MorrisAnderson

Ken Yager, MorrisAnderson

While established media companies can’t afford to ignore new innovations, merging old and new technology poses a variety of potential problems. Beyond the big picture concerns of failing to adapt or betting on the wrong technology, there are a number of concrete, practical considerations these companies must address.

Small Steps to Big Changes
One of the most important things for media companies moving into new terrain to realize is that change can’t—and shouldn’t—occur overnight. A new, future-oriented business can’t simply be tacked onto an existing company. A structural modification to a service business, such as the integration of a new digital arm, is a change in process. Unlike in manufacturing businesses, this change in process does not always involve concrete, physical alterations. But that does not make the change any less significant or make plotting out the intermediate steps any less important.

When MorrisAnderson advises established media companies that are merging with newer start-ups, we generally recommend that the company’s managers sketch out three organizational charts: one that shows the two organizations as they are, one that pulls them together in a joint venture style and one that shows what the combined organization needs to look like in around 24 months, when the two companies can be fully integrated.

In that middle step, old and new services may be delivered simultaneously in parallel. Part of the reason for this step is to ensure the smooth rollout of newly developed software. But it is also a question of understanding the human component of any business. Everyone involved—customers, employees and vendors—needs to be granted enough time to give up comfortable old habits and move to new, unfamiliar ones.

Mapping out the move from the middle step to the last one requires an acknowledgment that not all parts of the old business will be able to move over. Changes in services will inevitably render some relationships irrelevant. It is important, therefore, to include a review of strategic accounts in the process of envisioning the new organization. The company needs to understand that there will be sacrifices and to account for those sacrifices in making realistic projections about how the future organization will operate.

Problems of Scale
For media companies seeking to make it to the other side of the digital divide, a key consideration is the difference in scale that often exists between older business sectors and newer ones. Since digital media tends to be less expensive than traditional media, generating the same amount of revenue can require significantly more volume.

While differences in scale can often be handled effectively by software programs, it is much harder for humans to span the different environments.  The disciplines are different, and so the expectations and incentives are different.  When a company tries to serve two masters, unless it pays careful attention to service details, at some point one service will lose out or both will be watered down. Because of this, changes may need to be made over a significant stretch of time or merged companies may never be as synergistic as hoped.

Impact on Sales Strategy
The issue of scale has important implications for sales strategies. Because individual sales of traditional media bring in more money and commissions than do individual new media sales, salespeople working within a commission-based compensation structure are likely to focus their energy on older service types, ignoring the new media opportunities that the company needs to develop in order to secure its future. To avoid this problem, companies need to weight commissions to encourage investment in new services—even while these may bring in less revenue relative to the amount of effort required to close the sales.

Alternatively, the sales force could be separated into differentiated teams, each dedicated to either older or newer services. Dividing the sales force provides the additional benefit of allowing salespeople to specialize. The skills required to successfully sell a mature, well-known product or service are not the same as those needed to sell a newer product. Sellers of older products can afford to assume their potential customers are familiar with the benefits of the product and focus instead on matters such as pricing. For newer products, however, salespeople must be capable of communicating the value for the customer. Ensuring that salespeople with the correct skills are working with each type of product—and together when possible—is, therefore, critical.

Weathering the Winds of Change
By pointing out the challenges faced by old media companies seeking to embrace the new, I don’t mean to imply that the recent enthusiasm for hybridization is misplaced. In today’s world, adaptation is essential. But, as we’re often told in life, nothing worth doing is easy. If there are two things established media companies need to know about expanding into the digital realm, they are, first, that it’s worth doing and, second, that it won’t be easy.

Ken can be reached at kyager@morrisanderson.com.