CEOs Don’t Be Blindsided By Technology — Lessons from the Title Wave of Change in Media
Unless you have been living on a remote island for the past decade, you have seen or experienced the impact of major innovation in the Media Industry due to technology. Not surprisingly, McKinsey http://www.mckinsey.com/industries/high-tech/our-insights/digital-america-a-tale-of-the-haves-and-have-mores shows the extent to which this phenomenon, in the form of digitization technology, is affecting 22 sectors. With Media second on the list and having personally lived through those changes, I offer some hard and fast lessons to prepare CEOs for your company’s inevitable crash with technology.
Lesson 1 — You have a lot less time than you think
Whatever lead-time you think you have to pivot or be ready for tech’s impact, cut it in half. If you wait for the change, it will already be too late to prepare. Ask yourself, “Is your company feeling the impact of change driven by technology right now and how much time do you estimate it will take to rework your offering to stay relevant?” Begin that transition today before your survival depends on it. Look at the pace of change in media in the last five years vs the preceding five. Kodak offers a most devastating example with a shocking bankruptcy after 106 years in the film industry. Their failure to adjust in 1994 when the first consumer digital camera was released, led to an eight-year free fall and bankruptcy in 2012. In this environment, the only thing more dangerous than changing is doing nothing. Move early and often and it will be more cost effective and less painful. You must commit to your future today to be here tomorrow.
Lesson 2 — Your Pricing and Margins Will Suffer — Deflation
Technology driven productivity will trigger deflation of your prices as technology enables your industry to provide more in less time to customers. As a result, industry supply will quickly outweigh demand and prices will fall fast. Now overlay new competitors, due to better as well as cheaper technology and reduced barriers to entry, and you have a deluge of supply coupled with intense price competition deflating your margins.
Lesson 3 — You Can’t Fight the Market
No matter what made your company successful, address the impact of technology now. To do so, you must be willing to disrupt your core business before the market does that for you. If you stick with an outdated approach for too long, the future of your business will be threatened. Those who are slow to move will not generate enough cash to fund a pivot due to deflation and the influx of new competitors. Your company needs to pivot early while your existing business model is profitable enough to capitalize on the new opportunities in your changing industry.
Lesson 4 — Technical Quality Will Be a Commodity
Cheaper and more sophisticated technology and software are driving commoditization of “technical quality”. The iPhone video camera is a glaring media example of how just a few years of intense innovation undermined the video industry. Today’s iPhone’s technical quality is as good as or better than video cameras that cost hundreds of thousands of dollars just a few years ago. The iPhone also has sophisticated software to ensure the technical variables driving quality are optimized, something that previously only experts could do. We can learn a valuable lesson from how this subset of the media industry has become commoditized when technology enabled everyone to capture great looking video footage. If your business has a quality component driven by technology that separates you from your competition, now is the time to anticipate how its commoditization will impact your business. It’s just a matter of time until cheap technology and software will enable almost everyone to deliver great technical quality at very low cost.
Lesson 5 — Invest Less in Technology and More in People
In an environment where technology and software are cheap, the value will be in utilization of talent. Ideas, innovation and service will become the most important part of your offering. Your people will become the factor that differentiates you from your competition. Now is the time to invest more in your team because without them you will have very little to sell.
We have the media industry to thank for these lessons, but that is only the beginning. Tell me how you are anticipating or feeling the onslaught of technology in your business. If you have a story to share or an outstanding concern about adapting to innovation, I’d like to hear from you.