Sunday, January 19, 2014

Profit without Purpose is a recipe for disaster - III


Starting to connect the dots. Remember Elisabeth Murdoch's speech at the Edinburgh TV festival in 2012? Clearly very difficult for her to write. But she was crystal clear - "Profit without Purpose is a recipe for disaster".

Now skip through to this talk by Clayton Christensen, and watch what he says at 34'14.

You are captive to your customers (read audiences if you're in media). If  you develop products that your customers buy, they will provide you with the money to stay in that business. If they don't buy, you will fail.

Rod Adner wrote a mathematical model on theory of disruption in which he concluded: The pursuit of profit causes the leaders in the industry to get out and the disruptors to get in. Christensen took this theory and test it to see if it could predict the future of six different sectors of industry. By projecting what happens they could see if they were right or wrong. In their book Seeing What's Next (2004) they got it right with telecoms, semiconductors and emerging economies. But they got it spectacularly wrong with aviation and education. In the case of aviation they didn't see that established airlines would add more profitable long-haul routes and leave the short-haul flights to the budget airlines like RyanAir.

Since the book was written, exactly the same thing has happened to high street banks. In the pursuit of profit they have focussed on the big corporate deals and given away the consumer banking market to others. But the problem is that there are not enough of the big-spending clients to go around.

Christensen says that there are a few industries where we have not seen disruption. The hotel industry for example. Howard Johnsons and Holiday Inn are low-priced chains. For them to go upmarket they have the emulate what Four Seasons offers. They can't disrupt them.

This view was helpful when looking at the future of higher education. Until now, there hasn't been much disruption of colleges and universities. There have just been more and more of them. But now on-line courses like Coursera brings a way for small companies to disrupt traditional universities. The example shown below is from the University of Copenhagen about the history of Scandinavian Film and Television.

Ron Adner warns that a wider perspective is essential for disruptive thinking, which I interpret for broadcasters is that they have to think broader than broadcasting. It's a bit like trying to understand the future of radio and only thinking about DAB versus FM. The bigger picture is that you're trying to deliver audio to an audience. Sometimes it has to be in real time. But quite often the audience would like to decide when they listen to it.

Ron Adner Interview from TheWideLensBook on Vimeo.


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