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How Traditional Media Can Successfully Make the Transition to Digital

2010 March 10

Traditional media businesses run on profits.

Unfortunately, in the digital world that can be disadvantage.  When you have not only employees to pay, but loyal audiences and advertisers to keep happy, you’re going to be less aggressive than digital upstarts whose profitability is years ahead, if ever.

However, media incumbents can do a much better job than they’re doing.  Here are some ways to make that happen:

Disregard the Myths about Traditional Media in the Digital World

One of the biggest obstacles to overcome is the myths that exciting new digital moguls like to tell and journalists like to repeat when they lack a real story.

Myth #1: They don’t understand the Digital Opportunity. Media executives tend to be intelligent and well informed.  It is folly to believe that they could miss the daily headlines and exploding valuations surrounding Digital Media.

Ask any media CEO and he/she will tell you that digital is a major priority, list multiple initiatives and affirm his/her commitment to the digital revolution.  Of course, they will agree that traditional media doesn’t take digital media seriously enough, but they mean other companies, not them!

Myth #2: They don’t invest in Digital. Nothing can be further from the truth.  Whether they invest well is another question, but media giants put big money behind both internal initiatives and acquisitions.

From Time Warner’s ill-fated acquisition of AOL to News Corp’s MySpace buyout to thousands of smaller, more successful initiatives (especially those of Conde Nast), media moguls are ready to take big risks and put big money behind them.

Moreover, some legacy media companies have developed impressive technology.  I can’t think of any stand alone content site that has anything close to the functionality of the New York Times, CNN, or BBC.  They obviously invested in some very good development people and technology.

As I pointed out in this article, technology isn’t the problem, getting full value out of their investment is.

Myth #3: Mainstream media ignore their audience. There is probably no other industry as responsive to their consumer as the media industry.

Every major media supports regular, and in some cases daily, audience monitoring.  Qualitative focus groups are regularly held, content is tested and audiences are encouraged to participate.  Numbers are sliced and diced, argued and agonized over.

In fact, understanding audiences in one area where digital media companies are far behind traditional media.  It is often cited by advertisers as a reason they don’t invest more in digital.

Overcome Structural Rigidity

Legacy media companies, generally speaking, do understand the problems and opportunities that the new, digital world presents.  The problem lies not with talent, for no industry is as creative or innovative as the Media Industry.

Rather the problem lies in their organizational structures, which were set up for a slower, analog environment which required much more planning and investment.  Over the years, structures have been built up to produce big hits and contain the damage of occasional bombs.

Digital development, on the other hand, is mostly about small initiatives that grow into big ones.  You have to be comfortable with failing small, cheap and often.  Media incumbents need less gatekeepers and more evangelists.

The Way Forward

As I wrote before, the economics of digital are significantly different than analog, especially with regard to transaction costs and externalities.

Integration: One problem that needs to be solved is that today’s media people are actually too good at what they do.  Probably the most difficult and complex thing to do in the media is shoot film.  Even for a 30 second TV spot, there can be over 100 people on the set (and sometimes a lot more).

The reason they can perform so well under such adverse conditions is that standards have been built up over time.  In the new digital world, there are relatively few standards and people don’t know how to do their jobs as well.  Moreover, they know each other’s jobs even less.

This new reality requires a different kind of organization.  Smaller, more cross-functional teams need to be built so that problems can be worked out on the spot. Strategy and implementation need to be done simultaneously.

There are few rules to follow, so talented people have to figure out how to work together on the front lines not just at the senior level.

Walls need to be broken down and turf wars need to be abandoned. This holds especially for the deep chasm between the business and creative sides of the business.

Small Scale Initiatives: Media companies are faced with a large scale problem, so it’s understandable that they try to come up with large scale solutions.  Invariably, they end up with large scale failures.

Digital Media is still new and nobody really knows how to do it all that well.  Creativity researchers say that it takes ten years to acquire the skills needed to be really great at something.  Who has really truly had that ten years of hard practice in digital?  Very few.

What is required is more small scale efforts and more experimentation with less senior level involvement.  That requires smaller, more flexible budgeting.  It’s much easier to scale up than it is to scale down.

Empowerment: There is really no way to know beforehand what will be successful.  In the Digital World, implementation is strategy and it has to be done on the ground level.  If you have to hold a board meeting to make every decision, you will be too slow.

This last point is probably the most difficult, because it requires senior management to take a back seat.  Senior people are, almost by definition, ambitious and therefore like to direct strategy.  However, they will have to learn to channel their efforts into creating the right environment for success rather than making the prescient product strategy decisions.

What traditional media companies need most is to realize many of the practices that made them successful in the past will be liabilities in the future.  Planning cycles will need to be drastically shortened; large, creative egos will have to be held in check; and “greenlighting” will need to be done much further down on the organization chart.

Big digital success comes in small packages.

– Greg

12 Responses
  1. March 10, 2010

    There is one more point to view on digital transition. While moving to digital it’s crucial to see other opportunities that are not content production. On the web content goes along with services and integration and it’s not the thing that were common in TV or Press.
    Digital incarnations of traditional media will compete with services such as mail, search, social networks and others. And this competition is not the same as TV vs Press. In digital world there are the same metrics for (mostly) any kind of activity. There is no gaps such as between TV and press.
    So traditional media have to provide their digital products with some new features and put these features in business models to survive.
    .-= Dmytro´s last blog ..присядьте! =-.

    Greg Reply:

    Dima,

    It’s an excellent point, although digital video still has metrics problems, especially with psychographics.

    In any case, you’re absolutely right. Digital information lends itself to media mix evaluation much better than analog and atomized media do.

    – Greg

  2. March 11, 2010

    Good post Greg. I’m doing some consulting with a media company right now and I can tell you that all three of your myths are definitely myths with regard to this firm. The biggest problem is the structural rigidity (and sunk costs) – which appear to be almost impossible to overcome. I hope that they can, because I like the firm. But it’s amazing to see just how strong the path dependence is…
    .-= Tim Kastelle´s last blog ..What Open Innovation Is Not =-.

    Greg Reply:

    Tim,

    I’ve been there so I know.

    One thing that I wouldn’t underestimate is the issue with standards and interfaces. People in traditional media are used to having everything work together very well. In Digital, on the other hand, standards (especially between departments) are almost nonexistent, so people need to work across disciplines much more closely than before.

    This is especially true of creative people, who are used to being able to ignore other departments and mostly concentrate on the product, but now have to collaborate with web development, marketing and sales to get the product right.

    – Greg

  3. Hugh Willett permalink
    March 15, 2010

    I worked in technology publishing in Silicon Valley during the ’80s and the ’90s for large publishing companies. We were certainly aware of the digital revolution and reported it’s expansion weekly. Our readers, mostly with degrees in software, engineering or business, were certainly the earliest adopters of the internet.

    The earliest reactions were to copy print products in limited capacity to meet reader requests. The industry was still in a defense mode and we debated the so called “death of print” the way scientists debate the next ice age or a comet hitting the earth. Some said it could happen tomorrow, some said it would take fifty years, others said it was so unlikely that we should not spend precious resources until we were certain what was happening.

    The allocation of such resources was a major question. Print publishing has been under heavy economic pressure since long before people were talking about digital media. The question was, do we consolidate our position in print, the only model that could produce significant return on investment, or put more of those scarce resources into digital products that were still evolving.

    Greg Reply:

    Hugh,

    Thanks for your comment.

    Ironically, the last decade has been great for most of print (except for Newspapers and, it would seem, trade publishing).

    Magazine brands with niche audiences can adapt well to the web and advertisers still are willing to invest heavily. Moreover, investing in web is, in truth, not a heavy financial investment. It’s much cheaper to launch a web site than it is to launch a new print brand.

    Some tradiitional publishers, like The Atlantic and Conde Nast, understand this and are putting together great print/digital businesses.

    – Greg

    Hugh Willett Reply:

    Greg,

    The technology trade business was certainly set up for the fall it took after 2000. The .com bubble had pumped up the page count artificially, and at the same time overhead, personell etc. When the .com bubble crashed the technology trade publishing business imploded at the very same time it should have been expanding to meet the new digital opportunities.

    By 2000 he trade press had degenerated into a place for technology companies to pump up their stock with continual flow of press releases. Some of our biggest former ad customers, themselves technology businesses, became our biggest competitors when they realized they could distribute press releases themselves on the internet.

    Greg Reply:

    Hugh,

    Yes. I’ve heard that it’s been tough for trade titles, unfortunately.

    – Greg

  4. Simon Elkin permalink
    April 5, 2010

    Greg: These are all great points but I believe the transition is in fact following the value of digital media advertsing solutions quite closely. I don’t really think that anyone in the media buying or brand marketing business is really still subscribing to those myths, although sure, they use them as gates when vetting certain campaign spends. If a brand could directly associate a digital campaign spend with product sales, and it could be proven that the digital spend was more efficent and effective than the traditional spend, you would see the “transition” happen overnight. I believe the business in gerneal is spends too much time on innovation to prove its relevance to advertising and not enough time demonstrating that digital media campaigns sell things, how much, and how much in the context of the other places you could spend you money. Content choices and innovation are shifting eyeballs obviously, and if that’s how you buy, digital media will benefit with gradual revenue increases. The transition to parity in terms a comparison to traditional media (pre-2000), will happen when the digital campaigns have advertising value and impact beyond how many uniques your plan is delivering. “Build it and they will come”- No. “Prove it and they will come” – Yes.

    Cheers,
    Simon

    Greg Reply:

    simon,

    I agree with all of your points but , respectfully, I think they address different issues than the post.

    The post was about why most traditional media companies do so poorly relative to pure digital companies. They have a huge advantage in that they know how to develop content and manage creative people, but very few actually have competent web divisions.

    I agree that the reason that digital spend isn’t higher is because it is unproven beyond direct response. This is a major oversight on the part of digital people who keep harping on about how clients don’t get it, but will come around some day.” Advertisers look for media to fit their brief, they don’t fit their brief to media offers.

    Thanks for your comment.

    – Greg

  5. Falk permalink
    September 5, 2010

    Again, very interesting post with a lot of content in it.

    1. Innovation inertia refers to the concept of Clayton Christensen (Disruptive Innovation) and the innovation dilemma. He found out that along a broad range of industries leaders failed to transform their companies due to the efficiency trap (the gatekeepers in Finance, Marketing and Controlling, that want to see their requirements fulfilled before any initative is put forward) He proposes (as you do and I agree as well) to build external small scale units to carve out the opportunities in the niche market, gain cheap experience and THEN up-scale projects.

    2. However I disagree with Myth 1; Please read the Boston Consulting Group publications “The CMO Dilemma” and “Innovation Report 2009” (p. 28) that indicate that most Traditional Media Senior Executives do not feel confident in the field of Digital and Innovation (and CMOs usually have a better understanding of what they want than media agency and trad. media executives). Observing interviews and approaches with IPhone apps of print, radio and TV companies shows us that they did NOT understand what this medium is all about. But what is most triggering to me are the constant failure in developing learning capabilities since all approaches show that these companies could not get rid of their “mass media perspective” that excludes any idea of an honest integration.

    Greg Reply:

    Thanks for your input Falk!

    – Greg

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