The Hive Think Tank: The Content Trap - Strategist's Guide to Digital Change

1. The Content Trap: A Strategist’s Guide to Digital Change Bharat Anand Harvard Business School The Hive Think Tank, October 5th ’16 @bharat_n_anand

3. 3© 2016 Bharat N. Anand Diagnosing the Problem: Newspaper Circulation The online threat News Real‐time updating  Easier to search  Greater variety  Rich media format  Anytime‐anywhere  Interactive  Lower prices 

6. 6© 2016 Bharat N. Anand News versus Classifieds The online threat for different parts of a newspaper News Classifieds Real‐time updating   Easier to search   Greater variety   Video format   Anytime‐anywhere   Interactive   Lower prices   Revenue declines Small Massive

16. 16© 2016 Bharat N. Anand User Connections: Strategy Implications  Industry structure Neck-and-neck Winner-take-all  Growth possibilities Incremental Discontinuous  Customer acquisition Internal salesforce Customers are de facto salesforce  Product quality At a premium “Network” overwhelms quality Traditional businesses “Networked” businesses

17. 17© 2016 Bharat N. Anand User Connections and Network Effects: Strategy  Industry structure Neck-and-neck Winner-take-all  Growth possibilities Incremental Discontinuous  Customer acquisition Internal salesforce Customers are de facto salesforce  Product quality At a premium “Network” overwhelms quality Traditional businesses “Networked” businesses

22. 22 © 2016 Bharat N. Anand Complements: Strategy Implications  A customer values your product more when she has the complementary product than when she has your product alone – Price of complement drops -> demand for your product increases  Complements create value and profit opportunities  Examples: – Hot dogs and ketchup – Cars and roads – Tires and restaurant guides – Hardware and software – “Piracy” and Silicon Valley – Theaters and ?

23. 23 © 2016 Bharat N. Anand Complements and Product Connections: Strategy  Substitutes should be expensive, complements cheap – The battle between digital giants  Substitutes should be restricted, complements ubiquitous  Core competence versus complements – Narrow versus broad definition of business

25. Sony e-Reader versus Amazon Kindle Complement: wireless

26. 26 © 2016 Bharat N. Anand Complements versus Substitutes?  Radio and music  MTV and music  VCR and movies  DVR’s and advertising  Digital streaming and prime-time viewership  Free online courses and classroom enrollment

28. 28 © 2016 Bharat N. Anand Product Connections: Strategy  Product connections are pervasive  A result of consumer choice as much as technology  Requires deep understanding of user experience  Large opportunities to create and leverage positive connections

29. 29© 2016 Bharat N. Anand  Online strategy… Strategic renewal Schibsted  Aggressive response  Separate then integrate  Hire outsiders  Create new model for online  Frequent updating  Expand revenue streams (for eg., dating)  Low fraction of borrowed content  Aggregate content  Many links to others  Free 3

30. 30© 2016 Bharat N. Anand  Online strategy… Strategic renewal Schibsted  Aggressive response  Separate then integrate  Hire outsiders  Create new model for online  Frequent updating  Expand revenue streams (for eg., dating)  Low fraction of borrowed content  Aggregate content  Many links to others  Free Economist  Slow response  Integrate  Staff with insiders  Replicate print approach online  Infrequent updating  Similar revenue streams  High fraction of borrowed content  Produce most content internally  Few links to others  Paid

31. Connected Choices at The Economist

32. 32© 2016 Bharat N. Anand Functional Connections: Implications for Strategy  Context matters! – Customers, Competitors, Organization, History, Geography  Implications – Beware of best practice and indiscriminate benchmarking – Strategic choices have tradeoffs  And need alignment

33. 33© 2016 Bharat N. Anand  Proceed from strategic direction to functional initiatives rather than reverse  A common approach: – “Discuss initiatives  Free model  New products & services for print  Stronger marketing in local areas  Re-price Sunday paper  Bundling analysis  Rationalize newsrooms  More features in sports pages – Assign initiative leaders for implementation” – Result: incremental, misaligned, undifferentiated Functional Connections: The Initiatives Trap

35. 35© 2016 Bharat N. Anand Digital Transformation and Strategic Success Traditional Mindset  Offer the best quality product  Narrow product focus, core competence  Best practices and benchmarking Digital success  Networks and user connections  Complements and product connections  Recognize functional connections Not Content and Product But Customers and Connections

36. 36 © 2016 Bharat N. Anand Higher education: Digital Strategy?  “Will the classroom be abolished, and the child of the future be stuffed with facts as he sits at home? –Bruce Bliven, The New Republic, 1924 Integration of online, hybrid, and collaborative learning… Data-driven, personalized learning… Intelligent tutoring systems… Students as creators, not consumers… Foundation Series

51. 51 © 2016 Bharat N. Anand HBX and HBS: Complement versus Substitute 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24% 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 >50 Percentoflearners Age (years) June 2014 cohort HBS MBA

52. 52 © 2016 Bharat N. Anand HBX and HBS: Complement versus Substitute 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24% 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 >50 Percentoflearners Age (years) HBS MBA All HBX Cohorts

58. 58© 2016 Bharat N. Anand Higher Education: Digital Strategy & Learnings  Connections, not Content  “Best Content, Star Faculty” versus Peer Learning – User Connections  “Is Online Better or Worse” versus Complementarities – Product Connections  “Create MOOCs – Now” versus Differentiation – Functional Connections

59. 59© 2016 Bharat N. Anand Higher Education: Digital Strategy & Learnings  Connections, not Content  “Best Content, Star Faculty” versus Peer Learning – User Connections  “Is Online Better or Worse” versus Complementarities – Product Connections  “Create MOOCs – Now” versus Differentiation – Functional Connections CREATE TO CONNECT EXPAND TO PRESERVE DARE TO NOT MIMIC