The Strategic Digital Media Entrepreneur: Study Guides
The study guides for each chapter consist of seven components that can easily be adapted to slide format for use in the classroom.
- Overview of the lesson or module
- Bulleted learning objectives
- Pullout quote, summarizing the main theme of the chapter
- Discussion questions (to be used in advance of and during class)
- Out of class assignments and learning exercises (brief description included in study guide; more robust explanation can be found in “Strategic Digital Media Entrepreneur Learning Exercises” on the website)
- Suggested supplemental readings
Part One: Understanding the Basics of Digital Entrepreneurship
The first part of the book, “Understanding the Basics of Digital Entrepreneurship,” explains how the Internet has changed business models for media entrepreneurs. This section, which is composed of four chapters, traces more than 550 years of innovation to give students a financial and strategic overview of the media industry. This section, which sets the stage for students to understand why a new business model is needed in today’s media world, includes lessons on how to understand the difference between net income and cash flows, and examples of how to place a dollar value and rate of return on a media enterprise. This section concludes by analyzing the various ways the Internet has attacked the traditional business models of media companies and identifying strategic challenges and opportunities confronting all media entrepreneurs today.
Chapter One: Gutenberg to Zuckerberg: Innovation and Entrepreneurship
The first chapter in Part One gives readers a historical sense of the media industry. It begins with Johannes Gutenberg, exploring his legacy as the inventor of the printing press and probing for why Gutenberg was an exceptional innovator but fell short as an entrepreneur. Using this framework, students learn about the core competencies of economically successful media companies, how business models for media enterprises have changed over time, differences between disruptive and sustaining innovation, and lessons for today.
- Understand the core competencies of a media company
- Identify key transformative media innovations and explore how business models for media enterprises have changed in response to these innovations
- Explore the differences between disruptive and sustaining innovation
- Pinpoint the key mistakes that Gutenberg made and apply them to lessons for today’s media entrepreneurs
“Innovators and entrepreneurs share many of the same traits—including an ability to question the status quo. But, not all innovators are successful entrepreneurs. In this book, we will be exploring how founders of start-ups, as well as executives in legacy media companies, become successful entrepreneurs, as well as innovative leaders.”
–The Strategic Digital Media Entrepreneur, Gutenberg to Zuckerberg: Innovation and Entrepreneurship
- Ask students to briefly define a media enterprise and give an example. Students can write their answers in an online forum, which allows them to practice articulating their thoughts, do a small amount of research, and compare their answers with their peers. Instructors can compile these answers into a PowerPoint presentation to share at the beginning of class. Instructors can use this as a platform to share the book’s definition of a media enterprise: one that is involved in acquiring or creating content, which is then packaged and distributed to various individuals and groups in society that will consume that content. Instructors can then elaborate that the types of content determine the potential audience and business model of a specific industry. Using the different examples from students, the class can explore different core competencies of media companies: news, information, persuasion, and entertainment.
- When you think about the history of media developments, what makes a disruptive versus a sustaining innovation? This question works best after instructors have shown PowerPoint slides with timelines of media developments (included in the corresponding slides for Chapter One). Instructors should use this question to underscore Harvard Business School professor Clay Christensen’s research that a disruptive innovation is a breakthrough technological invention that creates new products, industries, business models, and markets, whereas as a sustaining innovation makes products better. For example, the launching of the Internet was a disruptive innovation, but an update to the Apple iPhone is a sustaining innovation.
- What are good qualities for an innovator to have? How about an entrepreneur? Instructors can divide the class into half and ask one side to hypothesize good qualities for an innovator and the other side to do the same for an entrepreneur. Both sides can present their findings and the instructor can take notes, so students can compare the two lists. The main goal of this exercise is to show students that qualities that make innovators successful are not necessarily the same as qualities of successful entrepreneurs. Instructors can point to a six-year study conducted by professors at three of the country’s top business schools that shows these skills to be most important for innovative entrepreneurs: associating, questioning, observing, experimenting, and networking. Of these skills, the first two – associating and questioning – were most important.
Instructors should refer to the case study “Mark Zuckerberg: Innovator and Entrepreneur?” Students can use this case study (no other research is required) to answer the questions listed under the “Exercises” part of this website.
- Dyer, Jeff, Hal Gregersen, and Clayton M. Christensen, Clayton. The Innovator’s DNA: Mastering the Five Skills of Disruptive Innovators. Boston: Harvard Business Review Press, 2011.
- Picken, Joseph C. “From Founder to CEO: An Entrepreneur’s Roadmap.” Business Horizons60, no. 1 (January-February 2017). https://doi.org/10.1016/j.bushor.2016.09.004.
- Allen, James. “The Surprising Truth Behind the Myth of the Lone Entrepreneur.” The Experts (blog), Wall Street Journal, May 6, 2016. https://blogs.wsj.com/experts/2016/05/06/the-surprising-truth-behind-the-myth-of-the-lone-entrepreneur/.
Chapter Two: The Story behind the Numbers
The second chapter in Part One builds on the previous chapter to show students how to understand a media company’s financial statements. This chapter explores how the economics of a media enterprise are reflected in a company’s financial statements, how to identify key information contained in these statements, and what can be assessed about the financial challenges and opportunities facing media executives. At the conclusion of this module, students should see that financial summaries provide insight into the health and long-term sustainability of an enterprise. Although past performance does not indicate future performance, students should see that trends in revenue, expenses, and profitability, obtained from the income statements, provide clues about the future performance of a company. The balance statement provides insight into a company’s assets and liabilities, including debts and pensions. Finally, the cash flow record shows how much money companies make from continuing operations and how they have used their cash to invest in new ventures.
- Understand how the underlying economics of a media enterprise flow through a company’s financial statements
- Clarify what the income statement tells us about past and current profitability
- Define a company’s most valuable assets and most onerous liabilities
- Identify how a company makes and spends money
“Publishers who are not profitable do not survive. That is why successful publishing entrepreneurs have a deep and nuanced understanding of how each of the of the processes and procedures involved in producing and selling a book affect the bottom line and the long-term sustainability of their company.”
The Strategic Digital Media Entrepreneur, The Story behind the Numbers
- Ask students to post their favorite book that was published in the last year and write a few sentences in an online forum explaining why the publisher may have decided to publish this book. This allows instructors to gain a sense of the class’s knowledge of the publishing industry and to launch a discussion about how companies like News Corp make their publishing decisions. Instructors can explain that editors at places like HarperCollins must make quick economic decisions, estimating the size and type of audience for a particular book compared with the upfront costs of producing and distributing the book.
- How have the emergence of e-books changed the publishing industry? This question encourages students to think about how the book industry has been disrupted, a central theme of the course. Instructors can explain that publishers have the potential to make more profit on e-books than print copies since there are fewer costs associated with the production and distribution of the content, and they do not have to account for returns on unsold books. To illustrate this point, instructors can show Table 2.2 “Price of Hardcover versus E-book, 2014” in a PowerPoint slide.
- What can you learn from a company’s annual report? This allows instructors to gauge the class’s financial literacy. Instructors can ask students to go around the room and identify what they could learn, keeping track of their ideas on a whiteboard. Then, instructors can use this to introduce the PowerPoint slides associated with this module, which walk students through a company’s income (or earnings) statement, balance sheet, and cash flow record. Instructors should underscore that each of these documents tells a slightly different story: the income statement gives valuable information about how a company’s revenues, costs, and profits are trending; the balance sheet provides insights into the value and type of a company’s assets; the cash flow statements record all of the cash flowing into and out of a company.
Instructors should use the case study “What’s the Future of News Corp” and the 2015 Annual Statement to test whether students have mastered how the economics of a media company are reflected in their financial statements.
- Rivera, Edward.Book Publishing in the US.IBIS World Industry Report 51113. IBISWorld, Inc., 2017.
- “Many Thought the Tablet Would Kill the Ereader. Why It Didn’t Happen: Ereader Usage Still Growing, Especially Among Older Americans.” eMarketer, February 29, 2016. http://www.emarketer.com/Article/Many-Thought-Tablet-Would-Kill-Ereader-Why-Didnt-Happen/1013638?ecid=NL1001#sthash.pVe6Ju1m.dpuf.
- Alpert, Lukas I. “News Corp Swings to Profit on Book, Real Estate Growth.” Wall Street Journal, August 8, 2016.
Chapter Three: What is a Company Worth?
Now that students understand what they can assess from a company’s annual report, it is time to learn how investors determine their value. This chapter teaches students how investors establish the market value of privately and publicly traded companies. It also explains differences between institutional investors, venture capitalists, hedge fund operators, and private equity fund managers. Using the example of Snap Inc., students learn how to calculate a return on a company’s investment and grow more familiar with methods such as EBITDA Multiple, Discretionary Cash Flow, or Book Value. They are also introduced to more complicated tools, such as Net Present Value, Internal Rate of Return, and Profitability, which allow investors to discount future cash flows because of inflation and to consider what other options might have yielded a better return.
- Identify the factors affecting the value of a company
- Understand how investors determine a media company’s valuation
- Pinpoint today’s media investors and assess what sort of return they are seeking
- Measure return on investment
“The worth, or market valuation, of a media company is based on its past performance and the credibility investors and shareholders place in the current management to deliver future earnings.”
–The Strategic Digital Media Entrepreneur, What is a Company Worth?
- Ask students to identify a media company and hypothesize factors affecting its value. Students can post this in an online forum and instructors can compile their results in a PowerPoint slide to launch the discussion. The goal is for students to begin thinking about internal and external factors that affect media companies, such as the current and projected macroeconomic environment, the industry segment in which a company operates, and the management and strategy of a company.
- Are today’s media investors predominantly individuals or institutions? What are the implications?This question allows instructors to gauge how knowledgeable the class is about media investors. Instructors should push to students to think about the implications of institutional investors, who invest money for other people, versus individuals. Instructors can highlight that according to one study, institutional investors held almost sixty percent of the stock in publicly traded media companies by 2007. Instructors can also use Table 3.3 “Today’s Media Investors: Percent of Shares Owned by Institutional Investors” in a PowerPoint slide to show students how their hypotheses correspond to the financial reality.
- What are some tools used to value publicly and privately traded companies? This is another opportunity for instructors to gauge the classroom’s financial literacy. Instructors can note that analysts, investors, and lenders pore over the annual financial statements looking for trends in revenue, costs, profits, and cash flow. They determine the value of a company, using one of these methods: EBITDA Multiple, Revenue Multiple, Discretionary Cash Flow, or Book Value. Established media companies are typically valued based on the EBITDA method but most start-up valuations are based on some combination of a revenue multiple and a projected EBITDA.
Instructors should refer to the case study on Snap, Inc. to assess how comfortable students are making financial assessments after this module.
- Abernathy, Penelope Muse, The Rise of a New Media baron and the Emerging Threat of News Deserts, University of North Carolina at Chapel Hill: School of Media and Journalism, 2016.
- Tan, Andrea, and Benjamin Robertson, “Why Investors are Fretting Over Dual-Class Shares.” Bloomberg, July 10, 2017. https://www.bloomberg.com/news/articles/2017-07-10/why-investors-are-fretting-over-dual-class-shares-quicktake-q-a.
- Frier, Sarah, and Alex Barinka. “Can Snapchat’s Culture of Secrecy Survive an IPO?” Bloomberg, January 17, 2017. https://www.bloomberg.com/news/features/2017-01-17/can-snapchat-s-culture-of-secrecy-survive-an-ipo.
Chapter Four: The Transformed Competitive Landscape
The last chapter in Part One shows students how companies must evolve in the rapidly changing media environment. Companies can grow through research and development of new products, partnerships, and acquisitions. Which strategy a company chooses is shaped by its life cycle: revenues are often double or triple the previous year during the early years of a firm’s life. However, as a firm matures, growth in revenues and profits becomes harder to maintain and media companies usually rely on acquisitions to sustain growth. This is complicated by disruptive innovations, such as the Internet, which typically attack cost structure first and then siphon off customers and revenues. This means that companies need a three-pronged strategy for shedding legacy costs, attracting new customers, and building new sources of revenue: they must follow the technology, follow the customers, and follow the money.
- Understand the various stages in the life of a company and how it affects a company’s ability to grow customers
- Articulate how companies can grow revenues and profits
- Grasp how fast companies must change their business model in order to survive
- Articulate how the Internet challenged the economics of existing media companies
“There are three growth strategies available to companies: they can focus on organic growth, relying on internal research and development efforts. They can seek out partnerships. Or, they can acquire other companies.”
-The Strategic Digital Media Entrepreneur, The Transformed Competitive Landscape
- Assign students to five different teams and have each team pick a life stage and a corresponding media company. The life stages are: foundation or pioneering stage; rapid, accelerated growth; mature growth; maturity; and decline. Students should discuss why their media company fits into this life stage. This can be a springboard to a broader conversation about similarities and differences of companies depending on their life stages. The goal of this exercise is to show how media companies face unique challenges depending on their life stage.
- Using the same teams and media companies, ask students to identify competitive threats. The goal of this discussion is to show students that market and economic structures have evolved for media companies in the twentieth century. Economists sort industry segments by the amount of competition they face. Instructors can show this by putting Table 4.1 “Matrix of Industry Competition” on a PowerPoint slide for students.
- Considering these changes, what should be the business model going forward? This question is designed to get students to “zoom out” and consider larger factors facing media companies. It also serves as a breadcrumb to the next module, in which they will be introduced to a business model for a digital media company. Instructors should point out that traditionally media enterprises were defined either by the products they produced or by the method they were delivered. However, the Internet has blurred the line between products, video games evolving into movies, and vice versa, or newspapers producing videos and documentaries for its websites.
Instructors should refer to the case study, “Was Yahoo’s Short Life Pre-Ordained” so students can use it as a basis to answer the questions in the learning exercise.
- Favaro, Ken. “Has Your Strategy’s Shelf Life Expired?” s+b blogs, March 4, 2016. https://www.strategy-business.com/blog/Has-Your-Strategys-Shelf-Life-Expired?gko=d2304.
- Abernathy, Penelope, and Richard Foster. “The News Landscape in 2014: Transformed or Diminished? (Formulating a Game Plan for Survival in the Digital Era).” Paper presented at the Yale University Conference on Information, the Law and Society, November 12, 2009.
- Drucker, Peter F. “The Discipline of Innovation.” Harvard Business Review80, no. 8 (August 2002): 95-103.
Part Two: Creating Sustainable Strategies and Business Models
At the conclusion of Part One, students should have a firm understanding of why the Internet has mandated a change in business models for media enterprises. Now students are ready to start learning about how to create profitable business models, which is detailed in Part Two. To give students an overview of a successful business model for media enterprises, it is best to start with the five components of a digital business model detailed in Chapter Five (defining a unique value proposition, understanding customers, reaching current and new customers, competing in a networked world, and investing in key assets and capabilities). This provides a roadmap for the next five modules, where students learn step-by-step processes for each aspect of the business model.
Chapter Five: A Strategy for Dealing with the New Business Imperatives
The first chapter of Part Two explains traditional business models of media enterprises and why they must adapt after the birth of the Internet. Using the examples of Bloomberg and the New York Times, this chapter shows students why even venerable organizations are facing significant threats in the digital age. To better understand these threats, this chapter teaches students how to use a SWOT (strengths, weaknesses, opportunities, threats) analysis. Then, it coaches students on how to use information from their SWOT analysis to start considering the components of a sustainable digital business model. The chapter concludes with five key questions for a strategy framework. Instructors should underscore these questions to students because they correlate with the five primary components of a digital business model for both large and small B2B and B2C media enterprises. These questions will also serve as the roadmap for the next five modules. The questions are: What is the unique value proposition your enterprise offers current and potential customers? What are your most promising (and profitable) current and potential customer segments? What are the best channels for reaching current and potential customers and enhancing your relationship? When should you compete and when should you collaborate in a digitally networked world? What are your key assets?
- Describe how business models for media companies are evolving and how traditional media companies and start-ups must develop core competencies around attracting and retaining audiences
- Detail the process of creating a business plan from scratch, focusing on context, opportunity, risk, and reward
- Practice performing a SWOT analysis to assess existing media companies, using the examples of Bloomberg and the New York Times to show students how they could perform a SWOT analysis
- Introduce the components of a sustainable digital business model for both start-ups and legacy enterprises, which will be elaborated on during the next five modules
“Media enterprises need to respond to the challenges posed by the rapidly evolving digital landscape by developing new strategies, new competencies, and new business models.”
-The Strategic Digital Media Entrepreneur, A Strategy for Dealing with the New Business Imperatives
Instructors can help students prepare for class or spur conversation during class by asking these questions, which emphasize key themes in this module:
- Explain one or two examples of technological change during your lifetime. Ask students to post brief responses (no more than 250 words) to the above question in an online forum. Writing short comments challenges students to distill their thoughts and express them succinctly. The instructor can then cull the responses and list them in a PowerPoint slide for the class, allowing students to see how their responses were similar to or different from their peers. By thinking about technological change during their lifetime, students should begin to consider the fast pace of change in the market, a central theme of this chapter. The speed at which technology is changing complicates matters for both start-ups and traditional media companies.
- What are some of the internal strengths and weaknesses of the New York Times? What are some of their external opportunities and threats? Instructors can spur discussion by dividing the class into four teams and giving each team ten minutes to brainstorm a different “quadrant” of the SWOT analysis for the New York Times. This teaches students how to think critically about a media organization, which is a valuable starting point in assessing the long-term viability of a current business model and opportunities available for growth. After ten minutes, the instructor can show PowerPoint slides with the SWOT analysis from the book, allowing students to compare how their answers differed from Abernathy’s assessment.
- Students should complete a follow-up assignment using the case study of Huffington Post, which allows them to demonstrate whether they mastered core concepts from this module. Instructors should refer to the section “How Arianna Huffington Thrives in the Digital World” so students can use it as their basis for answering the questions. See the section “Exercises”on the website for a more detailed explanation of the assignment.
- Bradley, Chris, and Clayton O’Toole. “An Incumbent’s Guide to Digital Disruption.” McKinsey Quarterly, May 2016. http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/an-incumbents-guide-to-digital-disruption.
- O’Brien, Luke, “The Mayor vs. the Mogul,” Politico, July/August 2015.
- Sullivan, Margaret, “Dean Baquet’s ‘Charting the Future’ Note to Times Staff,” The New York Times, January 6, 2015.
Chapter Six: Defining a Unique Value Proposition
This chapter explores the first question posed to students in the previous class about creating a sustainable digital business model. One easy way for instructors to convey the “building block” nature of this module and how it fits with previous and future classes is to show a PowerPoint slide of “The Components of a Customer-Focused Digital Media Business Model” at the beginning of class with the “Defining a Unique Value Proposition” section highlighted. This module uses the example of Netflix, which had a unique value proposition in the late 1990s, but struggled to differentiate itself when it transitioned to streaming in 2011, in order to help students better understand how to create value that matches their target customers’ wants and needs. Students are also introduced to key frameworks such as Vernon’s Product Lifecycleand research methods to better understand their target customer set. Students should understand that successful value propositions are about making trade-offs, regarding which wants, needs, emotions, and motivations will be addressed and which should be omitted.
- Explain what a value proposition is and why it is so important
- Use the Netflix case study to show how companies struggle when they cease having a unique value proposition
- Detail research techniques and tools to help students decide how they could improve their products
- Show students how to create value that matches their target customers’ wants and needs
- Explore how to set pricing and translate value into profit
“Only by deeply knowing customer needs and wants can you position yourself to offer unique value.”
The Strategic Digital Media Entrepreneur, Defining a Unique Value Proposition
- Ask students to briefly define a “unique value proposition” and post their answers to an online forum. It is recommended instructors do this in advance of class so students can begin to think critically about what makes a unique value proposition. This also allows instructors to gauge the base knowledge of students in the class. Instructors can then compile the student answers and explain to students that one of the best definitions is by business theorists Alexander Osterwalder and Yves Pigneur, who defined value propositions as “creating products and services customers want.”
- Tell students they are launching a media start-up and must determine what their customers want. How should they go about gaining this information? The goal of this exercise is to encourage students to think broadly about what motivates target customers. Instructors can do this by having students brainstorm in small groups for 5-10 minutes and then present their ideas to the classroom. Then, instructors can show the “Research Methods to Understand Your Consumer” graphic to the class – either as a handout or as a PowerPoint slide, which helps explain to students the different avenues of research available to understand how goods or services might appeal to customers.
- Using this same example of a media start-up, ask students to posit customers’ functional wants and needs, pains, gains, and motivations. The goal of this exercise is to have students practice completing a value creation customer profile, the first step in understanding a target customer. This works best if instructors print the handout “Digital Media Value Creation Customer Profile” and pass it out to students, who can write directly on the handout to hypothesize what the customers’ wants and needs, pains, gains, and motivations might be. Instructors should explain to students that they should consider what the customer wants and needs to accomplish, keeping in mind that economists define a “want” as a desire and a “need” as anything needed for survival. They should also consider how customers feel when they are trying to solve a problem and how they want to feel, which highlights the customers’ emotions. Finally, they should weigh why the customer is acting in a certain way, which could be emotional, social, or economic. This is the “motivation” part of the handout, which instructors should underscore is the most difficult to ascertain.
- Students should use the case study of Netflix to show they have command over how to define a unique value proposition. To prepare for the assignment, instructors should refer to “The Netflix Story: Three Value-based Strategies” case study. They should also guide students to the “Digital Media Value Creation Customer Profile” and “Digital Media Value Offering Map” and tell students to use the case study (no extra research is required) to hypothesize answers for all of the sections.
- Favaro, Ken. “Lessons from the Strategy Crisis at Netflix.” s+b blogs, September 6, 2016. https://www.strategy-business.com/blog/Lessons-from-the-Strategy-Crisis-at-Netflix?gko=1f1e1.
- Osterwalder, Alexander, Yves Pigneur, Gregory Bernarda, and Alan Smith. Value Proposition Design: How to Create Products and Services Customers Want. Hoboken, NJ: John Wiley & Sons, 2014.
- Hinterhuber, Andreas. “Customer Value-Based Pricing Strategies: Why Companies Resist.” Journal of Business Strategy 29, no 4(2008):41-50.
Chapter Seven: Understanding Customer Relationships in a Digital World
The second chapter in Part Two, “Understanding Customer Relationships in a Digital World,” builds on the concept of how to define a unique value proposition and teaches how media companies can more effectively reach current and new customers. This module addresses the second question posed in the business model, so instructors may want to highlight the “understanding customer relationships” section of the model to help students orient the class. In this module, students will learn how to strengthen their relationships with their customers and gain an understanding of the importance of “segmenting” customers into distinct groups. Students will get to practice these techniques through the supplemental exercise based on Sling TV, an Internet TV service aimed primarily at eighteen-to-thirty-five-year-olds.
- Explain how to approach customer segmentation, dividing customer base into distinct groups with specific needs, attitudes, and beliefs
- Understand how to determine a target market and how to position your product to your targeted customer segments
- Learn about different types of customers, using the framework of the “Diffusion of Innovation”
- Grasp the importance of loyalty and engagement and potential ways of tracking them (such as the Net Promoter Score)
“Successful media entrepreneurs understand the importance of “segmenting” customers into distinct groups, and then directing their marketing efforts, services and products at these targeted segments.”
–The Strategic Digital Media Entrepreneur, Understanding Customer Relationships in a Digital World
- Ask students to post a link to a current story about a media company and write a few sentences hypothesizing their target market, answering questions such as: Where do you think the customer lives? How old are they? What are their perceptions about this media company? This exercise, which works best in advance of class, teaches students how to read the news critically and begin to think about segmentation. It also helps the instructor understand how deeply students are thinking about the target customer and sets the stage for a more robust description of segmentation in class. Instructors can compile students’ answers to show similarities and differences in the media companies they chose and use this as a springboard for a discussion of the five common ways to segment a market or audience: geographic, demographic, attitudinal, behavioral, and psychographic. Instructors can also use this exercise to caution against “over-segmenting,” which is counterproductive because it is usually not profitable to discreetly target and position products and services for all segments. Instructors can pass out in class or highlight in a PowerPoint presentation the four rules of effective segmentation: that the customer segment is accessible; that the customer segment is responsive; that your product has tactical reach; and that the customer segment has purchasing power.
- Ask students to predict how the customer base for this media company might change over the next twenty years. This exercise can be conducted in small groups in class. It is designed to get students to think creatively about different types of customers and their attitudes toward technology. A key insight for students is that while a product is appealing to young, technologically savvy customers now, it may also be appealing to “technology laggards” in the future. This exercise sets up a discussion of the Diffusion Curve, which shows that each consumer’s willingness and ability to adopt an innovation or new technology depends on their awareness, interest, evaluation, trial, and adoption. Instructors might want to show the graphic “Maloney’s 16% Rule and the Diffusion of Innovation” in a PowerPoint slide after this exercise because it visually illustrates the differences between innovators – the first to purchase a product or service – and laggards – skeptics. Instructors should underscore that if you have a new product or service, you probably want to target innovators and early adopters with your messaging.
- Ask students how they would ensure their target customers stay loyal? This is intended to get students thinking about how to maintain existing customers. Instructors can use this question to explain key concepts such as Customer Lifetime Value and the Net Promoter Score, created by former Bain consultant Fred Reichheld to track the overall loyalty of current customers. Instructors can show accompanying graphics, “How To Calculate a Net Promoter Score” and “Net Promoter Score Leaders by Sector” on PowerPoint slides to emphasize that a business’s score fluctuates significantly depending on the industry segment.
- Students should use the case study of Sling TV to practice segmenting customers.
- Kobrak, Harry. “How to Avoid Five Common Mistakes in Market Segmentation.” AdvertisingAge, February 20, 2012. http://adage.com/article/cmo-strategy/avoid-common-mistakes-market-segmentation/232796/.
- Maloney, Chris. “The Secret to Accelerating Diffusion of Innovation: The 16% Rule Explained.” Innovate or Die(blog), May 10, 2010. http://innovateordie.com.au/2010/05/10/the-secret-to-accelerating-diffusion-of-innovation-the-16-rule-explained/.
- Reichheld, Fred. The Ultimate Question: Driving Good Profits and True Growth. Boston: Harvard Business School Press, 2006.
Chapter Eight: Reaching Current and New Customers
This chapter explores the third aspect of the customer-focused digital media business model: how to reach current and new customers. As they’ve done before, instructors may want to open the class by showing the business model and highlighting the “reaching current and new customers” section so students can understand how these principles build on what they’ve already learned. The purpose of this module is to teach students strategies and tools for acquiring and maintaining customers such as Human-Centered Design and Customer Journey Mapping. Students should also gain an awareness of how macro trends – particularly time spent with technology, user-generated content, digital innovation/disruption, and mobile access – are disrupting how people consume media. In order to capitalize on these trends, media entrepreneurs must leverage the best channel, which experts define as the path or route that goods or services travel from initial creation to reach the end consumer.
- Understand the various channels for acquiring and retaining customers and how media entrepreneurs can evaluate these channels
- Identify “human-centered” design and customer journey mapping and explain how they can help brands pivot in creating, aggregating, and planning content distribution
- Describe how channel mix changes as media consumption shifts and brands outgrow their target audience and attempt to reach new audiences
- Grasp how customer experience affects loyalty and brand attachment
“If the sea change is in fact reaching the pinnacle of live sports broadcasting, it’s time to rethink the channels.”
The Strategic Digital Media Entrepreneur, Reaching Current and New Customers
- Ask students to briefly (no more than 250 words) describe how a traditional media product has altered the way it is being delivered to customers (for example, an established newspaper that now uses an app or a newsletter). Instructors can ask students to link to articles about these changes in an online forum and then compile the examples for class. The goal is to get students thinking about how media organizations can use different channels to reach customers. Instructors can help students understand this by using the definition provided in the book: marketing channels are the path or route that goods or services travel from initial creation to reach the end consumer and they are either direct (when the sale of a product goes directly from the originator or producer to the final customer) or indirect (when the sale of a product goes through an intermediary).
- Ask students how media consumption habits are changing. This is aimed at helping students understand that powerful forces are shaping the modern digital consumer and media organizations are at the center of these shifts. Instructors can use this to segue into the four trends Silicon Valley venture capitalist Mary Meeker identified as shaping media consumption through 2020: time spent with technology, user-generated content, digital innovation, and mobile access.
- Students should use the case study of the NFL to write a “channel brief,” which succinctly summarizes a channel within the context of a target audience, and analyzes the channel’s potential to meet the media organization’s goals.
- Konrad, Alex. “Here Is Mary Meeker’s Internet Trends Report For 2017.” Forbes, May 31, 2017. https://www.forbes.com/sites/alexkonrad/2017/05/31/mary-meeker-internet-trends-for-2017/.
- Bolton, Ruth N., and Crina O. Tarasi. “Managing Customer Relationships.” In Review of Marketing Research, edited by Naresh K. Malhotra, vol. 3, 3-38. Armonk, NY: M.E. Sharpe, 2007.
- Court, David, Dave Elzinga, Susan Mulder, and Ole Vetvik. “The Customer Decision Journey.” McKinsey Quarterly, June 2009. https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/the-consumer-decision-journey.
Chapter Nine: Competing in a Networked World
This chapter tackles the fourth component of a digital media business model: how to compete and collaborate in a networked world. It teaches students how best to partner with other media and technology companies in an evolved media landscape that has shifted from “mass media” to “Me Media.” Similar to previous classes, instructors can highlight the “competing” section of the model to orient students where this lesson fits into the overarching framework for a digital media business model. This module highlights that in order to best compete in a world with tech behemoths like Facebook and Google, entrepreneurs must identify and evaluate potential partnerships, relying on five integrated phases where they consider situation assessment, target audience, value creation, economic evaluation, and measurement. Understanding these concepts can help students better understand when competitors are “friends,” “enemies,” or “frenemies.”
- Understand the economics for media in an environment that has shifted from finite content/infinite attention to the infinite content/finite attention
- Explain how traditional boundaries between media organizations competing for audience attention have become blurred and contested
- Distill how media organizations use collaboration to protect themselves from threats in a changing media environment
“In the evolving media landscape, survival of the fittest means survival of the most adaptable.”
–The Strategic Digital Media Entrepreneur, Competing in a Networked World
- Ask students to pick a media organization that existed before 1990 and briefly (no more than 250 words) describe its competitors. The goal of this assignment is to show students how vastly the competitive landscape has shifted for media organizations in the age of the Internet. Instructors can compile students’ answers in a PowerPoint slide that they show at the beginning of the class so students can see how their responses compared to their peers. After displaying examples from before 1990, instructors should point out the graphic “Mass Media Bubble” (which can be passed out or displayed as a PowerPoint) to underscore that now in the age of infinite content, or “Me Media,” supply and demand have traded places: there is unlimited content competing for a scarce amount of attention.
- Ask students how traditional media companies depend on tech giants like Google, Facebook, and Amazon? Does this make them “friends” or “enemies” with these companies? The goal of this question is to encourage students to think critically about the pros and cons of competing and collaborating with large technology companies. Students should point out both the opportunities (building web traffic and getting content in front of larger audiences) and challenges (favoring its own ads over competitors). This makes for a complicated environment, where friends and enemies are interchangeable – becoming “frenemies” – in the phrasing of Alexa Young’s bestselling youth adult heroines.
- Students should use the example of the industry trade group “News Media Alliance” demanding a fair share of Google and Facebook’s ad revenues to determine contested boundaries and areas for collaboration. The goal of this exercise is to teach students to think critically about areas for partnership and competition, both with large tech companies and with smaller organizations. Students should also practice using the “five collaborative tools,” listed in the learning exercise and included on the PowerPoint slides for this chapter.
- Heath, Alex. “Facebook and Google Completely Dominate the Digital Ad Industry.” Business Insider, April 26, 2017. http://www.businessinsider.com/facebook-and-google-dominate-ad-industry-with-a-combined-99-of-growth-2017-4.
- Blanding, Michael. “Why Apple and Amazon Choose to Be ‘Frenemies.’” Forbes, August 3, 2015. https://www.forbes.com/sites/hbsworkingknowledge/2015/08/03/why-apple-and-amazon-choose-to-be-frenemies/#2e5432403483.
- Gray, Steve. “Mass Media Bubble Bursts, Leaving News Publishers Vulnerable.” INMA, July 1, 2013. http://www.inma.org/blogs/disruptive-innovation/post.cfm/mass-media-bubble-bursts-leaving-news-publishers-vulnerable.
Chapter Ten: Investing in Key Assets and Capabilities
The final chapter in Part Two explains the last piece of the digital media business model: how to invest in key assets and capabilities. Like previous modules, instructors can highlight the “investing” part of the digital media business model so that students understand this is the last piece of the puzzle. This module teaches students a digital strategy map to prioritize their investments and projects. The map is based on all resources—not just the assets listed on the balance sheet, but also a company’s capabilities. The map is also based on the organization’s media environment, asking whether consumers are engaged in creating content or more passive spectators. After plotting where a media organization is on the map, the next step is for students to understand how they can move the needle. The key is through four pathways: creating digital products and services; developing digital marketing and distribution capabilities; digitalizing business processes and supply chains; and disrupting the ecosystem though innovation.
- Understand what type of media environment a digital enterprise operates in and the key resources and assets that a company has available to meet the expectations of its current and future customers
- Introduce a framework for aligning the media environment with a company’s key resources and potential pathways to digital transformation
- Help students determine where to place their bets to ensure profitability of the entire enterprise
“Strategy is about marrying the key resources that a company possesses, such as its tangible assets and its assorted capabilities, with the expectations of its customers.”
The Strategic Digital Media Entrepreneur, Investing in Key Assets and Capabilities
- Ask students to briefly hypothesize what the two most important factors might be when assessing a media organization’s digital strategy. Encourage students to think about all of the factors they have learned: defining a unique value proposition, understanding customers, reaching new and old customers, and competing or collaborating with other organizations. This allows instructors to assess the extent to which students grasp the “big picture” of an organization’s digital strategy. Instructors can display a PowerPoint slide that compiles the students’ answers so they can compare their answers with their peers. Then, instructors can use this to tee up the two axes of the digital transformation map: resources and environment.
- Ask students for examples of media organizations that have low versus high resources. This allows students to consider the broad range of media organizations and also allows instructors to underscore that resources are broader than what’s on the balance sheet: they include capabilities the company possesses that have a significant value to current customers and prospects; relationships with suppliers, vendors, competitors, and employees; and established and potential partnerships with other firms and various channels for reaching and engaging with current customers and prospects. Instructors should also highlight that the most important resources are often intangible ones – which students may not grasp at first.
- Ask students for examples of media organizations that have passive versus dynamic media environments. Instructors will want to first tell students that they are defining environment as the degree of involvement of an audience or customer segment with a specific medium’s content and format. Depending on how theoretical the instructor wants to be, they could include a note that this builds on sociologists David Althiede and Robert Snow’s observation that media cultures form or “coalesce” around various content formats, which they describe in their influential book Media Logic and Media Worlds. When talking about different organizations on the spectrum, instructors should ask whether a majority of the audience is actively involved and interacting with the content (e.g., posting comments) or do they consume content but don’t expect to actively interact with it? These consumers watch, read, or listen to the content and may can be very loyal but have no expectation of carrying on a robust, ongoing conversation with others or with the media enterprise.
- Students should plot two media organizations on the map they learned about in class, testing their understanding of media resources and environments. Then, they should give advice for how these media organizations could move across the grid, which allows instructors to gauge how well students mastered core concepts concerning the pathways for digital transformation.
- Forrester Research. “The Social Technographics®Ladder.”Forrester Research, Inc., 2017.
- Bughin, Jacques, Laura LaBerge, and Anette Mellbye. “The Case for Digital Reinvention.” McKinsey Quarterly, February 2017. http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/the-case-for-digital-reinvention.
- Abernathy, Penelope Muse. “Chasing the Community Newspaper Rainbow: The Whiteville News Reporter and the Digital Age.” Case Consortium @ Columbia CSJ-14-0055.0. New York: Columbia Center for Teaching and Learning, 2014.
Part Three: Leadership in a Time of Change
At the conclusion of Part Two, students should have a sense of how to develop a customer-focused strategy roadmap for creating profitable and sustainable digital media business models. They should also better understand how to define a unique value proposition, reach current and new customers and strengthen relations with them, utilize partnerships, and prioritize investments in key assets. Now students are ready to start learning about what happens when entrepreneurs try to apply these lessons. In the final module, students will gain an appreciation for the leadership challenges and opportunities facing media entrepreneurs today and in the future.
Chapter Eleven: Entrepreneurial Leadership and Culture
Overview: This module stresses the practical application of the skills and strategies described in Part Two. Students learn to define organizational culture and understand why it is so important, using frameworks such as Edgar Schein’s organizational model. They also learn about different types of structure and culture in organizations, helping them to identify how organizations change when they move from start-up to the mature phase. Just as students have focused on new skills and priorities in the Media 2.0 environment in other modules, this lesson teaches the importance of a culture valuing innovation that encourages prospecting. Finally, students gain a sense of the best way to use teams and the qualities of successful leaders: two essential lessons for anyone hoping to be a successful media entrepreneur.
- Understand the importance of organizational culture
- Learn what types of structures and cultures exist in organizations and what is needed in the Media 2.0 environment
- Detail the role of teams in the Media 2.0 environment
- Define what qualities make for successful leaders
“The economics confronting today’s media companies require both a new organizational culture and a new leadership style. A media company’s core competencies in the digital age – content creation, new revenue development, and technological competitiveness – must align with its organizational structure.”
The Strategic Digital Media Entrepreneur, Entrepreneurial Leadership and Culture
- Ask students to pick a media company whose organizational culture they admire. Ask them to write a few sentences about why they admire its culture. The goal for this exercise is to encourage students to think critically about what makes a winning organizational culture and how organizational cultures vary by company. The instructor can make a PowerPoint slide of the different responses to show how students interpreted the question differently and how the values they admired in an organization are similar to and different from their peers. Then, the instructor can use this conversation to introduce Schein’s components of an organizational model, underscoring to students that an organizational culture is more than just the outer layer of “artifacts and symbols.”
- Ask students how they think the organizational culture of media organizations has changed over the past 20 years. The goal of this discussion is to encourage students to think about what made for successful organizational cultures in the Media 1.0 environment versus in the 2.0 environment. Instructors can point out that prior to 2000 news organizations such as Axel Springer achieved market leadership by valuing operational excellence but they have had to shift to put a premium on product innovation.
- Ask students to pick a media leader and list a quality they admire in that person. The instructor can keep track of the different list of qualities by writing them on a whiteboard at the front of the class. The goal is to widen students’ perspectives about the skills that make for successful leaders. After soliciting students’ input, instructors can show a PowerPoint slide with the mix of skills that the executive search firm Russell Reynolds Associates describes as essential for successful leaders: disruptive and pragmatic, risk-taking and reluctant, heroic and vulnerable, and galvanizing and connecting.
- Students should use the case study of Axel Springer to answer a series of short-answer questions. This exercise tests the concepts in the module and gives students a real-life media example of a transformational leader.
- Russell Reynolds Associates. “Productive Disruptors: Five Characteristics that Differentiate Transformational Leaders.” August 12, 2015. http://www.russellreynolds.com/insights/thought-leadership/productive-disruptors-five-characteristics-that-differentiate-transformational-leaders.
- Watkins, Michael. “How Managers Become Leaders.” Harvard Business Review90, no. 6 (June 2012): 64-72.
- Katzenbach, Jon R., and Douglas Smith. The Wisdom of Teams: Creating the High-Performance Organization. Boston: Harvard Business School Press, 1993.
Chapter Twelve: What the Future Holds
Overview: This module wraps up the course, applying the entrepreneurial frameworks from previous lessons to the future of the media industry. The goal of this lesson is to review key themes from the course and show students how they will be even more relevant into the future as the media industry is continually tossed about by the “gales of creative destruction.” This module also helps students start to think about concrete steps they should be taking if they are launching a media start-up, where they will need to consider all of the elements of a digital media business model and core concepts from the previous lesson about leadership.
- Understand how the media landscape is changing and what this means for the news industry; business-to-business information and data providers; business-to-consumer media conglomerates; and technology companies.
- Understand the obstacles facing media start-ups and what entrepreneurs can do to improve their chances of overcoming these hurdles.
- Synthesize key trends for the future of the media industry, such as interactive games, new digital motion technology, the Internet of Things, augmented reality, and virtual reality.
“We are at the very beginning of another revolutionary era in communication…nevertheless successful entrepreneurs acknowledge that the business models that underpinned their enterprises for centuries have changed dramatically, then fix their gaze on the potential unleashed by digital technology.”
The Strategic Digital Media Entrepreneur, What the Future Holds
- Ask students to troll through news stories and post one about a new development in the media industry. Instructors can share these stories with the class, so students can see how their articles compared to their peers. Instructors should then use these developments to make the point that there is a lot we don’t know that lies ahead, however we can be better prepared for the future by understanding the strategic business imperatives for media enterprises, which we’ve discussed in previous modules. Instructors may want to refer to a PowerPoint slide that lists these strategic imperatives, or they can tell them to students in class: The customer will always be the ultimate driver of profitability and sustainability; The winners will be those companies with a tightly integrated digital strategy; Content is still king; How you bundle products and services can set you apart from your competitors; Business basics are as important as ever; Change is accelerating; Scale matters, even for small companies; Local tastes and habits remain important; Organizational culture and leadership make the difference.
- Divide the class into four teams and assign each team a media industry (news industry; business-to-business information and data providers; business-to-consumer conglomerates; and technology companies). Give each team ten minutes to hypothesize key challenges and opportunities for the industry, drawing from the knowledge they’ve gained during this course. Ask students to present their findings to one another and then lead a discussion about similarities and differences across the industries. A key point to make to students is that, as author and consultant Richard Foster points out, there are two tipping points that determine whether an existing media enterprise will survive an assault by a disruptive technology. The first occurs when customer behavior changes and the second occurs when the economics begin to work in favor of the disruptor.
- Tell students to assume they are launching a media start-up. What do they need to do? Log their answers on a whiteboard in front of the class so they can keep track of how their responses compare to others. This allows instructors to test how much information students have retained about the importance of business models for all organizations. Instructors can underscore that research shows that the success rate for start-ups is almost double if they have a business plan. Instructors should also highlight the importance of flexibility and the ability to change your plan based on customer feedback, making the point that about 80 percent of start-ups will make it through the first year, but will slowly fail over the next four years. Students should also consider leadership dynamics like choosing people wisely and carefully researching their investors.
- Students should build on the class discussion of the different media industries and write a research report about the state of one of the media industries – the news industry; business-to-business information and data providers; business-to-consumer media conglomerates; and technology companies – highlighting its key challenges and opportunities at present day. Instructors may want to make this a team assignment so students have the ability to practice working in teams and can continue the discussion they start in class.
- Rao, Anand. “A Strategist’s Guide to Artificial Intelligence.” strategy+business, May 10, 2017. https://www.strategy-business.com/article/A-Strategists-Guide-to-Artificial-Intelligence?gko=0abb5.
- Pew Research Center. “State of the News Media.” Accessed August 26, 2017. http://www.pewresearch.org/topics/state-of-the-news-media/.
- Kelly, Kevin. The Inevitable: Understanding the 12 Technological Forces That Will Shape Our Future.New York: Viking Press, 2016.