This edition first published 2019
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Sometimes innovation comes in an almost blinding flash of creative insight. More often those ideas result from a disciplined, strategic process of exploration and testing. Regardless of how innovation is born, the hard part is transforming that insight into a profitable business proposition. The most innovative and creative minds often fail as entrepreneurs.
The media industry is experiencing what the economist Joseph Schumpeter famously termed “creative destruction.” A new technology has rendered business models obsolete that until recently sustained century‐old media enterprises—from books and newspapers to television. Customers and investors are moving away from an aging industry, shifting their focus and resources to the new entrants. From the experience of other industries that have weathered “the gales of creative destruction,” we know that those who thrive in this new environment will need to adapt quickly.
New business models are beginning to emerge as leaders in both the academy and the industry explore ways to tap into the potential unleashed by this interactive, always‐on technology that connects media enterprises with their readers, viewers, and online visitors in revolutionary ways. Colleges and universities have established innovation and entrepreneurial centers that give students hands‐on experience with “ideation” and prototyping, and that, maybe—just maybe—will inspire one or more of them to come up with the next Facebook. Leaders of established, century‐old media empires commission innovation reports and encourage their employees to “think out of the box” about new ways to connect with current and potential customers. All of this occurs as the pace of change in the industry has increased significantly in recent years and shows no sign of slowing down. Indeed, many prognosticators predict it will increase.
As former executives of media companies, and now as college professors, we have our feet firmly planted in both worlds. Whether we are teaching tomorrow’s media leaders or conducting workshops for today’s leaders in the industry, we have noticed there are three significant hurdles that both students and professionals face. First, many of them lack the financial and strategic background to assess whether their great idea will be a profitable and sustainable business enterprise. Second, they need a new way of thinking about strategy and business models, a new framework for the digital space. Third, they cannot do it alone; they need to nurture entrepreneurial leadership at all levels and in all functions in their organizations. Therefore, we have designed a book that attempts to address those three missing links.
Inspiration for The Strategic Digital Media Entrepreneur comes from the many media innovators and entrepreneurs we’ve met in the profession and the classroom. During a time of immense uncertainty in the industry, they have focused their sights and energies on developing strategies that will allow their enterprises to thrive in the digital age.
A book is always a collaborative effort with many participants, who have generously shared insights and provided feedback that helped us refine concepts and ideas, and then communicate them in multiple venues—in print, in person and through online outlets.
We are indebted to our colleagues in the School of Media and Journalism at the University of North Carolina at Chapel Hill, especially Dean Susan King and UNC Provost James Dean, who have been strong advocates for our research and for the Center for Innovation and Sustainability in Local Media. The Center is funded by generous grants from the Knight Foundation and the University. The mission of the Center is to support both start‐up and existing news organizations by researching and developing sustainable business models, as well as innovative digital tools, and then disseminating that information widely. We have received invaluable support from both faculty and staff associated with the Center. We thank senior researcher Erinn Whitaker for her extensive and committed editing and research effort, Lorraine Ahearn for her editing advice, as well as John Prudente and Jill Fontaine for their research assistance. Craig Anderson, Madeline Brown and Pamela Evans provided timely administrative support.
Finally, our thanks to the editors at Wiley Blackwell. We are grateful to acquisitions editor Elizabeth Swayze, who saw the need for a book on this topic and approached us in 2015, and to Executive Editor Haze Humbert and Project Editor Janani Govindankutty and her team, who have seen the idea through to completion.
The book is divided into three Parts, each tackling a separate piece of the puzzle. The first section, “Understanding the Basics of Digital Entrepreneurship,” authored by Penelope Muse Abernathy, consists of four chapters, and explores how the Internet has changed the business models for media enterprises. It is both a financial and strategic primer. It traces more than 550 years of innovation, identifies the prevailing business models of the past and present, and introduces the idea that successful entrepreneurs (as opposed to innovators and inventors) focus on getting the business model right. It has lessons on how to understand the difference between net income and cash flow, as well as examples of how to place a dollar value and rate of return on a media enterprise. It concludes by analyzing the various ways the Internet has attacked the traditional business models of media companies, and by identifying the strategic challenges and opportunities confronting all media entrepreneurs today.
Part II, “Creating Sustainable Strategies and Business Models,” co‐authored by JoAnn Sciarrino and Abernathy, develops a new customer‐focused strategy roadmap for creating profitable and sustainable digital media business models. In the pre‐digital age, successful media enterprises tended to control each of the processes involved in creating, packaging, producing, distributing, and selling their content to consumers. This led to inward‐looking business strategies that focused on operational excellence and efficiency. The interconnectivity and immediacy of the Internet not only disrupted the economics of media enterprises, but also relationships with their customers—both their audiences and their advertisers. Strategies for companies in the digital space place the customer as the ultimate driver of profitability. Therefore, this section begins by posing five customer‐focused strategic questions, and then establishing a step‐by‐step process for answering each question. This process provides the tools to define a company’s unique value proposition, reach current and potential customers and strengthen relationships with them, utilize partnerships, and prioritize investments in key assets.
The concluding Part, “Leadership in a Time of Change,” authored by Abernathy, focuses on the leadership challenges and opportunities facing media entrepreneurs today and in the near future. It concludes by asking readers to consider the possibilities that are yet to be realized around artificial intelligence, augmented reality, and blockchain, to name but a few. Each chapter has timely case studies focusing on media enterprises that are attempting to transform their digital media business models.
Our complementary website for this book, www.cislm.org/digitalentrepreneurs, has an extensive amount of supplemental material, such as instructional videos, essays by media leaders about significant issues they are confronting, and updates on topics covered in the book. In addition, at www.cislm.org/digitalstrategy, we have provided materials (PowerPoints, study guides) for instructors using this book in either the academy or the profession.
As you may have concluded by now, this is not a classic economics textbook. Nor does it cover the sociological or policy implications of the disruption occurring in the media space. Those subjects require separate texts, and there are several excellent ones already. Rather, this book is about the business of media, so it relies on the language of business, often referring to readers and viewers as “customers,” or “consumers of products and services.” With apologies to journalists everywhere, we do not intend to diminish in any way the value of your vitally important work, communicating the news and information that feeds democracy at all levels of society. We are simply using business shorthand when we describe your journalism as “content” (undifferentiated from other types of content), or as a “product or service.” However, since one of us is a journalist, we would also make the point that if you care about the future of journalism, you should learn everything you can about the business of media.
We hope that the book will be used in its entirety in both the academy and the profession, since we believe, for example, marketing students and journalism practitioners benefit from learning about the finances of media enterprises, just as those specializing in accounting and finance need to understand how putting the customer first contributes to bottom line performance. However, given the scope of this book, we also realize that there may not be enough time in a semester to cover all of the material we included. Therefore, we have envisioned each section as potentially a stand‐alone entity that can be incorporated into the curriculum of existing marketing, strategy or journalism courses, as well as entrepreneurial centers.
This book reflects the insights gained from our strategy work with numerous media organizations, as well as what we have learned from our own professional experiences, research and teaching. We hope that what we offer in the following pages will be relevant for both the classroom and the profession, for college professors, as well as for those in the industry hoping to get funding for a new venture or transform their current media operations. We hope it both informs and inspires current and aspiring media entrepreneurs.
This book is accompanied by two companion websites.
www.wiley.com/go/abernathy/StrategicDigitalMediaEntrepreneur
www.cislm.org/digitalstrategy
The Instructor Website (at www.wiley.com) contains:
The Student and Professional Website (at www.cislm.org) contains:
In fact, no one can tell whether a given innovation will end up a big business or a modest achievement. But even if the results are modest, the successful innovation aims from the beginning to become the standard setter, to determine the direction of a new technology or new industry, to create the business that is—and remains—ahead of the pack. If an innovation does not aim at leadership from the beginning, it is unlikely to be innovative enough.
(Peter Drucker, “The Discipline of Innovation,” Harvard Business Review, August 2002)