At Cook’s Illustrated, we would survey our audience religiously. Readers would often tell us they wanted “healthy” and “low-fat” recipes, but when we published healthy, low-fat recipes, we’d learn in follow-up surveys that the readers wouldn’t actually make these foods.
This is an example of what behavioral economists would call the “social desirability bias.” People say what sounds good, but what they say may not match their actions.
Come on, media leaders, be honest: do your rally cries around innovation match your actions?
Unfortunately, I have seen too many media executive teams proclaim how important innovation is, but when you look at their list of top initiatives, few if any of them have to do with new product development.
Do an audit right now: how many of your top five initiatives are focused on creating new revenue streams for the future?
Don’t feel bad if you’re not innovating as much as you’d like to. Unfortunately this is commonplace in the media world.
Here are some of the main reasons why innovation in media companies is so tough, and what you can do about it
Too much focus on cost cutting
When times got tough for print businesses, the first place most businesses turned to was cost cutting. And guess what – it worked! Many cash-rich media companies got a little fat, and cost cutting helped stabilize profits.
But then something happened – shareholders and management got addicted to cost cutting.
One magazine Owner/Operator told me she continued to cut costs to successfully stabilize the bottom line for four years. Unfortunately, she wasn’t paying attention to something that is very important – revenue! During this four-year period, revenues fell by over 40%. She woke up one day and realized there were no more costs to cut, and there were no revenue enhancing initiatives underway. Now, if she can’t find some way to invest in marketing and sales, she’s going to face bankruptcy. I hope it’s not too late and that she can save her company.
I advocate running lean businesses, but don’t cut to the bone! Cost cutting is a one trick pony, not a long-term growth strategy. If you aren’t simultaneously driving the top line, you will have problems in a few years.
Short term incentives
Do your compensation plans motivate long-term thinking? Or are they based on meeting an annual budget?
Here’s the thing about innovation – it takes time. Here’s the thing about incentives – they work! So if you are motivating your team to hit annual targets, don’t be surprised if they focus on initiatives that pay off in under 12 months, rather than the truly innovative ideas that may take two or three years to come to fruition.
For publically traded companies, this can be somewhat managed through issuing stock options or restricted shares to balance the focus on the short term and long term. Many privately-held media companies lack a robust long term incentive plan. An ESOP (Employee Stock Ownership Plan) would help. Some family-held media businesses may be hesitant to issue actual shares or options, but there are other mechanisms. You should consult a compensation expert to see if there are incentives that could work given your corporate structure – for example, a long term incentive plan (LTIP) or a sales interest agreement (reward employees as-if they were shareholders if the company is sold). Again, please consult an expert as there are pros and cons, as well as tax implications, for all of these options.
Complexity of core business
Content creation businesses are complicated! I don’t think people outside of the industry fully appreciate how difficult it is to create content, keep track of subscriptions, manage direct marketing campaigns, deal with legacy technology systems, etc.
Unfortunately, this complexity gets in the way of making progress with innovation. I have seen projects killed because:
- “It would be time consuming to integrate well with our legacy system”
- “It would be hard to figure out how to make this work with our existing price points”
- “We are too busy managing the day to day, we can’t get this done”
A way to manage this is to create a “skunkworks” team to focus solely on innovation. The core management team should serve as an advisory board and ultimately be bought in to the project. But innovation will require some “breaking of the rules” (within reason, of course). Why spend six months and $250,000 integrating a new product with a legacy system, until you are sure the new initiative will be a success? Why worry about how to bundle the new product with existing ones until you’re sure the consumer will be willing to pay for the new thing? Get something up and running, prove market viability, and then integrate into core operations (or even moving core operations over to the new platform, if it ends up being better).
Managers uncomfortable with uncertainty
Another behavioral economics term for you: cognitive inertia. People prefer the status quo. If we tried something in the past and it worked, why not try it again?
When I started working with one client, they were concerned that revenues had stayed flat for the past five years. They couldn’t figure out why they weren’t growing. I looked at their list of initiatives and realize they had been doing the same exact thing for five years. What did Einstein say about doing the same thing over and over and expecting different results?
I get it, though. Innovation is uncertain, and uncertainty is uncomfortable. That’s why companies need a process to reduce the uncertainty. Here is a link to an article that describes such a process for innovation.
Poor understanding of the customer
A study by Harvard Business School showed that in the US, 85% of new product launches failed due to poor market segmentation.
Many executives forget to empathize with their target audience when developing new products and services. Are we creating a feature or article because the CEO would like it, or because the market would pay for it?
Get out there and spend a day in your audience’s shoes. Ford had a process they called “gorilla research” where they would send their designers to parking lots to hide and observe people interacting with their cars. What’s your company’s opportunity to do some gorilla research?
There are also several “big data” / analytical methods for better understanding your customer’s needs and wants. Have you been using them or just guessing?
How The Sterling Woods Group Can Help
We can be the “skunkworks” team for you! We work closely with management teams to develop a strategy for new product development, then we actually implement for you – including creating and migrating the content, running the marketing campaigns, and staying on top of the technology.
If you’re more of a DIY shop, we can come in and run training sessions on our proprietary new product development methodology.