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22. september 2014

The Gospel of Speed

Eight lessons learned from the transformation of the media industry. Few industries have accelerated faster than the media industry in […]

Eight lessons learned from the transformation of the media industry.

Few industries have accelerated faster than the media industry in recent years. The speed of disruption in the media industry has consistently been higher than in other industries in recent years. We who work there can feel it, and several studies confirm it. One study I find crisp and clear is the one conducted by Darell Rigby from Bain and Company, in which 500 companies in 20 industries where surveyed. It featured the media first in pace of change, ahead of tech, telecom and retail banking.


The white mark shows the current state, while the full bar shows the pace of change over the next five years. Source: Bain/HBR.com (White boxes indicate potential change held back from regulations etc.)

Throughout the 2000s, production, distribution, packaging, technology, business models, customer relationships and user expectations have flip-turned for all media companies. The Scandinavian news outlets came from a comfortable position of non-competition behind the immense barriers to entry formed by our tiny languages and heavy regulations (the Norwegian TV and radio markets weren’t opened for commercial TV until the mid 1990s). We were spoiled monopolists living off our ad revenues in one of the world’s per-capita richest markets. The media sector in these parts of the world has undergone the dual impact of exposure to competition and technological change on top of each other, suggesting that the pace of change in the last two decennia has been higher up here than the global average.

This article explores the consequences of living in this rapid-fire environment, and is based on experiences at Schibsted, a Norwegian media multinational, which is fighting eBay and Naspers internationally while transforming its old media foundations in its backyard markets.

It spells out a gospel of speed which the survivors and eventual winners in this tech turmoil live by.

I hope it’s a story of real change management, beyond the cheesy platitudes that usually surround a term which erroneously has become synonymous with management’s frustration with its workforce or a cover for enhanced performance management. I hope you read this as a dummies’ guide to improving your transformational skills, a best effort from us inside this shifting industry to give the rest of you a heads-up.

It started out fine. And it went well for a long time. The Norwegian local newspaper companies and what emerged as their handful of dominant owners came about at the end of the nineteenth century and built businesses that lasted and thrived for 150 years. They’re an astounding testimony to the resilience most business models have shown until recently. The life expectancy for an S&P 500 company (a broad index of major US stocks) was 60 years in the 1920. Since then, it’s dropped to less than a fourth: the average tenure of an S&P 500 corporation now stands at 15 years, according to research done by Yale professor Richard Foster.

Foster goes on to predict that three quarters of the S&P index in 2020 will be made up of companies that don’t exist today. Three out of four future winners are still ideas at this very moment. Think about that. In less time than it takes to train a doctor, hundreds of companies will make their first business plan, prototype, secure financing, hire, roll out value chains, succeed, get IPO’ed and dominate the future business space. They’re the Facebooks, Alibabas and Übers of tomorrow, each of them by various accounts valued at more than Norway’s largest and most valuable company, the oil giant Statoil.

Thus ends the model that worked so fantastically well for newspapers: a printing plant, a newspaper, classified ads, handsome profits. Voilà! For the change that has sliced the longevity of S&P companies isn’t hitting all companies with the same strength. Who does it hit? A survey of 200 professions based on data from the Bureau of Labor Statistics put journalists, printing plant workers and lumberjacks (paper is wood) in the top ten jobs that were most likely to underperform in terms of income growth and employment.

The reason is, of course, that the internet simultaneously outdoes the newspaper on all fronts. What used to be the entry barrier stronghold, the printing and delivery infrastructure, is torn down by online distribution. Then the bundling of news, informational updates and ads is undone: what used to be Aftenposten’s foreign affairs, Aftenposten’s weather forecast and Aftenposten’s travel advice are now fed directly to the users from the Politicos and Guardians of over there, the Yr.nos of back here and the TripAdvisors of everywhere. On top of that, targeted advertising technology outperforms the one seemingly safe asset that remained: the regional sway local news entities had over marketers. National and international players such as VG.no and Facebook.com can now offer advertising products where marketers can select precise and narrow segments to promote to, by gender, geography or topic of interest. That radically undermines the crude selection of audiences that can be achieved by allocating advertising budgets to specific local news outlets.

At what continues to be the paper-heavy end of Schibsted’s portfolio, revenues from the main source of income, print ads, is down by 20 percent. At the same time, mobile advertising is exploding, and those who master product development and advertising in this arena are having a field day that may offset the losses in traditional products. It’s a turnaround in the true sense of the word. Here are eight insights from this managerial handbrake turn:

1. Get real-time data

– the fastest reporting there is

Newspaper companies make money on advertising and on selling subscriptions. Reporting subscription and single-copy revenues has always been a long drawn-out process, usually not completed with full accuracy until six weeks after the end of the month. Why? Because there’s both the physical counting of newspapers returns from kiosks and supermarkets and the accounting of rebates, non-payments and changes in subscription types that all in all add up to an immense bookkeeping complexity as ancient as the Gutenberg printing process. This makes managing consumer sales in newspapers a quaint exercise: we order in cake in July to celebrate great sales in May or hastily assemble crisis meetings in December to address poor performance in October. At least that used to be the case. Last year I brought a new chief product officer onboard the management team in the news company I was managing. She was a VG alumnus, and for non-Scandinavians VG.no is considered the benchmark for online news in Norway because of its careful blend of Buzzfeedish snacks and NYT-standard investigative journalism. She brought with her an impatience that couldn’t stand the lag in data and the lack of dashboards, so her first priority was to accelerate reporting. Sounds boring, but makes an enormous difference.

It turned out the call centre ran fully updated data, a fact which, when coupled with the increase in online orders, made it perfectly feasible to run all subscription reporting in real time. That’s pretty much the fastest reporting there is. Now that’s a wholly different power tool, so leaders must show discipline and restraint, as there’ll often be an urge to react on even the slightest change: they must make sure they have the right balance between performance management right now and the long-term view.

So now Bergens Tidende runs all its reporting on traffic and customer interactions with real-time data. The instantaneous feedback tells us whether we’re doing the right thing for our readers. That’s information that is incalculably valuable to journalists, front editors and CRM analysts alike, and it motivates them to do a better job simply by showing them the effect of what they’re doing.

2. Get predictive data

– even better than the real-time thing



So what do you when you have instantaneous data? You want more. So you start thinking of ways to get your input for decision making even quicker than in no time, that is, ahead of time. Schibsted Media Group is investing heavily in advanced data analytics capabilities to garner and treat predictive data with the aim to compute when customers will churn, what they’ll want to read, and which products they’re likely to buy next. A hesitant customer will start receiving discounts for longer-term subscriptions, big spenders will be urged into bundles, and a reader on a news spree will be triggered by more stories the data tell us he’ll want to click into.

Does it work? It’s a little early to say for sure that the investments are paying off, but to give you an idea of the level of ambition, I can tell you the aim of the data analytics team is to double the amount of customers completing the article-buying processes on VG.noAftenposten.no and Aftonbladet.se by the end of 2014.

3. Fix your sights farther ahead

– higher velocity is placing tougher demands on leaders to remain foresighted



Speedier information and automation will change the fabric of companies in profound ways. Similary to how slalom and downhill place very different demands on alpine skiers, so will increased speeds in the business world impact the way corporations need to work in order to compete. Finance and controlling will have to fix their sights farther ahead; much like a driver does when she accelerates. In the media industry, longer-term scenario modeling has started to displace ordinary one-year budgets. Guessing on revenues and costs three or even five years ahead can sometimes amount to science fiction writing in an industry that’s in complete turmoil, but the advantages of longer-term planning are that it builds agreement on the strategic direction and creates commitment to the lifetime consequences of product decisions made today.

In the shorter term, businesses can run more or less continuous reallocations of resources. In these kinds of ever-rolling processes, the main aim is to go for the things that end up making lasting change. Don’t care about the plane ticket that turned out too high, but do work on the attitudes your workforce has to travel expenses and to the routines for following them up. Don’t care about any specific CPT (cost per thousand – a standard definition of audience prices in media) being obtained in any particular sale, but do work on how your sales force can work with customer expectations to improve the average prices over time.

Don’t slice overtime budgets when you should be negotiating with the unions on the general terms for overtime triggers and compensation. You get the idea. When things move fast, what’s happing now is about to be far behind you. That puts a higher attention value on what lies ahead.

To avoid misusing the old Gretsky quote about skating to where the puck is going to be, let’s just call it keeping up with Zlatan and not turning into Stephane Henchoz (a defender marking the Swedish international):




First I went left, he did too. Then I went right, and he did too. Then I went left again, and he went to buy a hot dog.


4. Avoid buying the hotdog

– care about where you’ll be in the future



One of the learnings from operating in a high-speed environment is that it gets harder to steer the business simply by looking at financial data. When Schibsted started attacking established classifieds sites outside Scandinavia, such as eBay in France, neither top-line growth nor margins featured prominently on the KPI dashboards. The markets Schibsted was competing in where either immature or highly competitive. In the first case, this meant that growing a market had to happen in synch with growing a business. In the second, Schibsted was playing the part of the attacker, investing heavily to oust entrenched rivals. In neither case were traditional financial metrics the key indicator of whether we were approaching the coveted no.1 position that pays off so well online.

That’s why Schibsted spent quite some time establishing metrics that could predict future success; among these were various traffic measurements, time spent online, distance to the closest competitor, ad insertion rates and ad throughput. It turned out that sites that scored well on these figures over time outperformed sites that were merely satisfying traditional P&L requirements.

5. Increase speed to grow your surface of contact

– the more you move, the more terrain you cover



Schibsted’s regional newspapers, Aftenposten, BT, Stavanger Aftenblad, and Fædrelandsvennen, were recently reorganized from a traditional business unit format to a functionally oriented organization chart. Consequently, all consumer sales – that is subscription and single-copy sales and marketing – were centralized and put under common command. One of the surprises we got in this processes was the difference in pace of customer contacts. BT had spent the past few years in projects to reach a level of permanent customer activity, that is to say that on every day of the year there was a campaign running. This was a major improvement on the days when the newspaper centered all its energy on two bet-the-house campaigns per year. So it came as a bit of a surprise to see that Aftenposten, BT’s sister newspaper in Oslo, had not only reached a state of contiguous campaigns, but had gone way beyond, simultaneously running hundreds of sales efforts targeted at different segments of prospective buyers. Its approach was of course one of coding and automation, where the various campaigns were pre-programmed to be triggered by customer action/inaction. The belief that increased speed is a good thing is held by generals and football managers alike. Why? Since it means your troops cover more ground, essentially giving you the same effect as multiplying their numbers. But what distinguishes the digital arena from the battlefield or football pitch is that here you can increase your speed 500-fold rather than by single-digit percentages.

6. Increase speed, create learning

– more iterations of trial and learning

When the Swedish Aftonbladet.se sells its freemium subscriptions, called Aftonbladet Pluss, the but-button is yellow with “Try Pluss now”. That specific design has been tested on 20,000 readers among 48 varieties of purchase-triggering designs. The test is done in a few hours, thanks to Aftonbladet’s immense traffic throughput and the fact that a digital redesign can be implemented in a matter of microseconds – which makes online trial and error a lot simpler than the redesign of a retail store or a bar in a pub and even permits rollbacks of whatever doesn’t work. That yellow button creates more sales than any other design, and it’s statistically proven. It’s an illustration of how product design, when done right and supported by an infrastructure that allows quick deployment, can significantly improve performance through thousands of swift baby steps. Imagine the advantage over traditional value chain redesign processes, where decision-making, structures for quality control and investment approval would chew up any immediacy created by new ideas.

7. Improve the perceived speeds to customers

– may be even more important than internal tempo



The use of digital tools can often improve the perceived speed of service, even when they do not accelerate the measurable interaction time between company and customer. It’s the modern equivalent of the old example of a hotel with a slow elevator which installs a mirror and thus ends all complaints about its speed.

A comparison study done by Schibsted’s call centre shows that customer service operatives could administer six times as many inquiries using chat rather than phone. The reason is not, as you might suppose, that chat is a faster form of communication; in fact, a typical support chat lasts longer than a phone call. Rather, it is the operatives’ ability to discharge several calls simultaneously that makes the difference. Speed of service is consequently improved. Not only is the first person standing in the line being served, but also five or six people behind him. Time spent waiting in line is reduced.

8. Watch out for rupture

– when speed increases, the risk of communication breakdown increases



When Bergens Tidende (BT) in the autumn of 2012 launched a large change program that would eventually result in downsizing one fourth of the workforce and a sixth of costs, it came as somewhat of a surprise to most of our employees. We were managing a company that had been running margins of 12-14 percent – at the high end of what’s usual for Norwegian news media – and our cost-cutting measures caused anger and frustration. Quite understandably, I’d say. The groundwork for the change process had been laid by working with scenarios where all the most likely outcomes told a very different story from our quarterly reports. But this was a hard message to convey when the triggers in those scenarios were just starting to go off.

The situation we found ourselves in will become ever more common when the pace of change increases, whilst managers and other decision makers set their sights far ahead. To BT, focusing on long-term scenarios rather than managing the present was a new thing. Also, the data and other signals of weakness were still heavily concentrated at the top of the organization, so it would be hard for anyone outside the management group to come to the same conclusion. In hindsight, it is obvious there was a high risk of rupture in trust and communication in the way the situation was set up.

Based on experiences gained from these events, Schibsted’s Norwegian businesses have now remodeled the way they work on and communicate change.

First of all, we’re trying to avoid “heavy lifting”, or so-called change programs. These all-encompassing, motivation-engulfing, ultimatum-like programs run contrary to my belief that change is constant: if change is constant, why don’t we change for two years and then all of a sudden dive into revolution? They also tend to bring forward decisions that could be taken more wisely if given a little more time, or to miss decisions all together because parts of the organization may try to wait out the change projects that run against deadlines that cover the entire company.

Second, we put emphasis on democratizing data. Instead of aggregating data in bulk reports for distribution to experts or executives, an abundance of live data on users, subscriptions and sales has been made widely available. Anyone can see whether we’re winning or losing. In addition, the top executives spend a lot more time communicating different possible futures for the business with colleagues to prepare everyone for whichever direction the organization might take.

– – –

You may ask yourself: “All this is fine, but are these guys getting any results?” That’s the right question to ask.

A study done in 2012 by Andrew McAfee and George Westerman from the Massachusetts Institute of Technology and Didier Bonnet of Capgemini Consulting 1 shows that businesses which improve their digital capabilities are on average 26 percent more profitable and achieve 9 percent more return on capital than companies that do not. To me, their most decisive finding was that companies where digital change was understood and pushed through from the top by an active and passionate executive were the ones that ranked at the very top in terms of performance.

Andreas E. Thorsheim has worked in Schibsted for ten years in various positions, notably as CEO of Bergens Tidende, CFO/COO of Schibsted Norway and Director of Projects for Media Norge. Thorsheim holds the degree of cand.oecon (equivalent to a master’s degree in economics) from the Norwegian School of Economics and Business Administration (NHH) and a CEMS master’s degree in international management from NHH and the London School of Economics.

Further reading: Nieman Lab: The newsonomics of Schibsted’s VGTV and web-native TV

McAfee, Westermann og Bonnet (2012) – The Digital Capabilities Your Company Needs

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From left: CEO of the Norwegian Media Businesses’ Association, Randi Øgrey; Secretary General of the Norwegian Press Association, Elin Floberghagen; Secretary General Reidun Kjelling Nybø of the Norwegian Editors’ Association; and leader of the Norwegian Union of Journalists, Dag Idar Tryggestad. Photo: Christine TolpinrudFrom left: CEO of the Norwegian Media Businesses’ Association, Randi Øgrey; Secretary General of the Norwegian Press Association, Elin Floberghagen; Secretary General Reidun Kjelling Nybø of the Norwegian Editors’ Association; and leader of the Norwegian Union of Journalists, Dag Idar Tryggestad. Photo: Christine Tolpinrud

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