Disruption Myths

In my previous post based on SIIA’s recent Information Industry Summit #IIS14, ‘New Business’ Models, Not Technologies, Drive Disruption, I talked about the huge challenge facing existing business information and media companies when they go up against startups: VC- and angel-funded business are expected to spend money, not make it, until they are established (and some existing players are destabilized).

Diane Pierson, principal of the new consulting firm Wheels-Up Innovation, firmly addressed the practical issues around changing an existing organization in her presentation, The Five Myths of Internal Disruption. I found one of the first stats she offered oddly encouraging: 75% of startups fail within the first year, but (only) 70% of all internal disruption activity ends in failure. In spite of the financial advantage that comes with VC or angel funding—which, of course, varies widely in magnitude—existing companies actually have a slightly better chance of getting something new off the ground.

I am sure leaders of existing companies can vastly improve their chances of creating something new, whether it’s a product or business model, by leveraging all the assets that have made their companies successful, but, they must also understand that disruption is a delicate, highly volatile undertaking.

One of my favorite quotes of #IIS14 was Pierson’s definition of internal disruption: “The willful and intentional introduction of conflict into an existing organization for the greater good.”

Most people don’t like conflict and few know how to handle it productively. CEO, presidents and other top executives are no different in this regard, I have found.

Someone must be the designated Disruptor, the champion of change, Pierson said. This person may come from within the organization or, as often happens, from the outside. A CEO must expect this Disruptor to be a lightning rod for conflict, as well as a catalyst for change, and the CEO must determine his or her own tolerance for conflict before putting a Disruptor in position.

All too many times, I have seen top management abandon their own hand-selected Disruptors when complaints start coming in. Maybe they expected conflict to accompany change, but they were not aware of how much conflict they themselves could withstand. “Your existing organization is watching you to see how strong your resolve is, how far you want to go with this disruption, and how quickly you will move,” Pierson said.

You might not realize it, CEO, but if you waver on the course that you have set—because you are destabilized by the backlash—your organization will sense it and they will withdraw support in subtle ways from the Disruptor and his or her projects.

CEOs can take steps to prevent that situation, though. Pierson pointed out that Disruptors, who probably have a pretty high tolerance for conflict, will need to be reined in, coached or redirected by the CEO. “Make sure disruptor knows what his or her decision rights are,” she cautioned.

Pierson also pointed out that people whose responsibilities are not involved in disruptive activities—such as customer service, production, sales—can be left out, and those who are immersed in disruption, particularly the Disruptor, should learn to appreciate people who are not part of the change team. She noted that there are generally two types of people in organizations, the changers and the builders. Changers like to create new things and they usually like to move to another challenge once they have set change in motion. The builders in the organization will (eventually) take up the new activity and make it better—because that’s what they do.


Marie Griffin Marie Griffin, principal, Marie I Griffin Consulting, is an independent business-to-business writer, content strategist, editorial manager and conference programmer. Follow her on Twitter at @griffinsider and her blog at griffINsider.com.

IIS recap: Sensors, Wearables and the Internet of Things: A Revolution in the Making

Written by Michael Davis

20140205-132914.jpgChances are you know someone benefiting from a connected device. Think of your friends with fitness bands or the people you know who program their DVR remotely. Matt Turck’s presentation on Wednesday afternoon highlighted the emergence of connected devices and how our interaction with the physical world is changing.

Simple devices are becoming more sophisticated. We’re moving from fitness bands to devices such as connected contact lenses that can help diabetics monitor their glucose levels.  Google’s $3.2B purchase of Nest Labs, makers of a connected thermostat, has helped to validate the market, and momentum continues to build.

According to Turck, we’re now entering a classic hype cycle, with market research firms and interested companies predicting huge markets and revenue opportunity.  We’ve moved beyond Internet 1.0 and 2.0, where we connected computers and people together, to a new phase of connecting everything else to the network.  Welcome to Internet 3.0 – the Internet of Things.

Key points from Turck’s presentation include:

● The Internet of things is about much more than fun consumer devices.

● There are huge business to business opportunities and enterprise applications.  For example, connected manufacturing floors, energy grids, healthcare facilities and transportation systems.

● Connected devices can communicate with each other wirelessly.  They do not need to be connected to the internet.

● All things become data.  Where we have sensors we can collect information.  Devices are easily programmed and information can be passed back and forth through APIs.

As a result, nearly everything becomes social.  Network interaction is being built in to our systems.  The data being collected helps us understand usage patterns and generate new insights.  Every company is becoming a software and information company.Why is this trend happening now?  Turck cites five reasons:

● Mobile adoption & growth

● The emergence of big data and cloud computing as enabling technologies

● Open hardware

● Crowdfunding and

● The availability of 3D printing for prototyping

While there is lots of entrepreneurial activity around the Internet of Things, activity is not restricted to startups.  General Electric, Honeywell, Siemens, Comcast, and many others are all pursuing innovative solutions.  Hot areas include home automation, wearables, the industrial internet, and robotics.  Equally important, the ecosystem needed to support the development of such solutions is coming together.  For more information, visit Turck’s Internet of Things Landscape, version 2.0.

As with all emerging technologies, there are potential issues and unanswered questions.  With more connected devices and data online, the need for secure, protected solutions will be ever-present.  And while the Internet of Things represents enabling technologies with enormous potential, it remains to be seen if it can evolve out of the living room into a true global network.

So what happens next?  The coming months will be filled with exciting announcements of new ventures, funding and solutions.  There will also be casualties.  Hardware will fail, organizations will stumble and privacy will be compromised.  Overall, the emergence of the Internet of Things represents an extraordinary opportunity to innovate and create value.  In 10 years’ time, if we’re successful, we’ll look back and all this technology will be ubiquitous and invisible.


20140205-132257.jpgMike Davis is a sales and marketing professional in the software and information industry.  Most recently he served as Commercial Director at Digital Science, a business unit of Macmillan Science and Education. Follow Mike on Twitter at @mdavisri and connect on LinkedIn at http://www.linkedin.com/in/mdavisri.

IIS Recap: Industry Outlook: The New Information Order

Written by Brad Mehl

20140205-152249.jpg

This session featured a provocative “what’s next’ discussion among a panel of industry luminaries. Ken Auletta’s opening remark sums it up:

“I think the war of the worlds aptly describes what’s happening in information business.”

Disruption was a big theme on the panel, which agreed that disruptive change can even bring down industry giants. There’s an assumption that the giants – Microsoft, Google, Apple and Amazon.com – will dominate the whole landscape of the future. But as Brad Burnham of Union Square Ventures pointed out “it’s not inconceivable that a Facebook or an Apple will collapse. Look at what happened in other industries—take Sears Roebuck for example.” As Ken Auletta pointed out, Bill Gates was extremely mindful of disruption. His biggest fear in business? Two guys in a garage.

But as the panel discussed, in the coming years the biggest disruptive moves won’t be innovations in technology, they will be innovations in business model. For example, the big competition between Samsung and Apple is the business model—app store vs. chipset.

The role of data and its potential to drive competitive advantage was also a big theme of the discussion. Daniel Lewin from Microsoft said,

“The companies that have the data will be the most relevant – Google and Amazon.”

The discussion on data quickly turned into one on privacy. What will be the killer transition that could undo the big players like Amazon, Facebook and Google? Brad Burnham predicted that it’s probably going to be some kind of open system for data where consumers can move their data to another provider. Daniel Lewin echoed the sentiment,

“Everyone thinks all data is going to the cloud. But two generations from now….a lot of the processing of data will happen on the device. It will belong to the consumer. Industries will provision the B2B view of it, but the data will belong to the consumer.”

The panelists also discussed complex regulatory issues with regard to data. How can Facebook compete if it can’t use the data it collects? Who owns the data? Companies? Individuals? Governments? It will take time for government and regulation to keep up.

There were two disruptive trends for content creators with traditional business models:

1. The democratization of content and the cheapness of creating new content. As Brad Burnham said, “The young generation values authenticity and relevance over production value. Some kids exclusively watch internet video and watch no TV.”
2. The unsustainability of traditional media (like TV). Ken Auletta mentioned consumer examples but a larger point loomed: “4/10 of ad dollars go to TV. ½ people who have a DVR skip the ads. It’s not sustainable.”

The session closed with advice for the audience. Bob Carrigan, the new CEO of D&B, offered this perspective

“Think expansively about liberating your content from traditional distribution channels.”

Bottom line, this session was like having a front row seat to the future.


20140205-151740.jpgBrad Mehl is president of Boundless Markets, which provides data-driven overhauls and upgrades of marketing and sales functions for business information and SaaS companies. He has over 20 years of experience in growing revenue and leading digital transformation at leading business information companies and early stage ventures.

IIS Recap: Stair Steps to Capital

Written by Janice McCallum, Consultant

With the amount of brainpower and experience packed into this panel, it’s difficult to sum up in a short article the advice doled out in the 45 minute session. I recommend watching the video here to extract maximum benefit. Nonetheless, I’ll do my best to recap the most quotable moments below.

The panel chaired by Michael Chen (pictured right) cleverly included representatives from investment companies that target seed capital, early stage, growth capital, all the way to the exit stage. Brian Cohen, Chairman of New York Angels, represented the angel investors; John Elton, Partner at Greycroft Partners represented the VC segment; Bob Nolan, Managing Partner, Halyard Capital, represented private equity; and Wilma Jordan, Founder and CEO, Jordan, Edminston Group, Inc. (JEGI), represented investment banking.

Angel investing: Brian used the term “angel exhaustion” to describe the general sentiment of individual investors who have tried their hands at funding early stage startups with very limited success. The most common problems stem from lack of experience and from having portfolios that are too small to properly diversify risk. Brian described angel investing as a “brutal sport”, a “contact sport” that requires a “spidey sense” that can best be developed through direct hands-on experience.

He also emphasized that relationships matter a lot and veteran investors will typically invest in people (the team) above product. His vetting of an investment candidate includes a 3-step interview process that reminds me of Chopped on the Food Network, since a candidate has to pass the breakfast meeting in order to make it to the lunch meeting, and only those who make it to the dinner meeting survive the process.

Venture Capital: Echoing Brian’s comments about angel investments, John said that most venture funds don’t do well. Often, valuations are too high at early stages and successful exits never occur.
In Private Equity, where targets are seeking growth capital for already established businesses, the market dynamics have been favorable: there’s ample money on the sidelines, interest rates are low, but in 2013 more money was spend to bolster internal growth than to invest in new companies. Bob from Halyard Capital sees banks as being more aggressive this year in backing some big deals.

Finally, M&A is expected to pick up in 2014 after a somewhat soft 2013. Wilma agreed with the others that the team is the most important element and she said that JEGI spends a lot of time coaching companies on how to package themselves and their companies for sale.
The topic of crowd funding through sites like Indiegogo or Kickstarter was raised a couple of times in the panel discussion. Surprise, surprise, crowd funding isn’t well looked upon by this group, in part because individuals who invest via a website can’t really get to know the company and its team. It may be a good first step for early startups, but with no due diligence, one of the panelists said “democratization of funding is a scary thing”.

The moderator asked the panel if leaders of the future need to be social media and technology savvy and the response was a resounding “yes” from all panelists. Wilma added examples of how companies can expand their technology talent and know-how via acqui-hires.
To end the session, each panelist was asked for a prediction for 2014. Among the most interesting predictions:

“Yahoo will either be sold or have a new CEO”, Wilma Jordan.

Crowd computing, a macro trend that marries the best of what humans and computers can do, will be disruptive in 2014, according to John Elton.

IT security will continue to be an investment target in 2014, according to Bob Nolan.

Finally, Brian Cohen pointed to wearable or built-in sensors that record information about health and wellness as a big growth area in 2014.


 

 Janice McCallum is a consultant to publishers, investors, and  technology companies. She joined the InfoCommerce Group in January, 2008 and  now serves as Managing Director of Health Content Advisors. Recently, she was  named one of the Top 200 Thought Leaders in Big Data and Analytics by Analytics  Week. Follow her on Twitter @janicemccallum and on her blog.

 

 

IIS Recap: The Rise of the Mediata Startups and Why it Matters

Written by Janice McCallum, Consultant

In this keynote session that kicked off day 2, Rafat Ali, a pioneer in adapting the best of the consumer Web to professional publishing, presented a vision of the B2B media company of the future. However, one can’t really refer to the new generation as “B2B” media companies anymore, since appealing to both professional and consumer audiences is a fundamental attribute of the vision.

The professional versus consumer distinction isn’t the only artifact of traditional B2B publishing that is being dismantled. The other area where boundary lines are now blurred is the separation between media companies that are driven by traditional journalists and data content companies that compile industry data and offer access to data streams. Rafat has coined the term “mediata”, which is a fusion of media and data, to describe the information companies that are able to combine the best of the media and data publishing worlds.

Rafat describes most traditional B2B publishers as too fragmented in the market segments they serve and in the production and marketing of their editorial vs. data products. In fact, he describes a world where data products have entered the fold through acquisitions or roll-ups created by private equity companies with very few native “mediata” companies. His start-up, Skift, is an exception, of course, and has targeted the travel industry. Skift’s coverage spans previously siloed areas in travel publishing: e.g., different modes of travel, phases of travel (e.g., planning, in-market, after-market) and different types of travel (i.e., business and leisure).

One fascinating comment that relates to the earlier point about breaking down barriers between consumer and professional audiences: to appeal to both audiences Skift bans its editors from using industry jargon, which helps significantly in its syndication efforts. And syndication is a critical element of Skift’s distribution strategy.  As someone who spends most of her time working with both professional and consumer healthcare publishers, I’m prepared to start a healthcare version of Skift based on this comment alone!

Condensing his comments and the megatrends he presented, some key takeaways for the publishers in the room include:

  • Tackle a vertical and create a broad collection of news and business intelligence that appeals to all segments of the industry, including consumers.
  • Learn from the best of the open consumer Web when it comes to design and user experience.
  • Start with a plan to fuse data and editorial and incorporate varied media types in a single newsfeed. LinkedIn was called out as a leader in pushing a mix of media and data to users.
  • Syndicate widely and avoid industry lingo to enhance your ability to syndicate to professional and consumer audiences.
  • Mediata companies can design revenue models that utilize both advertising/sponsorship and subscription revenue. Investors will see you differently from traditional B2B publishers because of the subscription revenue. Furthermore, the data content can serve as a basis for stories to populate your news content (again, LinkedIn serves as a good model with its work anniversary and similar updates in newsfeeds).
  • For existing B2B publishers that want to make the transition to mediata publishers, Rafat suggests bringing in outsiders who are comfortable with a “data is media” model. You may not have to replace the entire team, but success is unlikely unless there is a sufficient injection of outsiders who have no blinders to the benefits of “mongrel” media and have no allegiance to the traditional siloed structure.

The slides and the video for this talk are available here. Click on the links to view two short video interviews with Rafat at IIS14:  Rafat on Industry Trends and Rafat Predicts No Single Publisher Will Dominate Each Industry Vertical.   See also, Here Come the Mediata Startups, an article by Rafat posted to LinkedIn in December 2013.


 

 Janice McCallum is a consultant to publishers, investors, and  technology companies. She joined the InfoCommerce Group in January, 2008 and  now serves as Managing Director of Health Content Advisors. Recently, she was  named one of the Top 200 Thought Leaders in Big Data and Analytics by Analytics  Week. Follow her on Twitter @janicemccallum and on her blog.

 

 

‘New Business’ Models, Not Technologies, Drive Disruption

Dealing with disruption was the keyword running through all the sessions of SIIA’s recent Information Industry Summit #IIS14 in New York. In different ways, presenters and panels addressed the need to disrupt one’s own business – before some outsider does it to you.

In the days since the show, as I’ve considered what I heard, I’ve pondered a question that has bothered me for years: In the business information and media industry, we have been seeing and talking about “disruption” for more than a decade, so WHY is it still so hard for most companies to take the steps they intellectually know they should in this regard?

It hit me that the indisputably disruptive changes in technology may have obscured the real challenge—the “new business” model. By that, I don’t mean business models in the sense of advertising- or subscription-based models. The “new business” model that is, and long has been, most threatening is one that funds a challenger in undercutting the financial structure of a given business vertical until the new player is well enough imbedded to survive—and a number of previous players have been taken out.

Angel- and VC-funded companies are not supposed to make money (at least in the early phases). How is a privately held or private-equity-funded (and debt-laden) “traditional” media company supposed to compete with that? This is not a challenge that can be overcome by “embracing” digital media or social media or native advertising or any other psychological adjustment.

“Media Techtonics-Fiery Death or Violent Rebirth?” panel

During the second session at #IIS14, Henry Blodget, CEO-Editor at The Business Insider, sat on a panel titled “Media Techtonics-Fiery Death or Violent Rebirth?” Near the end of a lively and appropriately contentious session, fellow panelist Alan Spoon, General Partner at Polaris Partners (and president of The Washington Post Co. from 1993-2000), challenged the audience: “How many of you could allow a Henry Blodget to start a business within your company? And, if you did, would he flourish there?”

(If you’re not familiar with Henry Blodget’s history, read the blog post he wrote last year before speaking at a Folio event.)

I would love to hear your answer, media executives, in light of the fact that Business Insider has gotten almost $29 million in funding (CrunchBase) since mid-2008 and didn’t turn a profit (of $2,127, according to Blodget) until 2010. Today, Business Insider employs more than 100 people and attracts 23 million readers a month (making it the third-most-visited digital business news site), and it’s still profitable, but look at what it took to get there.

My question isn’t about Henry Blodget’s vision, capabilities or what it would take to fit him in your culture. What does a business media or information company need to do to free up millions of dollars to take a chance on a truly disruptive product or business?

Of course, there are examples—albeit few—of  traditional media companies that have turned around digitally, but leadership and investors had to stomach significant disruption with no guarantee they wouldn’t be kicked to the curb for failing.

Allen Schoer, Founder & Chairman, The TAI Group and Michael Hansen, CEO, Cengage

Witness Forbes Media, which is currently for sale and is expected to get anywhere from $100 million to $400 million. Let’s remember, though, that it took over a decade of major, consistent investment in Forbes.com, to get to this place. During that period, Tim and Steve Forbes lost day-to-day management roles to president-CEO Mike Perlis (in late 2010). Earlier that year, Forbes Media had made the acqui-hire of Lewis D’Vorkin and his company True/Slant, naming him chief product officer. Because D’Vorkin’s contributor network and BrandVoice native advertising model have become successful, this seems like a brilliant move today, but it didn’t back then, and the last four years were not without plenty of bumps.

Indeed, scrapes, bumps and, sometimes, disastrous crashes, are what disruption looks like!

Michael Hansen, CEO of digital learning company Cengage, made that point quite poignantly during his #IIS14 keynote. Cengage Learning filed for Chapter 11 bankruptcy last July while announcing a pre-arrange restructuring to eliminate $4 billion of $5.8 billion of outstanding debt. Bankruptcy is such a disruptive event, by nature, that it enables management to make significant changes that otherwise would never be accepted, he said.


Marie Griffin Marie Griffin, principal, Marie I Griffin Consulting, is an independent business-to-business writer, content strategist, editorial manager and conference programmer. Follow her on Twitter at @griffinsider and her blog at griffINsider.com.

More Than One Way to Monetize an Event

In July 2013, SIIA officially completed its merger with American Business Media (ABM), now an SIIA division. Although the industry may be called “business media,” live events are just as important as media to most ABM members. ABM’s industry benchmark, the Business Information Network (BIN) Report, regularly calculates the size of the industry, and, as you can see from the pie chart that shows the BIN revenue breakdown for the industry for the 1st half of last year (pictured), 45% of the revenue came from trade shows, conferences and other live events. That’s the exact same percentage as digital and print revenues put together.

The future of events for b-to-b media companies also looks bright. In its recent Entertainment & Media Outlook 2013-2017, PricewaterhouseCoopers (PwC) forecast that b-to-b media company trade show and event revenues will increase at a 4.5% compound annual rate (CAGR) through 2017.

So, to help SIIA, SIPA and ABM members meet or exceed that growth, events were the topic of three consecutive breakout sessions on the first afternoon (Jan. 29) of SIIA’s Information Industry Summit. Three speakers shared how they have grown event revenues, each with a different model.

Michael Garity, VP Global Event Strategy & Business Development for Asset International, is leveraging editorially driven conferences to drive integrated media programs. Garity surveyed Asset International’s sponsor/advertiser community to find out what drove their event strategies and was surprised that the expected reasons—to generate leads and solidify relationships with customers—were not at the top of his customers’ list. Rather, sponsors wanted to enhance their brands’ status and become known as thought leaders.

With that insight, Garity and his team developed “event-led thought leadership” programs. With a speaking opportunity for a high-ranking executive at the center, Asset International created many ways for the sponsor to maximize that industry exposure, including pre-event webcasts, on-demand access to a video after the event, a microsite, or a print or digital profile of the thought leader. Garity noted that it’s important to know not only what to offer a particular customer, but also when to offer it. For example, with a highly cost sensitive client, salespeople might wait until the event—when everyone is at their peak excitement level—to sell a marketing program to lengthen that effect. Another client, meanwhile, might get more excited when presented with a full bells-and-whistles program from the beginning.

This new event-first selling strategy, along with an expansion of event products offered at Asset International, has led to an 80% increase in event revenue, Garity told the IIS audience; one-third of the company’s revenue now comes from events, he added.

Diane Schwartz, senior VP/group publisher for Access Intelligence’s Media & Communications group, was up next to explain how her group leverages premium (paid) content to drive attendee-paid events. Unlike Asset International’s sponsor-revenue-driven events model, Schwartz oversees a group that is highly reliant on audience revenue, for both its subscription media products and events. Because the audience values the premium content of the media (mostly newsletter) brands enough to pay for them, Schwartz and her team “surround” paid media with premium-content products on other platforms, including conferences, webinars, pay-to-enter awards programs, recognition/reward events, online learning and even e-books.

“We’re always thinking about how we can repackage our content and resell it,” she said.

Next, Dana Lupton, VP of Questex Media’s Beauty and Spa Group, shed some light on the “hosted” buying events. The linchpin of these events is guaranteed, appointment-based, one-on-one meetings between the sponsors/vendors and bona fide buyers. Vendors who are used to exhibiting at trade shows—and waiting for days for the right buyer to (maybe) come by—are enticed to these events by the carrot that the meeting’s host (publisher) will make sure they meet in-person with a certain number of prospects with budgets and a true interest in buying their products and services.

The buyers, meanwhile, are enticed by the ability to see a number of vendors efficiently and by a lot of perks—free airfares, a free stay at a high-end hotel or resort, free meals and fun group activities. “We make sure this is a white glove experience for buyers and we build in experiences that create a really close ‘kumbaya’ atmosphere by the end of it,” Lupton said. One example of a group-building experience was a Top Chef-type of competition where each attendee group was led by a Ritz Carlton chef.

Another incentive for the attendees is to meet and get to know the editors of the media properties, Lupton noted. Editors have the opportunity to mix with the movers and shakers in their industries and to elevate their personal brands, and the audience welcomes and appreciates the presence of the editorial team.

The trick to this model is that the ratio of buyers and vendors needs to be close to one-to-one. Lupton advises dedicating someone in the “buyer acquisition” role, which is separate from the role of meeting planner/coordinator or salespeople. “This is critical, especially in the first year or two,” she said.

Because a hosted event requires a large financial investment and high-touch staffing, margins have tended to be in the 17%-to-20% range in Lupton’s experience, she said, although she has seen them as high as 40%. “You have to manage your costs very carefully and pay very close attention to the hotel contracts,” she said.


Marie Griffin Marie Griffin, principal, Marie I Griffin Consulting, is an independent business-to-business writer, content strategist, editorial manager and conference programmer. Follow her on Twitter at @griffinsider and her blog at griffINsider.com.