leverage the “strong” brand presence of the newspaper and off you go. Surprise, surprise, it didn’t work; because the assumption the strategy was built upon - a tight linkage between content creation, distribution and monetization – was slowly, but surely being torn apart.
So what is the lesson? Well, every venture investment is based on a set of assumptions. Given the pace of innovation and change in the technology, services and media landscape, and the five to seven years it takes to build a truly great company, every company is likely to face some external forces that invalidate core assumptions during the company building process. If the core assumptions don’t change, you are probably on to a hot-spot in the market where your value proposition is well aligned with a major, enduring problem. Run fast and hard. If a core assumption does change, watch out, question your assumptions, understand the implications and adjust fast. If you wait too long, you’ll make the same class of mistakes traditional media has made in coping with the Internet and as a consequence, your business may suffer the same fate.
Consequently, this is one of the reasons I look for entrepreneurs who are able to come to grips with the cold, hard truth and make adjustments. This in turn requires both humility and a high level of self awareness that enables deep introspection.
Filed under: Lessons Learned, Media
