Three critical mistakes of digital companies with content

The world drowns in content. As a competitive digital enterprise, it may be tempting to believe that the key to success is to produce higher-quality content that exceeds the digital confusion. However, this type of approach is a fundamental misunderstanding of the functioning of the digital world, explains Bharat Anand.

“Digital technology is basically good at connecting people,” says Professor Anand of Henry R. Byers at Harvard Business School’s Strategic Unit. “Most companies that have experienced digital success – Facebook, Amazon, Uber, Airbnb, and others – are not just product developers, but also connectors.”

Anand explores this phenomenon as well as the tension between “content” and “connections” in a new book entitled “The Content Trap”: A Guide for the Strategist for Digital Transformation. It addresses digital transformation efforts in the media, entertainment and related fields where digital transformation has taken place for almost a quarter of a century, with the goal of understanding which lessons can be applied to other sectors. ,

The book is rooted in a digital training program for senior executives at Harvard Business School, Anand’s many years ago with Felix Oberholzer-Gee, and Andreas Andresen, a professor of business administration at The Corporate Strategy Unit, who are struggling to adapt to the digital world. Teachers have seen the same problems repeat over and over again, “many came from the pursuit of seemingly rational mind that turned out to be imperfect.”

“AN EFFECT OF DIGITAL TECHNOLOGY IS THIS VALUE IN A PART OF A SECTOR THAT HAS BEEN TAKEN TO ANOTHER –
The first trap that Anand encounters is paying too much attention to the content or the product rather than focusing on connecting users. As an example, he mentions the newspaper industry, which was barely able to compete in the digital age.

“It’s generally accepted that the Internet is destroying newspapers because online information is cheaper, faster and more efficient,” says Anand. Most newspaper companies have responded by investing heavily in their own online news sites. “But the real problem was the loss of revenue from classified ads on sites like Craigslist and Monster.com.”

Schibsted, the largest Norwegian news company and an enterprise investigated by Anand for ten years, has recognized this threat. In 2000, when other newspapers had raised money from the Internet after the collapse of the Internet bubble, the company aggressively invested in online classifieds. “They thought that if we had the right answer, this could be a market for everyone involved,” says Anand.

Following extensive investment in this sector, the company has established itself as the most popular classifieds website in Norway, producing lists of neighboring countries. “More cars were sold on the construction site than in Norway,” says Anand. From there, the company expanded into other countries. Today, he is one of the world’s leading classified ad companies, on which Schibsted accounts for the majority of the operating profit.

“Even more interesting,” notes Anand, “the company takes lessons by linking people to advertisements in the newsroom and asking a simple question when it comes to important news: how can that be?” to help readers to help each other?

Anand develops this idea of ​​user connectivity using the example of one of the largest digital companies most Americans have never heard of: the Chinese Internet giant Tencent. The company was founded in 1998 as an instant messaging service, but has since expanded to include the Weibo microblogging product, online games and the social media application WeChat.

According to Anand, the company is particularly interested in how it monetizes the service. Facebook generates 90% of its advertising revenue, Tencent produces less than 20% of the ads. Instead, it relies on virtual coins, called Q coins, that users can use to personalize their online presence by buying virtual apparel, jewelery and pets, as well as wallpapers and ringtones.

“The core of the success lies in a deep understanding of consumer behavior and customer willingness to pay,” says Anand, “and then leverage the success of one product network to another.” namely the user connections “.

The second problem Anand sees in digital strategy is that a company is too tied to some form of content or product, rather than taking a broader view of their business. “We often hear in the business that product success requires using key products and key skills,” he said. “One of the effects of digital technology is that the value of one part of a sector is often redistributed to another.”

Take the music sector. The general opinion is that piracy has killed the music industry: The decline of CDs coincided with the rise of Napster in 1999. However, the value did not fully benefit consumers – mostly to companies offering complementary products and services. Anand: “Think about how much money we spend on hardware like MP3 players and smartphones, or on digital broadband access, which is becoming more and more important for streaming digital music.” The disagreeable result was that companies often made profits at the expense of their sister departments Although Warner Music was beginning to suffer, Time Warner Cable’s assets ran out.

Then there was the revenue from the concerts, which exploded as the CD revenues fell and more went to the artist. “It’s no coincidence that 30 years ago, concerts were commercials for buying music, and now that content prices are harder to control, free or cheap music is promoting a live show,” says Anand.

For businesses that work in the digital world, success requires identifying product links – additions, neighbors, and overflows.

The third case in which Anand sees companies sinking is trying to methodically follow the example of other successful companies. Unlike the digital world of the analog world, the core elements of the strategy – determining what your customers want and how they are ready to deliver – remain unchanged. However, this requires that interdependencies and functional connections must be seen and managed at all levels of the organization. “The context is important, it’s a simple idea that we ignore so often, and the best companies in the digital world are developing unique strategies that meet their needs.”

To use the concept of connectivity, the mindset of the organization needs to be changed. “Most companies have big problems leaving the product and content trap,” says Anand. “But they should.Strategic success requires content sharing only to customers and connections.”

In the last three years and just as Anand began to write the book, he was forced to make a digital effort closer to home: online education. With some HBS teachers and staff, he helped create HBX (the school’s digital learning initiative) and then led it.

The book’s ideas have shaped Anand’s thoughts on online education and some of HBX’s decisions. “Several months into the effort, the team found themselves in the rhythm of trying to create a great platform with great content – it was the same trap,” recalls Anand. HBX’s efforts shifted to harnessing the power of social learning, one of the traits that is believed to differentiate the HBX experience from the learner.

“Digital education and other sectors can benefit from the test and experience of media companies, and we would do well to avoid the same mistakes they have learned.”

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