(Annette Moser-Wellman)

When an industry goes through a radical disruption, everyone knows change has to happen and it's often those companies who change early that survive. I spoke with Professor Georges Haour, an expert in technology and innovation management from the global business school IMD. Haour believes organic growth for media companies is difficult because of the shrinking advertising dollars. Still, he claims there are ways to innovate and find ways through the dark night of the industry.

One of the first lines of defense is looking for small entrepreneurial candidates to acquire. Mergers and acquisitions hedge against risk when the future for growth seems unclear. Certainly we've seen this at work in traditional media. Hearst is a case in point with their investments in companies from Kaboodle and UGO Entertainment to eInk and Pandora. When you have the money to spend, acquisitions can be a viable option for growth. But what if you don't have a lot of free cash? How then do you innovate?

Haour uses the pharmaceutical industry as a metaphor for media industry innovation. Having leaned on mergers and acquisitions to fund their growth, pharmaceutical firms are looking forward to new ways to innovate. The mass market is less lucrative due to patent restrictions, so companies are moving toward finding new ways to create specialized medicines for specific ailments. And with the promise of genome discoveries, there will be ways to further personalize medications.

In effect, the Internet may be to the media industry what the Human Genome Project may be to the pharmaceutical industry. What if an innovation strategy for customized or personalized service was at work in the media world? Haour believes that the highest levels of value will come from those who can tailor media products to the needs of widely diverse groups. "The way to innovation is to meet the needs of the different gender, ethic and societal interests in ever-personalized ways," he says.

An example Haour shares is the European public-service cultural television channel, ARTE. The channel provides programming for audiences from different cultural backgrounds, particularly French and German. With high-quality, creative broadcasting, ARTE offers documentaries, feature films, theater, music and more. The channel demonstrates that it's possible to gain significant viewership from highly tailored content. Haour notes, however, that the problem with targeting smaller audiences with specialized content is "when you go to the top of Mt. Fuji, there are not many people there. But the way that media will come out of the current crisis will be to provide higher value to smaller segments. There will be no mass effect anymore."

In fact, innovation is particularly difficult in areas where markets are habituated to a free product. When you expect free content, you rarely want to open your wallet because you believe you can find the same product somewhere else, and you often can. Haour sees that same phenomena at work in social network media. Finding ways to monetize Twitter, Facebook or even LinkedIn will require the ability to provide higher value to small segments. The 'freemium' strategy, or charging small amounts of money for small services such as the ability to e-mail outside your network, will give way to higher value, more expensive services.

How might this happen? Haour notes the low quality of conversations available in the electronic space. "For example, LinkedIn has the ability to provide more value creation in the form of well-managed discussion forums. There is value in conversations that matter. They should follow the lead of business schools and find a way to replicate quality discussion on-line and charge for it."

Lastly, innovation requires leadership who are comfortable scrambling in the midst of change. Haour explains, "We bubble about innovation, but we don't want to take risks. When you only care about satisfying Wall Street, you don't consider the role of commerce in the common good. We need leaders in media who see the incredible possibilities in times of change and not merely the constraints."


Annette Moser-Wellman is President of Firemark, Inc., an innovation consultancy, and author of Six Competencies of the Next Generation News Organization and Running While The Earth Shakes: Creating An Innovation Strategy To Win In The Digital Age, both published by the Media Management Center.

This TechScout article is part of a series of Moser-Wellman interviews commissioned by the Media Management Center to explore opportunities and insights at the intersection of technology and the news media. Click here to view other articles in the TechScout series.

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