We haven’t yet, but speakers and panelists at the MFM’s annual conference in Atlanta earlier this month suggested that we will soon, if we all start believing it, seize the opportunities that the new media present and build companies that are designed not to last, but to adapt to the changing media technologies.
Can it be that Norman Vincent Peale and Napoleon Hill were right when they said we get what we believe? That’s one of the messages I took away from our annual conference in Atlanta earlier this month.
We have seen the enemy …
Dr. Robert Eisenbeis, chief monetary economist at Cumberland Advisors and retired research director of the Atlanta Federal Reserve Bank, has a decidedly different perspective on the U.S. financial situation than the one that seems to be assaulting us on a daily basis. Not only is the notion that our economy is the worst since the Great Depression a myth, non-economic factors, such as 2008 presidential campaign rhetoric and media coverage, are responsible for influencing the consumer behavior that is used for determining the economy’s health, he told conference attendees.
Eisenbeis cited data from The University of Michigan’s Index of Consumer Expectations, which showed that the largest proportion of consumers in the history of the survey thought that the economy was in recession in October. Nearly every consumer in the survey reported that he or she had heard media reports about the spreading impact from the financial and credit crisis, lower home and stock values, or rising unemployment. Using data tracking news reports about the economy, Eisenbeis demonstrated the correlation with the Index’s findings and illustrated that these expectations preceded many of the actual events that signaled we were in a recession.
Peter Smyth, chairman and CEO of the Greater Media radio group, made a similar observation as part of a general session discussion, noting that over half of the economic downturn could be attributed to consumer behavior driven by self-perception.
Smyth and Eisenbeis also agreed that we aren’t likely to experience anything near the Great Depression, which was marked by a GDP that failed to improve for 15 consecutive quarters and unemployment rates of over 22 percent. In fact, when we take into account the much larger labor supply that exists today, unemployment levels of the late 1970s and 1980s were much worse than the unemployment forecasts for 2009.
Happy days are here again
So what will it take to get consumers spending again? Eisenbeis reminded conference attendees that we got out of the last recession, following the dotcom bust, by stimulating investments in housing. As we know, much of that spending was funded by debt. Eisenbeis believe we shouldn’t rely as heavily on consumer spending — or really, borrowing — this time around. Another difference is how we are handling the write-downs. In 2002, the capital markets absorbed some $2 trillion in asset write-downs. This time around, the markets are still assessing the impact of government-led strategies to remove toxic assets from balance sheets.
As a result, the main driver for getting out of the current recession will be corporate investments, which will need to come from corporate profits, he believes.
Noting that “people who live by the crystal ball need to be comfortable eating glass,” Eisenbeis said that lot of economist are citing the “green shoots” that portend an improved economy by 2010. He said a 2010 timeframe will also allow analysts to determine what type of impact the government’s stimulus package has had on the economy. However, a full recovery won’t occur until we’ve seen a turnaround in business attitudes and consumer spending, he warned. All the more reason to examine how our personal attitudes are influencing workplace and consumer expectations and the outlook for business investment at our own companies.
Evolve and prosper
So, what opportunities are there for companies that have the audacity to ignore the conventional wisdom and believe that the future of media companies includes prosperity?
One conference session, led by FTI Consulting’s Bruce Benson, summarized the research that FTI has conducted as part of its work for a number of media companies. In it he noted trends that are allowing some companies to enjoy positive results even in these turbulent times. Benson, senior managing director, entertainment & media at FTI, began with a review of the “Causes of the Chaos” that have disrupted traditional business models, including open platforms like the Internet, that are undermining the market positions for vertically integrated companies. As openness rises, the walled gardens that had maintained equilibrium for these companies collapses. For example, as he noted, anyone can become a broadcaster on the Internet.
Idea résumés replace business plans
Moreover, Benson has found that the accelerating pace of disruptive change requires companies to “do it quickly, do it cheaply and either fail fast or iterate their way to success.” This approach toward product development is less about business plans and more about “idea resumes” — one-to-two-page documents that summarize the how, what and why for a “fail fast and cheap” innovation that review committees approve within days, not weeks or months.
Adapting to a many-to-many media world
One of the drivers behind the need to accelerate our process for seizing new business opportunities is the impact of the Internet and other open systems on traditional business models. As Benson pointed out, the media world has functioned using one-to-many networks for the past 300 years, beginning with print media produced for a mass audience. While we may use the Internet as a one-to-many network for publishing news stories and delivering podcasts, innovations like Napster demonstrate just how disruptive many-to-many capabilities can be to traditional business models.
Consumers in a many-to-many environment are compelled to belong to the biggest network. While being first to market is a great starting point for having the largest user network, what really matters is having the network that attracts the most members. The viral nature of many-to-many networks, where each member attracts two or more additional members, means that the entity with 1 million members has the potential for 1 million more members than the organization that has 999,999 users.
According to Benson, the best strategy for the smaller network is to become compatible with the bigger network, which neutralizes the larger network’s competitive advantage. These businesses must also offer benefits that exceed the “nuisance factor” associated with making the switch.
Brand is in the eye of the beholder
While some ad experts have reminded clients for years that customers ultimately control our brands, the impact of social behavior and consumer interaction in a many-to-many media world is reinforcing this reality for today’s businesses. Benson cited recent research from Forrester that demonstrated the role of social media in providing the groundswell that “creators,” “critics” and “collectors” can play in influencing one another as well as the “joiners,” “spectators” and “in-actives” who follow their lead.
Understanding this impacts brand management activities. Focus groups can be complemented by listening to what consumers are saying about the company via blogs and other social media. In addition, as Benson pointed out, companies should be incorporating socialized media tools, with sales activities expanding to include energizing the consumer base, product support becoming more about supporting user groups and R&D incorporating ideas from top customers.
Building to adapt versus building to last
Applying these axioms to media companies, Benson noted that we need to change from being organizations that focused on a “built to last” model and focus more on “building to adapt.” For example, the competitive advantages for a build-to-last company would focus on such things as greater efficiency, more stability and broader reach. In contrast, companies that build to adapt find their competitive advantage through differentiation, adaptability and speed.
Adopting these changes to how we approach our businesses requires distinguishing between what is core from what is context. Many newspaper companies would find that while news is core to what they do, delivering it via newspaper is really more about the context. The same would be true for music companies that view CDs as context to their core business of distributing music.
American Idol is one example of what media can do to take advantage of social media and other tools that foster consumer participation. In addition to being a breakout TV series, it provides music labels with a very effective process for identifying artists whose records will sell. Yahoo’s relationship with newspapers has also demonstrated the value of co-opetition, generating a 34 percent increase in CPMs.
Benson concluded with an examination of the potential of advanced interactive video services to support more effective advertising and support direct purchasing. Positive thinking is active, not passive. New technologies will continue to emerge; we must constantly be examining how we will adapt to these changes in order to remain relevant in the lives of our customers.
With education about the business of media representing the core for what we do at MFM, I look forward to sharing additional insights from our conference in future columns. It’s my hope that they will give you road markers on the path to prosperity for you and your company.
Please take the time to let me know how they are helping you and your company to adapt to the bright future that awaits everyone willing to embrace it. When you do, I will also include your stories in future columns.
Mary Collins is the president and CEO of the Media Financial Management Association, a professional society addressing the diverse needs of the industry’s financial and business professionals. Her column appears here every other Friday.