How To Prepare For An Uncertain Future

 Could you imagine still operating a successful business if you no longer had the broadcast spectrum used by your station? That would have been a pretty unthinkable scenario until the FCC’s call for bandwidth reclamation a few years ago. As TVNewsCheck’s Harry Jessell observed in a recent column, the notion has moved from unthinkable to possible to unlikely, based upon the final version of legislation authorizing incentive auctions of TV spectrum.

However, coming up with a scenario that challenges our business assumptions is precisely the type of tactic that Barbara Cohen, president of Kannon Consulting, uses with her clients. Cohen, whose firm provides planning, facilitation and revenue-focused consulting services to media and marketing companies, believes that effective business planning must take into account the unforeseen circumstances as well as the ones that are staring us in the face.

In an article that appears in the January/February issue of The Financial Manager, the bi-monthly magazine for members of MFM and BCCA, Cohen outlined five key principals to help companies imagine the different scenarios that can affect their business models and empower them to become more flexible in the face of change:

 Don’t wait for the media industry to work together.

“The history of the business teaches us that few industry-wide efforts have worked,” Cohen observes. “It is not because industry leaders do not have good intentions; it is because they have different and competing incentives.”

While Cohen uses the example of the differences that exist between the needs of a newspaper company that operates several large metro properties and those of papers that operate in individual markets or smaller metro areas, her point would be applicable to broadcast stations as well. For this reason, her firm advises its clients to “assume that you will need to survive on your own with select service providers and strategic partners, not necessarily other media players.”

Get your organizational house in order.

“If you’re among those who whine that their company’s departments don’t work well together, then stop it,” Cohen admonishes. Instead, she encourages organizations to ensure they have aligned performance incentives across their functional areas. In organizations where different reps are tasked with selling broadcast and digital, rewards should be set for the team. Similarly, newsrooms that are supposed to work with the digital team, should have their performance metrics based upon that behavior, according to Cohen. 

While hypothetical scenarios may be well suited to encourage “out of the box” thinking during strategic planning, she believes organization meetings should be more pragmatic. “Identify ideas with a better than 50-50 chance of success, establish the metrics to measure success and go. If the idea does not work, try to learn from the experience and move on.” Companies need to reward the experimentation and action, not talk. 

Stop looking at the business as digital vs. core.

“Most local news websites provide the same benefits as their core version and have been around for over 10 years. In any consumer products company, they would be seen as one mature product — Tide powder and Tide liquid, Johnny Walker Red, Johnny Walker Black. Look at products in light of the benefits they provide, product maturity and their competition.” 

On the other hand, Cohen adds, “Truly new businesses provide a different set of benefits and typically a new competitive set.” She uses the example of the iPhone, which “moved a communications tool, the mobile telephone, into an entertainment device and competes not just with phones but any form of portable entertainment….” 

Stop searching for “the big win.”

Using her experiences in working with newspaper companies, Cohen reminds us that there isn’t going to be a single action, “or even two or three,” that will replace all the revenue lost by the fragmentation affecting traditional media properties.

“Even the best consumer-goods firms only get it really right three in 10 times. So if firms with well-established processes and a history of innovation only bat .300, it is unlikely traditional media companies (or even some of the ‘new’ ones) will do as well.”

Plan for uncertainty; assume change, not status quo.

Cohen says: “Organizations attempt to peer into the future, trying their best to make sensible strategic decisions, only to end up staring at widespread uncertainties.” She goes on to say that while organizations will often set a course for steering through the crucial issues that cloud their horizon “based simply on predictions and the belief that you can see past these uncertainties” while in reality there is so much that we can’t see or predict with the help of traditional analysis.

I think we’ve all known someone who paralyzed decision making with analysis. The truth is you cannot eliminate all the uncertainties. Trying to do so simply wastes time and competitive advantage. But that doesn’t mean you should be flying blind. Cohen says, “Anything that can help make a decision in the midst of uncertainty is of value.”

Cohen’s firm recommends using scenario planning to make these hard decisions more effectively. “Scenario planning helps delineate perceptions about alternative futures in which today’s decisions might be played out. The goal is not to predict the future accurately, but to help identify several potential — and plausible — future states, recognize warning signs of change and develop strategies and investments to adapt to those changes.”

Rehearsing potential futures identified in the scenarios also helps organizations to “challenge assumptions and allows for quicker reactions when evidence suggests that the marketplace is heading in an unexpected direction,” according to Cohen.

However, the scenarios need to be plausible in order to be beneficial. “Any elements that can be readily proved false must necessarily be replaced,” she says. She also coaches organizations to make sure their scenarios are internally consistent, and sufficiently different from each other. 

In addition, Cohen says scenarios need to:

• Challenge the leadership team, through imagining events and possibilities that are “unthinkable” in their own vision of today and the future.

• Require participants to think creatively, to confront their blind spots and to break old paradigms and stereotypes.

• Be written with both descriptors, which describe the environment but may not change from one scenario to the next, and with drivers — trends that are selected to vary from one scenario to the next (one market’s descriptor could be another market’s driver). 

Examples of drivers include privacy, which Cohen says could reflect changing societal values and potential government regulation. “If large numbers of individuals begin to show concern over the data being collected about them, and governments began severely limiting the type and extent of information companies can keep, the growth in advertising tools like database marketing could slow.”

Another example is audience fragmentation. In this scenario it becomes extremely difficult for some advertisers to reach their target audiences. “Return on investment (ROI) is increasingly important for advertisers, and the purchase of media becomes commoditized in real-time, dynamic pricing models.” This could make buying/tracking services the “defacto ‘stock exchanges’ for ad opportunities.”

Or, how about the resurgence of the value of brand serving as a counter balance to these drivers? In this view of the future, “premiums are paid for smart and innovative creative executions to communicate and persuade consumers about how products and services can meet their needs. The value of intermediaries to build these types of campaigns, some in long form, increases. Media placement provides an important halo to the brand, so where advertising is viewed becomes important.”

Of course, as Cohen notes, no one can truly predict which, if any, of these futures will occur. Staying what she calls “outside in focused” and “monitoring the marketplace with sound metrics” can certainly help. This allows management to use agreed measures to quantify changes in the market and “accelerate those programs that are most appropriate.” You are making decisions looking through the windshield, not just at “rear window measures” such as sales or viewership. 

All the scenario building in the world won’t amount to much without a catalyst that binds the strategic planning techniques outlined by Cohen with the business plans and implementation required for realizing them. That catalyst is leadership. Cohen emphasizes that “the adoption of this perspective can only occur when the leadership of the company chooses to take on this challenge.”

As Jessell observed in his column, the compromise that protected local broadcast spectrum may have done so in a manner that preempts the opportunity for greater collaboration between the broadcast and wireless industries. While that may remain to be seen, Cohen has provided us with the tools and a compelling message based on the experiences of other media industry groups that there are times when our assumptions can blind us to the best course for the future of our businesses.

Barbara Cohen is just one of the experts who will participate in Media Finance Focus, the annual conference for MFM and BCCA, May 21-23 in Las Vegas. This will be the 52^nd consecutive year that we gather together and, as our conference name suggests, “focus” on the issues that will help media companies to navigate through the always uncertain future.

Given the venue, this year’s conference is aptly themed “Stacking the Deck in Your Favor.” More information may be found on the conference website. We hope you can join us in May when, in keeping with our mission, we will be providing the continuing professional educational (CPE) that allows us all to become the catalyst for leaders who can assist their companies in making the best decisions for their strategic direction.

Mary M. Collins is president & CEO of the Media Financial Management Association and its BCCA subsidiary. Her column appears in TVNewsCheck every other week. You can read her earlier columns here.