Why The Customer Journey In Banking Will Never Be ‘Digital Only’ (Author: Lisa Joyce, Senior Staff Writer for The Financial Brand)

In an omnichannel world, financial consumers determine what should happen at every touchpoint in the experience. Just because the journey doesn’t start and end digitally doesn’t mean that ‘digital isn’t working.’

Source: https://thefinancialbrand.com/69504/customer-journey-banking-experience/

How consumers research and purchase banking products is complex. More than half start their journey either online or using a mobile device, and most of them end up finishing the process in a branch.

Many banks and credit unions would call that a failure because the online and mobile channels didn’t deliver an entirely digital consumer journey. That’s not entirely true. Banks and credit unions aren’t measuring digital’s impact correctly, according to the ForeSee. They contend that an “all-digital retail delivery experience” is aspirational, but not realistic.

Financial institutions might desperately want people to use digital channels exclusively (even if they aren’t fully capable of delivering such an experience). But consumers are in charge of their own journeys, which is why ForeSee concludes that digital is working even when the journey doesn’t start and end digitally.

For instance, think about how you shop for clothes, or electric toothbrushes, or a new refrigerator. It’s increasingly rare that consumers shop for a product or service using a single channel. Take a refrigerator. If your refrigerator is ready to take its last breath, you go online and start researching different makes and models. You narrow down your search to a few. But a refrigerator is a big-ticket item and you want to touch and feel it before you buy. So, you hop in the car and drive to the nearest big-box store that carries that brand. You open and close the door, check the freezer space, chat with the salesperson. You kick the tires, as the expression goes.

You then sneak off to the lumber section, out of view of salespeople, so you can use your mobile phone to look up pricing for that model at other stores — both brick-and-mortar stores and online retailers. You return home to think about the refrigerator. The next morning while drinking coffee, you use your tablet to order the refrigerator online from the same big box store you visited the day before. You might have been able to get the same refrigerator for a few bucks cheaper, but it was reasonably priced, you trust the big box brand, and they have next-day delivery.

Your path to a new refrigerator was a complex journey involving multiple channels: online research using a desktop computer, a visit to a physical store, mobile price comparisons, and an online purchase. And in all likelihood, you are perfectly okay with that. You don’t think the process is “broken” or that any particular channel “failed” you. Each channel did exactly what it could/should do, and you leveraged each the right way at the right time.

Consumers like charting their own journey depending on their comfort with different channels, and the type of product or service they are buying. The journey for paperclips would look a lot different than, say, a new sailboat. Similarly with services, the journey to plan a family vacation would look markedly different than finding a new accountant or hair stylist. The combination and weight of online reviews vs. word-of-mouth referrals will vary greatly.

Bank and credit union consumers are no different. Their journey is complex and almost always includes multiple touchpoints. Consumers that start their journey digitally don’t necessarily complete their transaction digitally. In fact, according to the ForeSee Experience Index, Overall, nearly two-thirds (61%) of consumers start their journey in a digital channel when opening a new account, while more than half (58%) of those end up in a branch.

Where Financial Consumers Start and End Their Journey

As part of their analysis, ForeSee broke down the customer journey, comparing the starting point and end point between national banks, regional banks and credit unions. Their resulting illustrations are among some the best infographics The Financial Brandhas ever seen — telling a rich, complex story in a simple, visual format.

Consumers May Actually Like It This Way

So why does the consumer journey include multiple touchpoints? Is it because the online or mobile account opening process is so poor that people get frustrated, hop in the car and drive to a branch? Or is it because they just feel more comfortable opening an account face-to-face?

Not long ago, there was much chatter in the banking world about the “omnichannel experience” — that consumers could choose whatever channel they were most comfortable with. But the general assumption was that digital natives (e.g., Millennials) would be thrilled if they could do everything in digital channels. This, of course, is what banking executives were hoping for — that consumers would eventually migrate to digital self-service channels so those costly branch networks could be pared back. Turns out that ultimately it doesn’t really matter what you want them to do. What matters is that they are using multiple touchpoints by choice.

The mistake that banks and credits unions make is thinking that “omni-channel” is predicated on offering a consistent experience in every channel. But consumers will — and indeed many prefer — to bounce around from channel to channel, depending on where they are in the journey. Or time of day. Or even mood. They’ll select the channel that, at that particular time, seems the easiest or most convenient.

In fact, notes Jason Conrad, Vice President of ForeSee’s retail banking business, consumers who stay in one channel are actually less satisfied than those who use multiple channels. Conrad could be more blunt: “Consumers like having multiple channels.”

And according to ForeSee’s data, the particular channels they start or end with doesn’t impact satisfaction.

Measuring Digital’s Impact the Right Way

Banks and credit unions tend to approach the consumer journey as a logical progression from point A to point B, and therefore assume that consumers want to remain in the channel they started in. If a consumer starts opening an account online, financial institutions consider the consumer experience a failure if the consumer then finishes opening the account in a branch. Banks and credit unions work feverishly to figure how they can improve the digital account opening process so that consumers stay online.

Sure, you can (and should!) improve account opening; many consumers would be thrilled to finish opening and account digitally. But others would prefer to start the process online and then visit a branch to seal the deal.

So you shouldn’t measure success based on how many consumers start and end their journey digitally. Those consumers who research an auto or home loan online but who abandon their session before completing an application doesn’t necessarily mean that something is wrong with the digital experience. Digital could very well be doing what digital should be doing: allowing consumers to research products and services before buying… either online or in a branch.

“Measuring online conversions just isn’t as important as banks and credit unions like to think it is,” says Conrad. “Instead, they should measure and quantify digital’s contribution to conversions in other channels.”

When a consumer walks into a branch, you need to ask them about their journey, says Conrad. Did they conduct some research online? Did they look at reviews on their mobile device? Did they talk with friends or family? And what prompted them to come into the branch? Would they have preferred to complete the transaction fully digitally, or were they happy to research first and then come to the branch?

These questions will allow you to better gauge the success of your digital channels. And the answers enable you to determine which products and services consumers want to complete fully digitally vs. those that require face-to-face interaction. You can then focus on improving the digital experience for those products and services, and tailor your brick-and-mortar experience accordingly. If consumers want to complete a mortgage face-to-face with a lender, don’t spend time and money trying to fully automate the process when you could focus on a different product, such as online checking accounts. Using the right benchmarks lets you properly allocate resources to each channel.

Conrad believes that as long as banking providers manage and measure the experience wherever consumers interact with them in a standard and scientific way, the journey will take care of itself no matter how complex it may be.

“The consumer journey can be infinitely complex with an unlimited number of variations,” he says. “Just remember, branches still matter… a lot.”


Is digital an effective mass market medium? – Marketing Week

Source: Is digital an effective mass market medium? – Marketing Week

Digital media are fast becoming dominant in brand marketing but can they deliver long-term effectiveness as well as short-term results, reaching both the masses and targeted audiences?

The amount of data available to marketers using digital channels is immense. But while digital is lauded for its ability to allow brands to reach the right consumer, at the right time, in the right environment, the question remains whether it is an effective medium for mass marketing.

Digital channels are often accused of making marketers think too narrowly in their activity, meaning they sacrifice reach and long-term growth for narrow, short-term metrics.

Brands have become more acutely aware of this trade-off since the publication of Byron Sharp’s book ‘How Brands Grow’, which suggests marketers should replace targeting with “sophisticated mass marketing”.

Last year, Procter & Gamble’s chief brand officer Marc Pritchard confirmed the company was moving away from targeted Facebook advertising after calling its approach too “targeted and narrow”. P&G, however, insisted it was not planning to cut its total investment in Facebook and would continue to use targeted ads for some products, such as selling nappies to expectant parents.

Meanwhile, Mars’s former global CMO Bruce McColl has asserted that he is “not a great believer in targeting”, adding that the company’s target is “about seven billion people [≈ population of the world] sitting on this planet”. Speaking at the Advertising Research Foundation’s conference last year, he said: “Our task is to reach as many people as we can; to get them to notice us and remember us; to nudge them; and, hopefully, get them to buy us once more this year.”

Both statements would indicate that the brands are following Sharp’s recommendation to “continuously reach all buyers of the category” and move away from standard segmentation and targeting if they want to grow their business. It is often not digital that springs to mind when looking to reach people at scale.

READ MORE: Mark Ritson – We should thank Byron Sharp, not attack him

Stay visible

Aviva’s brand communication and marketing director Pete Markey says there is a “sweet spot” of people the insurer wants to reach, but argues that if a business becomes too narrow, it will not be visible to customers.

Instead, he suggests the best segmentation is one the entire business can use that goes beyond targeting to focus on the experience the brand wants to give the audience.

“I see a role for broader segmentation, but I also see a role for smaller, microtargeting. It’s not one at the expense of another,” says Markey. “I’ve seen segmentation that works and doesn’t work. The danger is if it becomes the exclusive property of the marketing team, the rest of the business isn’t that interested. If you can’t use segmentation, it very quickly loses its credibility.”

IPA director of marketing strategy Janet Hull believes the natural progression is towards personalisation, driven by the rise in data generated by digital and social media.

“The insight you get from data you can then expand on, starting with the individual. That approach gives you more nuance, so you can serve creative work that works and improve the quality of advertising online and offline,” she adds.

Brands can use targeted marketing communications to deliver personalisation, which drives increased engagement and conversion rates, according to the IPA’s Social Works Personalisation guide published in March. However, the report acknowledges that strategies designed to increase brand relevance should always be balanced with campaigns that drive reach through mass marketing.

Targeting en masse

When The Economist wanted to increase brand awareness and drive subscriptions, it targeted a group of people labelled the “globally curious”, modelled on its database of existing subscribers. Despite being targeted, this was by no means a niche group, with The Economist estimating the number of globally curious people was close to 73 million.

“If a brand is to solve an awareness challenge, then reach is important, but we don’t conduct reach campaigns just for the sake of it. There will always be a longer-term goal and everything we do has a KPI to it,” explains Mark Beard, senior vice-president of digital media and content strategy at The Economist.

READ MORE: Tricks and tips for maximising digital effectiveness

“We need to make sure everything we do is driving some kind of interaction and [can] help us convert more people to subscribers,” says Beard

This was the approach taken by The Economist for its digital marketing campaign ‘Raising Eyebrows and Subscriptions’. The aim was to provoke the audience by serving them content they couldn’t ignore in order to demonstrate the relevance of The Economist’s journalism. The idea was to give people “their own epiphany” by offering content that compelled them to subscribe.

Part of this strategy involved placing ad units on articles the globally curious target group were already reading, which showed them a hopefully more interesting article authored by The Economist team.

The success of the campaign was highly measurable, generating 5.2 million clicks and 64,000 new subscribers worth £51.7m in lifetime revenue. The campaign, which won a Gold Cannes Lion last year, continues to run and has evolved to include an element of video.

The discussion is moving beyond reach to ‘attentive reach’, which takes into consideration more than just viewability.

Gerald Breatnach, Google

“We don’t really run campaigns in our digital department,” says Beard. “We don’t talk about campaigns, we talk about always-on activities and initiatives. With digital you can be short term, but it is possible to be long term too.”

Mondelez International’s digital and social media manager Pollyanna Ward is an advocate of operating an always-on digital strategy, which feeds into a wider campaign across TV, experiential and outdoor.

“For us in FMCG, we need to reach everyone. There’s no one specific audience. For us, the priority is always going to be reach. So you might have an always-on strategy where you’re planning things for an entire year and you might continuously pump out a brand message on Facebook, Twitter or YouTube.

“You can change that in real time and push out core brand messages at times when it’s relevant, meaning you don’t need to do continuous targeting all year round. Then shorter-term digital strategies are key with the big activations to get people buzzing and when they’re aligned with your PR, experiential and TV you get results a lot quicker.”

New measures of effectiveness

Concerns continue to persist over how effectiveness should be measured in the digital age. Facebook fuelled the fire last year after revealing a number of errors in the way it measures audiences, admitting it overstated for how long users watch videos on its site by up to 80%.

READ MORE: Mark Ritson – Facebook should hang its head in shame for measurement errors

This, in part, led P&G’s Pritchard to launch a searing assessment of the industry’s “murky” supply chain in January, blaming the “antiquated media buying and selling system” for its inability to cope with the technological revolution.

Last month, meanwhile, WPP CEO Sir Martin Sorrell urged Facebook and Google to step up and “take responsibility” for measurement errors and ad fraud, arguing the major digital players are “clearly not doing enough”.

Yet despite these concerns Facebook’s revenues continue to soar, rising 51% in the fourth quarter of 2016 to $8.8bn ≈ cost of 2011 Hurricane Irene

≈ net worth of Steve Jobs, founder of Apple, 2011
≈ Domestic box office gross, 2011
≈ cost of Spanish-American War
≈ Chernobyl costs, USD at the time

” data-evernote-id=”177″>[≈ Construction cost for Gerald R. Ford-class aircraft carrier] (£6.9bn). So as brands appear unlikely to move ad spend away from the platform, it is more important than ever to find new effectiveness metrics.

Dixons Carphone’s commercial marketing director Jonathan Earle suggests one method is to add bespoke codes to track customers who purchase as a result of seeing an advert on Facebook or YouTube.

The discussion is moving beyond reach to ‘attentive reach’, which takes into consideration more than just viewability.

Gerald Breatnach, Google

However, if marketers want to drive sales, he argues there are digital channels that deliver much stronger results than social media.

“If the metric is to get as many people thinking about us as possible, then social has a clear role to play, but if you want to drive sales, that’s where pay-per-click comes in,” he explains.

“If I had £100 to spend on a marketing campaign and my sole aim was to drive sales, I would just use social to drive awareness, consideration and conversation as there are better channels to drive the final sale.”

Earle argues that pay-per-click (PPC) is the most measurable marketing channel, serving content to customers that matches their organic online search terms. The team can then track that traffic from the click-throughs all the way to conversion and order value. The PPC activity takes between seven to 10 days to maximise, says Earle, who advises marketers to be clear upfront about what it is they want to deliver.

At Google and YouTube, the response to measurement issues is to offer free tools like AdWords and brand lift surveys, as well as third-party viewability verification.

“The discussion is moving beyond reach to ‘attentive reach’, which takes into consideration more than just viewability,” explains Google brand planning industry lead Gerald Breatnach.

“We tend to think of this in terms of ‘WAVE’ – measuring watch time, audibility, viewability and engagement. Marketers not only need to know how many views a campaign has generated, but the unique reach of the campaign and the average watch time. Ultimately, these campaign metrics need to link to sales results,” he says.

Defining success

Understanding that success looks different on each channel is crucial to accurately measuring effectiveness and in the digital landscape there is no one-size-fits-all approach.

“If I wanted to make an impact with the younger generation,  I would be looking to see how effective Snapchat is at delivering impressions, but when it comes to different channels I would be looking at the view-through rate to see if we have made an impact,” Ward explains.

“If the view-through rate shows they only watched 10 seconds of our 30-second ad, then did we land our product message in that time? Or have they watched a pretty piece of creative, but we’ve done nothing for brand linkage and brand awareness?”

Reach is important, but on its own it isn’t good enough.

Mark Beard, The Economist

Google’s Breatnach agrees it is a mistake to think all digital channels work in the same way or only equate to “tightly targeted” performance marketing.“Online video advertising on YouTube, for example, has the potential to offer attentive reach and deliver long-term brand results,” he explains.

“Search is naturally targeted to audiences further down the purchase funnel. Programmatic has the potential to deliver both mass reach and sophisticated targeting.”

Peugeot’s marketing director Mark Pickles appreciates that to measure digital effectiveness you need absolute clarity about what you want to achieve.

“For a new product, the primary focus is likely to be on reaching mass awareness within the identified customer segments. Whereas with an established product, often the place for digital is to convert existing awareness into some form of action – what I call a ‘nudge’ – which pushes the consumer a little closer to us,” he says.

“Clearly, the metrics for these two campaigns will be different and so will the media optimisation rules. Setting a campaign that is optimised to generate hard sales leads is likely to fail when it comes to reaching enough eyeballs, particularly as our programmatic algorithms quickly seek out targeted prospects.”

The Peugeot marketing team generally sets several secondary objectives and a primary objective, which Pickles emphasises it is important to be realistic about.

He says: “If I was to set the primary objective of a campaign action as ‘how many sales can I directly attribute?’, I’m likely to under-value the secondary deliverables. A campaign might sell a few cars, but generate sufficient awareness and action that translates to results outside the campaign metrics.”

Hull argues that it is fundamental for marketers to understand the difference between what they are doing for the long term and their brand activation objectives.

“You also need to make sure you’re getting the right investment for the KPIs that you’re setting, because there’s no point setting KPIs and then not putting the right amount of money behind them,” she explains.

“Some of the clients have been saying that they have been under spending relative to the promise they have made on what they’re going to deliver. We also need to get the languages to match up. New media brings a new vocabulary and new forms of measurement, but you have got to know how they relate to the other forms of measurement.

Holding your nerve

Armed with the ability to optimise 24 hours a day, seven days a week marketers now have the opportunity to tweak campaigns in real time.

Aviva uses econometrics and attribution to measure effectiveness, combined with its brand impact index, which investigates brand health. Markey argues that marketers cannot afford to ignore the opportunity to optimise.

“The idea that as a marketer you can be asleep at the wheel is so wrong. To push a campaign out and hope it works or do campaign evaluation at the end would be insane, lazy, suicidal,” he says.

“For me, when you start any activity you need to know how you’re going to measure it throughout and consistently go back, using neuroscience to refine activity.”

However, when exploring real-time optimisation marketers must resist the temptation to make knee-jerk decisions, which take them away from their original KPIs.

“When you’re spending money on a campaign that’s aimed at trading and selling, and you say ‘I want to sell 20 of this thing and I only sold three’, you can pull that money and put it somewhere else,” says Markey.

“When you’re trying something new, it’s much harder and you have to hold your nerve. You need the levers, but you need to know when to pull them. There are many examples of campaigns that are a slow burn. There is an expectation that when the new campaign has launched, sales will double tomorrow, and we all know that’s rarely the case.”

It is not what you track, but what you choose not to track that’s important.

Mark Beard, The Economist

The Economist’s Mark Beard agrees that it is very easy for marketers to fall into the trap of tracking everything on a digital campaign just because they can.

“It is not what you track, but what you choose not to track that’s important. We track two things predominantly – the number of prospects we’re bringing in and how many subscribers we’re generating as a result of those prospects,” he says.

“There are many other KPIs we could have reviewed as the campaign went along but the danger these days where much of marketing is done via machines, is if you give the machine the wrong KPIs to optimise you won’t get the results you want.”

This is where human input plays a vital role, says Beard, ensuring the right KPI is chosen at the outset and setting up the artificial intelligence to operate at its optimum.

In a world where optimisation can happen at the touch of button, it is more crucial than ever for marketers to set out with a clear appreciation of their KPIs and then design their digital activity to deliver as part of a holistic strategy.

Case study: Effectiveness on a shoestring

The objective: Australian swimming pool company Narellan Pools teamed up with agency Affinity on a targeted, data-driven digital campaign to increase its share of the crowded Australian market.

The research: The cross-referenced five years’ worth of first-party data, including sales, site analytics, leads and conversion rates, with five years’ of third-party data spanning the weather and consumer confidence. The research found sales spiked when there were two consecutive days with higher than average temperatures.

The campaign: Looking at the weather across 49 regions in Australia, the team fed real-time temperature data into the programmatic platform. When the right conditions were met, it activated the campaign across search, pre-roll video, banner and social, targeting people who had already shown an interest in buying a swimming pool.

The result: As Narellan Pools only advertised when the specific temperature conditions were met, the company was able to reduce its media spend by more than 30%. The campaign drove a 23% increase in sales and generated an incremental return of investment of $54 (£34) for every $1 (62p) spent. The campaign also went on to win the 2016 IPA Effectiveness Award special prize for best small budget campaign.

Martec’s Law: the greatest management challenge of the 21st century – Chief Marketing Technologist – marketingIO

The majority of marketers (72%) feel that the marketing technology landscape is changing either “rapidly” or at “light speed” — which is evident from the explosive growth we’ve seen in that landscape graphic over the past 5 years.In contrast, the majority of marketers (67%) say that their company’s own use of marketing technology is evolving only “slightly” or “steadily” — or “not at all.”

This is Martec’s Law: technology is changing faster than organizations.And while you might predict that the marketing technology landscape is bound to settle down soon, keep in mind that we’re now on the cusp on an explosion of new innovations in virtual reality, augmented reality, the Internet of Things, conversational interfaces, robotics, artificial intelligence, and so on. The next three years are likely to see more technological change than the last three. (Sorry.)

Source: chiefmartec.comWith apologizes to Moore’s Law. Curated for you by marketingIO: One Source for All Marketing Technology Challenges.

Source: Martec’s Law: the greatest management challenge of the 21st century – Chief Marketing Technologist – marketingIO

How newspapers can convince advertisers to return to print | Marketing Week

Can print reverse a long-term decline in ad revenues or have marketers moved on?

Source: How newspapers can convince advertisers to return to print | Marketing Week


Perhaps you could blame the dozens of devices consumers now carry in their pockets. Or maybe paper is just too outdated for the delicate hands of a millennial. One thing Is forcertain: marketers are not getting as excited by newspapers as they used to.

Last year, print ad spend fell 11% to £1.22bn for the UK’s national newspaper industry,according to the latest expenditure report by Ad Association/WARC. A sharp contrast to the 2.5% growth the nationals secured from digital ad revenues and internet ad spend’s 17.3% rise to £8.6bn.

The UK’s most prolific print advertiser in 2015 was BSkyB, which invested £47.7m, according to Nielsen. However, this was a 15.9% fall compared with 2014 and a 22.4% slump from the £61.5m it pumped into print advertising in 2013.

Sky is not the only major brand moving away from print. Since 2008, the country’s biggest supermarket Tesco has gone from highs of £61.6m (in 2010) to investing just £25.1m in printadvertising last year. And traditionally newspaper-heavy sectors such as cars and B2B – with the latter often relying on recruitment ads – also both appear to be abandoning ship.

For the period 1 July 2015 to 30 June 2016, automotive brands dropped their ad spend in UK newspapers by 24.2% year-on-year to £104.8m, with only government and politics (-32.2%), office equipment and stationery (-35.7%) and business and industrial (-31%) recording steeper falls.

In fact, at the halfway point of 2016, the UK’s top 10 print advertisers had invested just £127.2m in the channel. And while Brexit was good news for newspapers in terms of readership numbers, it has raised concerns over marketers’ spending habits. Subsequently, it would probably take a minor miracle for newspaper ad revenues to match the £457.9m highs seen back in 2010.

“We’re in a hugely volatile moment and it has felt at times like print is just about hanging on,” admits Richard Furness, director of publishing at The Guardian. “But things are moving to a good place and I wouldn’t be in this job if I didn’t see a long-term future.”

Read more: Keeping marketers tuned into radio

Confidence in print

Furness’s encouragement is partly because the decline in ad revenues for national newspapers is projected to almost halve (to a 5.9% decline) in 2016 and  slow even further to only a 3.4% decline by 2017, according to Ad Association/WARC.

The Guardian now has, on average, 160,000 readers during the week, 300,000 for its Saturday edition and 200,000 for its Sunday edition. Up to 1.5 million people ≈ population of Mogadishu, capital city of Somalia

≈ population of San Antonio, Texas, US
≈ population of Auckland, New Zealand
≈ population of Almaty, Kazakhstan
≈ population of Swaziland, nation
≈ population of Novosibirsk, Russia
≈ population of Pretoria, capital city of South Africa
≈ population of Lusaka, capital city of Zambia
≈ population of San Jose, capital city of Costa Rica
≈ population of Mosul, Iraq
≈ population of Kharkiv, Ukraine
≈ population of Lyon, France
≈ population of Marseille-Aix-En-Provence, France
≈ population of Tabriz, Iran
≈ population of Phoenix, Arizona, US
≈ population of Davao, Philippines
≈ population of Mecca, Saudi Arabia
≈ population of Mbuji-Mayi, Democratic Republic of the Congo
≈ population of Cordoba, Argentina
≈ population of Kuala Lumpur, capital city of Malaysia
≈ population of Daejon, South Korea
≈ population of Phnom Penh, capital city of Cambodia
≈ population of Kaduna, Nigeria
≈ population of Karaj, Iran
≈ population of San Salvador, capital city of El Salvador
≈ population of Kampala, capital city of Uganda
≈ population of Philadelphia, Pennsylvania, US
≈ population of West Yorkshire, United Kingdom
≈ population of Lubumbashi, Democratic Republic of the Congo
≈ population of Bursa, Turkey
≈ population of Santa Cruz, Bolivia
≈ population of Maputo, capital city of Mozambique
≈ population of Lome, capital city of Togo
≈ population of Perth, Australia
≈ population of Harare, capital city of Zimbabwe
≈ population of Gabon, nation
≈ population of Bamako, capital city of Mali
≈ population of Guinea-Bissau, nation
≈ population of Tijuana, Mexico
≈ population of Montevideo, capital city of Uruguay
≈ population of Khulna, Bangladesh
≈ population of La Paz, capital city of Bolivia
≈ population of Turin, Italy

“>[≈ population of Conakry, capital city of Guinea], meanwhile, still “actively consider” buying The Guardian on the weekend.

“These are the numbers I am confident about,” he says. “All of our research shows that this core audience is turning to print for a long-term escape away from the never-ending madness of digital and 140 characters. People are returning to print much like the vinyl effect – they know we can provide something more authentic and well-rounded when it comes to big news such as Bowie passing or Brexit – and brands are waking up to that reality too.”

The Guardian is confident its current circulation can be profitable while Archant’s The New European is pushing a new pop-up model

Chris Duncan, chief customer officer at News UK, is very much in agreement with his rival. “A news story on Facebook typically peaks at around 60,000 readers,” he adds. “But 4.5 million people ≈ population of Lebanon, nation

≈ population of Rangoon, capital city of Burma
≈ population of New Zealand, nation
≈ population of Guadalajara, Mexico
≈ population of Republic of the Congo, nation
≈ population of Alexandria, Egypt
≈ population of Sydney, Australia
≈ population of Luanda, capital city of Angola
≈ population of Georgia, nation
≈ population of Saint Petersburg, Russia
≈ population of Costa Rica, nation
≈ population of Norway, nation
≈ population of Ireland, nation
≈ population of Riyadh, capital city of Saudi Arabia
≈ population of Chittagong, Bangladesh

“>[≈ population of Croatia, nation] picked up The Sun to read about Theresa May becoming the new Prime Minister so you would be a fool to write us off just yet.”

Duncan could have a point, with recent figures from the Audit Bureau of Circulation, the independent body that verifies newspaper sales data, showing a much-needed surge.

The Times posted a 15% rise in print sales in June – boosted by the EU referendum result – compared with the same period last year. The Guardian, meanwhile, increased its average daily sales by 3.6% in June compared with May, while the FT improved its average daily sales by 0.49% over the same period.

At the other end of the market, The Sun was up 2.6% month-on-month, with The Daily Mirror the only daily national title to post a decline as its sales dropped 1.02% in June compared with May. “When there’s a big story, people are still turning to a newspaper for the definitive coverage,” explains Duncan.

“Digital delirium” hitting newspapers

Rufus Olins, CEO at Newsworks, says marketers are suffering from what Marketing Week’s columnist Mark Ritson has described as “digital delirium”. Subsequently, he claims marketers are returning to print in big numbers.

A recent study by Newsworks claimed that adding print newspapers to a multichannel marketing campaign can boost return on investment threefold. According to the study, which was conducted by Benchmarketing and looked into 500 econometric marketing models built over the past five years, newspapers make TV campaigns twice as effective and online display four times more effective.

“There is growing evidence that the pendulum has swung too far,” adds Olins.“There is an increasing amount of scepticism – at both client and agency level – about the investments that they have made and a recognition they are not delivering ROI. This island has a richer newspaper habit than just about anywhere else in the world, with 47 million people ≈ population of Kenya, nation

≈ population of Ukraine, nation
≈ population of Colombia, nation
≈ population of Tanzania, nation
≈ population of South Africa, nation
≈ population of South Korea, nation

“>[≈ population of Spain, nation] reading them in one form or another.

“You’re going to see the ad revenue decline stabilise over the coming years and brands start to realise how powerful newspapers can still be.”

Rufus Olins, CEO, Newsworks

In particular, Olins singles out Lidl as one of the brands that has benefitted most from backing print over recent years and one that can create a “ripple effect”.

Newspapers have certainly played a major role in the German discounter’s journey huge increases in market share over the past few years, admits Lidl’s head of media Sam Gaunt. “Print media allows us to reach large groups of shoppers at key points in time, with formats that deliver standout and which communicate our messages effectively,” he says. “It also allows us to be culturally relevant to what’s going on in our customers’ lives, nationally and regionally, across the year.”

Print can also, at times, provide more value and less distractions than digital. Gaunt explains: “Digital advertising has unique strengths and is an important part of our media mix but these strengths can come at a premium and it needs to be used judiciously. Digital needs to be interrogated just like any other medium and, for certain communications tasks, print still holds it’s own: for communicating a simple message to a broad, mass audience print can reach a lot of people with effective formats at comparatively low cost.

He clarifies: “People may spend more time with other media but time spent with print is quality time, where people are less likely to be distracted, and that offers powerful communication opportunities.”

Experimenting with new models

One of the main ways newspapers are winning back advertisers is by experimenting with new ad formats.

At The Guardian, Furness says its new ‘barndoor format’ – essentially a gatefold on the front page – has created a real buzz and has already been adopted by brands such as Heineken, which have been vocal about prioritising digital ad spend over traditional in recent years.

At News UK, meanwhile, Duncan recently debuted a bluntly titled new format for The Sun and The Times. “We recently debuted the biggest fucking print ad ever, a format that allows you to expand the format of The Sun to be a six-sheet poster. It will be huge for us and allows brands to be incredibly impactful around huge events like Andy Murray winning Wimbledon.”

One of the formats the print edition of The Sun offers to advertisers

Newspapers are also taking some queues from digital – taking on risk by launching new products that are allowed to fail fast. In the case of Trinity Mirror’s The New Day and CN Group’s “newspaper for the north” 24 the bets did not pay off and the new publications were closed down.

But Archant’s The New European, a new national newspaper for the 48% of Britons who voted to remain in the EU, has just had its planned 4-week print run extended and

Archant has just pledged to continue printing The New European, after the pop-up paper “exceeded” sales targets and Will Hattam, chief marketing officer at Archant, says the new model can “revolutionise” the newspaper business.

“We see it as an opportunity to launch a publication that exists for a set period of time where there’s an extraordinary mood in the country and a real interest in the topic that crosses political lines. If you can exist while that mood exists, you have a hugely tuned in audience that will also be more tuned into brand messages.”

The bridge between paid and digital

In March, Waitrose raised a few eyebrows when it said print remained its “most effective” advertising channel.

However, four months on and it isn’t changing its stance. Waitrose’ ad manager Joanna Massey explains: “We do generally see a good NPROI for print advertising, which is why we continue to advertise in this medium.

“There is a role for print titles in this digital age but we like to think of news brands as a whole entity rather than just print when planning media, as readers access news brands in a number of different formats and on different devices.”

Each campaign is different and the effectiveness of a channel very much depends on the type of campaign (brand building or direct response), the individual campaign objectives, level of spend, a number of other variables and also how one defines and measures effectiveness.

But for brands such as Waitrose to continue backing print, Alex Steer, head of technology, effectiveness and data at media agency Maxus, believes newspapers must become better at selling themselves.

At a recent Newsworks event, he urged delegates: “If you look at the big digital brands like Facebook, they are all investing millions in econometrics to prove their marketing effectiveness.”

“The newspaper industry now needs to make an equal commitment to telling advertisers why it’s still one of their most important channels.”

Alex Steer, head of technology, effectiveness and data, Maxus

Since January 2016, research firm Lumen has used laptop-mounted eye tracking camerason 300 consumers’ laptops to collect visual data on what they notice when they are online. And over this period the study, which was run in partnership with Nectar-owner Aimia, recorded 30,000 minutes of data, with evidence relating to around 15,000 digital ads.

It found that only 44% of digital display ads received any views at all. And, of those, only 9% of ads received more than a second’s worth of attention. Only 4% of ads, meanwhile, received more than two seconds of engagement.

In comparison, almost half (40%) of press ads were viewed for more than one second and aquarter of print were viewed for more than two seconds, nearly six times the rate of digital.

But even if the Lumen study proves consumers are still interested in print ads, The Guardian’s Furness says print brands must not get carried away. Digital advertising remains the UK’s single biggest advertising channel and is set to grow beyond £10bn by 2020, according to the IAB, and Furness says print must facilitate this shift.

He concludes: “Print newspapers are a bridge to our future. If in a couple of years that bridge has stronger foundations, then that’s job done but print is no longer the winning destination and never will be again. Where we have got it wrong as an industry in the past is we’ve continued competing with digital. We now have to accept that while print can still be healthy, it must work as a bridge to very different future.”

Brand viewpoint

Andrew Mortimer, director of media, Sky

While Sky has grown advertising spend in online media, it certainly doesn’t signal the death of traditional media like television, outdoor and print. In fact, advances in data and technology have significantly enhanced the opportunities available in traditional media, as well as giving us a better understanding of true effectiveness of online advertising.

The data-led approach that has driven the success of Sky’s enhanced TV targeting on Sky AdSmart is being increasingly replicated by the news brands, particularly those with access to good customer data.  We are having an increasing number of conversations with publishers who can bring together editorial expertise, creativity, access to talent and an opportunity to personalise communication with our different consumer segments.


For the marketing team at Sky, there is no doubt that print remains a valuable advertising channel. To kick-off our recent campaign for Sky Cinema, we partnered with The Sun’s new film magazine launch Popcorn. We created an integrated editorial section called ‘Microwave Popcorn’ with features on upcoming movies, front cover branding, ads in the magazine and a takeover of The Sun Online’s dedicated film channel, all working together to communicate the benefits of Sky Cinema as the market-leading movie subscription service.

The contextual environment that print offers means that tactical advertising can deliver huge impact. To celebrate Team Sky winning the Tour de France for the fourth time, adverts this week appeared in relevant content in both print and iPad editions across a number of news brands. Magazines played a core part in the recent launch of Sky Q, allowing us to reach tech opinion formers with a range of messages to demonstrate the superiority of the new Sky Q service.

Print advertising remains a key channel to drive both long-term brand metrics and short-term sales effectiveness, consistently delivering a positive return on the significant investment Sky makes.

2016: Digital — which includes mobile — is neck-and-neck with TV ad spend in the US – eMarketer

Source: Ad Agency Clients Are Most Interested in Advertising on TV – eMarketer

Roughly half of US ad agency professionals said their clients are most interested in advertising on spot TV or spot cable—more than any other medium including digital, mobile, streaming video and radio, April 2016 research revealed.

Media on Which Their Clients Are Most Interested in Advertising According to US Ad Agency Professionals, April 2016 (% of respondents)

Media buying and selling software provider Strata surveyed 84 US ad agency professionals who were at the media director level or higher at agencies of varying sizes. When it came down to the advertising media their clients were most interested in, TV was the top choice.

Digital was second. Indeed, 31% of US ad agency professionals said their clients were most interested in advertising on that medium. Few respondents said their clients were most interested in advertising on mobile.

US Total Media Ad Spending, by Media, 2016 & 2020 (billions)

eMarketer estimates that digital—which includes mobile—is neck-and-neck with TV ad spend in the US. eMarketer expects outlays on digital ads will hit $68.82 billion  in 2016, while TV spending will total $70.60 billion.

Nevertheless, no other medium can challenge TV’s dominance of the US advertising market. According to eMarketer, spending on every other medium combined, which includes print, radio and out-of-home, doesn’t come close.

– See more at: http://www.emarketer.com/Article/Ad-Agency-Clients-Most-Interested-Advertising-on-TV/1014270?ecid=NL1002#sthash.IQZrlkF4.dpuf

Executive Master in Digital Marketing and Communication – Join us on June 7

Following the success of last year’s programme (37 participants), Solvay has reworked its programme to refine it and presents its new one:

Executive Master in Digital Marketing and Communication

Screenshot 2016-05-30 11.33.00.png

Interested? Want to learn more?


Download the brochure


Contact the coordinator: Thierry Antoine ( tantoine@ulb.ac.be or 02/650.41.45).


Register at the information session on June 7, 2016 from 18:30, in the premises of Solvay Brussels School (42 avenue Franklin Roosevelt, 1050 Brussels (Atrium on the ground floor). This completely free evening, which includes a walking diner, will let you ask the organisers all your questions.

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An incumbent’s guide to digital disruption | McKinsey & Company

Source: An incumbent’s guide to digital disruption | McKinsey & Company

Incumbents needn’t be victims of disruption if they recognize the crucial thresholds in their life cycle, and act in time.

A decade ago, Norwegian media group Schibsted made a courageous decision: to offer classifieds—the main revenue source of its newspaper businesses—online for free. The company had already made significant Internet investments but realized that to establish a pan-European digital stronghold it had to raise the stakes. During a presentation to a prospective French partner, Schibsted executives pointed out that existing European classifieds sites had limited traffic. “The market is up for grabs,” they said, “and we intend to get it.”1Today, more than 80 percent of their earnings come from online classifieds.2

Navigating digital disruption

Our framework for understanding the life cycle of industry disruption.
About that same time, the boards of other leading newspapers were also weighing the prospect of a digital future. No doubt, like Schibsted, they even developed and debated hypothetical scenarios in which Internet start-ups siphoned off the lucrative print classified ads the industry called its “rivers of gold.” Maybe these scenarios appeared insufficiently alarming—or maybe they were too dangerous to even entertain. But very few newspapers followed Schibsted’s path.

From the vantage point of 2016, when print media lie shattered by a tsunami of digital disruption, it’s easy to talk about who made the “right” decision and who the “wrong.” Things are far murkier when one is actually in the midst of disruption’s uncertain, oft-hyped early stages. In the 1980s, steel giants famously underestimated the potential of mini-mills. In the1980s and 1990s, the personal computer put a stop to Digital Equipment Corporation, Wang Laboratories, and other minicomputer makers. More recently, web retailers have disrupted physical ones, and Airbnb and Uber Technologies have disrupted lodging and car travel, respectively. The examples run the gamut from database software to boxed beef.

What they have in common is how often incumbents find themselves on the wrong side of a big trend. No matter how strong their ingoing balance sheets and market share—and sometimes because of those very factors—incumbents can’t seem to hold back the tide. The champions of disruption are far more often the attackers than the established incumbent. The good news for incumbents is that many industries are still in the early days of digital disruption. Print media, travel, and lodging provide valuable illustrations of the path increasingly more will follow. For most, it’s early enough to respond. (For a quick guide to assessing your organization’s position in the digital disruption journey, see “Digital disruption: A discussion guide for incumbents.” [PDF-7.6MB])

What’s the secret of those incumbents that do survive—and sometimes even thrive? One aspect surely relates to the ability to recognize and overcome the typical pattern of response (or lack thereof) that characterizes companies in the incumbent’s position. This most often requires acuity of foresight3and a willingness to respond boldly before it’s too late, which usually means acting before it is obvious you have to do so. As Reed Hastings, the CEO of Netflix, pointed out (right as his company was making the leap from DVDs to streaming), most successful organizations fail to look for new things their customers want because they’re afraid to hurt their core businesses. Clayton Christensen called this phenomenon the innovator’s dilemma. Hastings simply said, “Companies rarely die from moving too fast, and they frequently die from moving too slowly.”4

We are all great strategists in hindsight. The question is what to do when you are in the middle of it all, under the real-world constraints and pressures of running a large, modern company. This article looks at thefour stages of disruption from an incumbent’s perspective, the barriers to overcome, and the choices and responses needed at each stage.

Where you are and what you need

It may help to view these stages on an S-curve (exhibit). At first, young companies struggle with uncertainty but are agile and willing to experiment. At this time, companies prize learning and optionality and work toward creating value based on the expectation of future earnings. The new model then needs to reach some critical mass to become a going concern. As they mature—that is, become incumbents—mind-sets and realities change. The established companies lock in routines and processes. They iron out and standardize variability amid growing organizational complexity. In the quest for efficiency, they weed out strategic options and reward executives for steady results. The measure of success is now delivery of consistent, growing cash flows in the here and now. The option-rich expectancy of future gain is replaced by the treadmill of continually escalating performance expectations.

In a disruption, the company heading toward the top of the old S-curve confronts a new business model at the bottom of a new S-curve. The circle of creative destruction is renewed, but this time the shoe is on the other foot. Two primary challenges emerge. The first is to recognize the new S-curve, which starts with a small slope, and often-unimpressive profitability, and at first does not demand attention. After all, most companies have shown they are very good at dealing with obvious emergencies, rapidly corralling resources and acting decisively. But they struggle to deal with the slow, quiet rise of an uncertain threat that does not announce itself. Second, the same factors that help companies operate strongly toward the top of an S-curve often hinder them at the bottom of a new one. Because different modes of operation are required, it’s hard to do the right thing—even when you think you know what the right thing might be.

This simplified model, of a new S-curve crashing slow motion into an old one, gives us a way to look at the problem from the incumbent’s perspective, and to appreciate the actual challenges each moment presents along the way. In the first stage, the new S-curve is not yet a curve at all. In the second, the new business model gets validated, but its impact is not forceful enough to fundamentally bend the performance trajectory of the incumbent. In the third stage, however, the new model gains a critical mass and its impact is clearly felt. In the fourth, the new model becomes the new normal as it reaches its own maturity.

Let’s step through these stages in sequence and see what is going on.

Stage one: Signals amidst the noise

In the late 1990s, PolyGram was one of the world’s top record labels, with a roster boasting Bob Marley, U2, and top classical artists. But, in 1998, Cornelis Boonstra, CEO of PolyGram’s Dutch parent, Koninklijke Philips, flew to New York, met with Goldman Sachs, and arranged to sell PolyGram to Seagram for $10.6 billion ≈ cost of 1989 Hurricane Hugo

≈ cost of 2004 Hurricane Frances

“>[≈ MIT university endowment in 2011]. Why? Because Boonstra had come across research showing that consumers were using the new recordable CD-ROM technology (which Philips coinvented) largely for one purpose: to copy music. In hindsight, this is a good example of how, in the early stages of disruption, demand begins to “purify” and lose the distortions imposed on it by businesses.5

The MP3 format had barely been invented, Napster was a mere gleam in Sean Parker’s eye, and PolyGram was riding at the top of its S-curve—but Boonstra detected the first signs of transformational change and decided to act swiftly and decisively. Within a decade, compact-disc and DVD sales in the United States dropped by more than 80 percent. Similarly, Telecom New Zealand foresaw the deteriorating economics of its Yellow Pages business and sold its directories business in 2007 for $2.2 billion ≈ Cost to buy the world a coke

≈ total US basketball salaries, 2011
≈ cost of US-Mexican War

“>[≈ Average total annual tax break to the five biggest oil companies] (a nine-time revenue multiple)6while numerous other telecom companies held on until the businesses were nearly worthless.7

The newspaper industry had no shortage of similar signals. As early as 1964, media theorist Marshall McLuhan observed that the industry’s reliance on classified ads and stock-market quotes made it vulnerable: “Should an alternative source of easy access to such diverse daily information be found, the press will fold.” The rise of the Internet created just such a source, and start-ups such as eBay opened a new way for people to list goods for sale without the use of newspaper ads. Schibsted was one of the earliest media companies to both anticipate the threat and act on the opportunity. As early as 1999, the company became convinced that “The Internet is made for classifieds, and classifieds are made for the Internet.”8

It’s not surprising that most others publishers didn’t react. At this early stage of disruption, incumbents feel barely any impact on their core businesses except in the distant periphery. In short, they don’t “need” to act. It takes rare acuity to make a preemptive move, likely in the face of conflicting demands from stakeholders. What’s more, it can be difficult to work out which trends to ignore and which to react to.

Gaining sharper insight, and escaping the myopia of this first stage, requires incumbents to challenge their own “story” and to disrupt long-standing (and sometimes implicit) beliefs about how to make money in a given industry. As our colleagues put it in a recent article, “These governing beliefs reflect widely shared notions about customer preferences, the role of technology, regulation, cost drivers, and the basis of competition and differentiation. They are often considered inviolable—until someone comes along to violate them.”9

The process of reframing these governing beliefs involves identifying an industry’s foremost notion about value creation and then turning it on its head to find new forms and mechanisms for creating value.

Stage two: Change takes hold

The trend is now clear. The core technological and economic drivers have been validated. At this point, it’s essential for established companies to commit to nurturing new initiatives so that they can establish footholds in the new sphere. More important, they need to ensure that new ventures have autonomy from the core business, even if the goals of the two operations conflict. The idea is to act before one has to.

But with disruption’s impact still not big enough to dampen earnings momentum, motivation is often missing. Even as online classifieds for cars and real estate began to take off and Craigslist gained momentum, most newspaper publishers lacked a sense of urgency because their own market share remained largely unaffected. And it’s not like the new players were making millions (yet). There was no performance envy.

But Schibsted did find the necessary motivation. “When the dot-com bubble burst, we continued to invest, in spite of the fact that we didn’t know how we were going to make money online,” recalls then-CEO Kjell Aamot. “We also allowed the new products to compete with the old products.”10Offering free online classifieds directly cannibalized its newspaper business, but Schibsted was willing to take the risk. The company didn’t just act; it acted radically.

Now, let’s openly acknowledge how hard it is for a company’s leaders to commit to supporting experimental ventures when the business is climbing the S-curve. When Netflix disrupted itself in 2011 by shifting focus from DVDs to streaming, its share price dropped by 80 percent. Few boards and investors can handle that kind of pain when the near-term need is debatable. The vague longer-term threat just doesn’t seem as dangerous as the immediate hardship. After all, incumbents have existing revenue streams to protect—start-ups only have upside to capture. Additionally, management teams are more comfortable developing strategies for businesses they know how to operate, and are naturally reluctant to enter a new game with rules they don’t understand.

The upshot: most incumbents dabble, making small investments that won’t flatten their current S-curve and guard against cannibalization. Usually, they focus too heavily on finding synergies (always looking for efficiency) rather than fostering radical experimentation. The illusion that this dabbling is getting you into the game is all too tempting to believe. Many newspapers built online add-ons to their classified businesses, but few were willing to risk cannibalizing the traditional revenue streams, which at this point were still far bigger and more profitable. And remember, at this time, Schibsted had not yet been rewarded for its early action: its results looked pretty similar to its peers.

In time, of course, bolder action becomes necessary, and executives must commit to nurturing potentially dilutive and small next-horizon businesses in a pipeline of initiatives. Managing such a portfolio requires high tolerance for ambiguity, and it requires executives to adapt to shifting conditions, both inside and outside the company, even as the aspiration to deliver favorable outcomes for shareholders remains constant.11The difficulty is the tendency to protect the core at the expense of the periphery. Not only are there strong, short-term financial incentives to protect the core, but it’s also often painful to shift focus from core businesses in which one has, understandably enough, an emotional as well as a financial investment.

No small part of the challenge is to accept that the previous status quo is no longer the baseline. Grocery retailer Aldi has disrupted numerous incumbents globally with its low-price model. Aldi’s future success was visible while Aldi was still nascent in the market. Yet many incumbent supermarkets chose to avoid the near-term pain of sharpening entry price points and improving their private-label brands. In hindsight, those moves would have been highly net-present-value positive with respect to avoided loss—as Aldi has continued its strong growth across three continents.

Stage three: The inevitable transformation

By now, the future is pounding on the door. The new model has proved superior to the old, at least for some critical mass of adopters, and the industry is in motion toward it. At this stage of disruption, to accelerate its own transformation, the incumbent’s challenge lies in aggressively shifting resources to the new self-competing ventures it nurtured in stage two. Think of it as treating new businesses like venture-capital investments that only pay off if they scale rapidly, while the old ones are subject to a private-equity-style workout.

Making this tough shift requires surmounting the inertia that can afflict companies even in the best of times.12In fact, our experience suggests stage three is the hardest one for incumbents to navigate. As company performance starts to suffer, tightening up budgets, established companies naturally tend to cut back even further on peripheral activities while focusing on the core. The top decision makers, who usually come from the biggest business centers, resist having their still-profitable (though more sluggishly growing) domains starved of resources in favor of unproven upstarts. As a result, leadership often under invests in new initiatives, even as it imposes high performance hurdles on them. Legacy businesses continue to receive the lion’s share of resources instead. By this time, the very forces causing pressure in the core make the business even less willing and able to address those forces. The reflex to conserve resources kicks in just when you most need to aggressively reallocate and invest.

Boards play a significant role in this as well. Far too often, boards are unwilling (or unable) to change their view of baseline performance, further exacerbating the problem. Often a board’s (understandable) reaction to reduced performance is to push management even harder to achieve ambitious goals within the current model, ignoring the need for a more fundamental change. This only worsens problems in the future.

Further complicating matters, incumbents with initially strong positions can take false comfort at this stage, because the weaker players in the industry get hit hardest first. The narrative “it is not happening to us” is all too tempting to believe. The key is to monitor closely the underlying drivers, not just the hindsight of financial outcomes. As the tale goes, “I don’t have to outrun the bear . . . I just have to outrun you.” Except when it comes to disruption, that strategy merely buys time. If the bear keeps running, it will get to you, too.

The typical traditional newspaper operator, likewise, wasn’t blind to a shift taking place, but it rarely managed to mount a response that was sufficiently aggressive. One notable exception was former digital laggard Axel Springer. The German media company was “a mere Internet midget,” according to Financial Times Deutschland, until it leapt into action in 2005. It went on a shopping spree, acquiring 67 digital properties andlaunching 90 initiatives of its own by 2013.13Like Schibsted, it saw the value pools moving to online classifieds and made the leap. The lesson is that incumbents can win even with a late start, provided that they throw themselves in wholly. Today, digital media contributes 70 percent of AxelSpringer’s earnings before interest, taxes, depreciation, and amortization. The core has become the periphery.

To generate the acceleration needed at this stage of the game, incumbents must embark on a courageous and unremitting reallocation of resources from the old to the new model—and show a willingness to run new businesses differently (and often separately) from the old ones. Perhaps nothing underlines this point more than Axel Springer’s 2013 divestment of some of its strongest legacy print-media products, which accounted for about 15 percent of its sales, to Germany’s number-three print-media player, Funke Mediengruppe. These products, such as the Berliner Morgenpost, owned by Axel Springer since 1959, were previously a core part of the corporate DNA and emblems of its journalistic culture. But no more. They realized that the future value of the business was not just about the continuation of today’s earnings but rather relied on the creation of a new economic engine.

When incumbents lack the in-house capability to build new businesses, they must look to acquire them instead. Here the challenge is to time acquisitions somewhere between where the business model is proved but valuations have yet to become too high—all while making sure the incumbent is a “natural best owner” of the new businesses it acquires. Examples of this approach in the financial sector include BBVA’s acquisition of Simple and Capital One’s acquisition of the design firm Adaptive Path.


Stage four: Adapting to the new normal

In this late stage, the disruption has reached a point when companies have no choice but to accept reality: the industry has fundamentally changed. For incumbents, their cost base isn’t in line with the new (likely much shallower) profit pools, their earnings are caving in, and they find themselves poorly positioned to take a strong market position.

This is where print media is now. The classifieds’ “rivers of gold” have dried up, making survival the first priority, and sustainability and growth the second. In 2013, the CEO of Australia media company Fairfax Media told the International News Media Association World Congress, “We know that at some time in the future, we will be predominantly digital or digital-only in our metropolitan markets.”14True, some legacy mastheads have created powerful online news properties with high traffic, but display advertising and paywalls alone are for the most part not enough to generate a thriving revenue line, and social aggregation sites are continuing to drive unbundling. Typical media firms have had to undertake the multiple painful waves of restructuring and consolidation that may be needed while they seed growth and look for ways to monetize their brands.

For the incumbents who, like Axel Springer and Schibsted, have made the leap, the adaptation phase brings new challenges. Having become majority digital businesses, they’re fully exposed to the volatility and pace that comes with the territory. That is, their adaptation response is less a one-time event than a process of continual self-disruption. Think of Facebook upending its business model to go “mobile first.”15You can’t be satisfied with the first pivot—you have to be prepared to keep doing it.

In some cases, incumbents’ capabilities are so highly tied to the old business model that rebirth through restructuring is unlikely to work, and an exit is the best way to preserve value. Eastman Kodak Company, for example, may have been better off leaving the photography business much faster, because its numerous strategies all failed to save it. When a business is built on a legacy technology that is categorically different from the new standard, even perfect foresight of the demise of film or CDs would not have solved the core problem that the digital replacement is fundamentally less profitable.

The simple fact is that new profit pools may not be as deep as prior ones (as many newspaper publishers have come to believe). The challenge is to adapt and structurally realign cost bases to the new reality of profit pools, and accept that the “new normal” likely includes far fewer “rivers of gold.”

The reality is, most industries are still in stages one, two, and three. That’s why the early experiences of media, music, and travel companies can prove so valuable. These first industries to transition to a digital reality highlight the social and human challenges that by their nature apply to companies in most every industry and geography.

(For a quick guide to assessing your organization’s position in the digital disruption journey, see “Digital disruption: A discussion guide for incumbents.” [PDF-7.6MB])

About the author(s)

Chris Bradley is a principal in McKinsey’s Sydney office, where Clayton O’Toole is a consultant.

The authors wish to thank Adam Bird, Jules Carrigan, Angus Dawson, Dennis Ducro, and Jay Scanlan for their contributions to this article.