Tag Archives: disruption

What to Do When What You’ve Always Done, Doesn’t Work Anymore

dematurityBefore I begin with this week’s blog article, I wanted to share with you a milestone this blog reached this past Sunday (5/6/2018) at 11pm EDST. Dick Taylor Blog dot com marked 100,000 visitors to this blog site. DTB premiered on January 4th, 2015 with 75 people stopping by to visit.

Thank YOU for making this blog a weekly habit. -DT

There’s no doubt about it. We live in challenging times.

The big word of the day is “disruption.”

We read every day about how some new shiny toy is the latest radio disruptor.

But is that really what’s happening?

Dematurity

The radio broadcasting industry may be dealing with something bigger; dematurity. “Dematurity is what happens to an established industry when multiple companies adopt a host of small innovations in a relatively short period of time,” says John Sviokla. The term was coined back in the 1980s by Harvard Business School professors William Abernathy and Kim Clark.

Radio’s Dematurity

Think about this phenomenon as it applies to radio.

The internet introduced the concept of streaming radio. Two companies introduced nationwide radio coverage from satellites above America. The smartphone provided an opportunity for Pandora to stream to cellphones. Podcasters followed. Facebook, Twitter, Instagram, SnapChat and others would compete for a smartphone owner’s attention on these same devices. Meanwhile, on the home front, Amazon developed its Echo voice activated device, as Google, Microsoft, and Apple followed with their own smart speakers. Facebook, not to be left out, says it will introduce its own smart speaker this coming July.

Each move by these technology companies might have seemed trivial when announced, but when looked at in total, they represent a crescendo of mini-disruptions.

The Currency of People’s Time

While most will focus on the shiny new innovation, what we’re really seeing is how people spend the most valuable currency in their lives, their time.

For broadcasters, the challenge is providing people with a listening experience worth a person giving us their time.

Government Regulations

Another factor that impacts business is government regulations. While radio broadcasting has been heavily regulated since the birth of commercial radio in the 1920s, we compete against online and satellite audio providers that are not.

Government regulations have enormous impact on the type of competition and the intensity it brings in your market.

Death & Taxes

Benjamin Franklin wrote in a 1789 letter that “Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be certain, except death and taxes.” In business, you probably can add dematurity. There is not a business that won’t be impacted by it, if it’s not already.

Ask the Right Questions

John Sviokla poses these questions for trying to get a handle on how to build value and sustain value:

  • What makes for efficient scale?
  • Who is the competition?
  • Who are the customers?
  • What do the customers want?
  • Who owns what?
  • Where is the risk?

Sviokla, in his book, The Self-Made Billionaire Effect, says more than 80 percent of the self-made billionaires he’s profiled made their money by reinvigorating a mature industry. “They either introduced a product tuned to new consumer habits, changed the technologies of production, adopted new ideas from another industry, adapted to new regulation, changed the distribution system, or made some combination of those moves,” says Sviokla.

While dematurity is inevitable for all businesses, brainstorming what change is happening, and making changes to take advantage of it, is the difference between crisis and opportunity.

“Change will lead to insight far more often than insight will lead to change.”

-Milton H. Erickson

 

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A Kodak Moment

116Remember when something special happened in your life, people would say “That’s a Kodak moment?”

A “Kodak moment” was something that was sentimental or charming, a moment worthy of capturing in a photograph.

Did you know that term is still used? However, its meaning today is entirely different. Today a “Kodak moment” is used to represent a situation in which a business fails to foresee changes within its industry and drops from a market-dominant position to being a minor player or worse, declares bankruptcy.

The Kodak Lesson

While digital cameras were invented in 1975, in 1998 Kodak had 170,000 employees and commanded 85% of all photo paper sales worldwide. But only a few short years later, their business model disappeared and Kodak nearly went bankrupt.

If you had asked anyone in the world in 1998 if they thought in three years they’d never be taking pictures on film again, they would have called you crazy. But that’s exactly what happened to Kodak.

The 21st Century Revolution

Evolution is gradual. People often don’t even feel things changing.

Revolutions are violent. Things change quickly. People often have lots of difficulty dealing with them.

The industrial revolution was certainly disruptive to craftsmen and the trades industry. Radio was disruptive to the print communications industry when it was introduced in the 1920s. The 1950s would watch television provide a similar disruption to radio, print and motion pictures.

Now we are undergoing a new revolution with the internet, social media and smartphone technology. And this revolution is moving at exponential speed.

Software is the driving force behind lots of the changes we are experiencing. It’s what enables Uber, Airbnb, Pandora, Spotify, Netflix, Amazon, Google, Apple etc.

Computers are learning at an exponential pace via “artificial intelligence.”

More Dangerous Than North Korea

Elon Musk recently tweeted “artificial intelligence is more dangerous than North Korea.” We never think when we post on social media that artificial intelligence algorithms are processing all of that information to influence future social media interactions, future ads that will pop up, shopping sites that will be recommended, what news we’d like to see in our newsfeed or who we might like to become friends with.

It’s all very reminiscent of the computer “HAL” in the movie “2001 a Space Odyssey.”

Specialists vs Generalists

Not all jobs will go away. But reductions in force of up to 90% in almost every profession are possible and only specialists will remain to handle anything supercomputers can’t.

Autonomous Vehicles

While the auto industry races to get autonomous cars to market, we already have other forms of autonomous transportations systems operating today; like the monorail at Disney or major airports.

The trucking industry is one of the largest employers in America. 7.3 million people are employed throughout the economy in jobs that relate to trucking activity. What happens when trucks can drive themselves to the people employed in this industry?

Fossil vs Solar Energy

Last year, more solar energy was installed worldwide than fossil. Renewables are fast becoming the least cost energy option around the globe.

Smartphones

77% of all adults in America today say they own a smartphone. That number was only 35% six years ago.

But if you’re looking for the smartphone’s impact on the future, 92% of 18 to 29 year olds today own a smartphone.

Suffice it to say, if your business model doesn’t work on a smartphone, ‘fuhgeddaboudit.’

Convergence

What it all comes down to for mediated communications – newspapers, magazines, radio & television – is the 21st Century is the convergence of all media becoming a reality.

We are watching the end of each of these industries being unique, special and different; with all of them competing for the same space via the internet.

Or as Herbert Spencer put it in his Principles of Sociology, it’s “survival of the fittest.”

What kind of “Kodak moment” do you think history will record for mediated communications?

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When TV Disrupted Radio

97I grew up with TV.

Essentially, we were “born” in the same year.

I don’t remember a time when TV didn’t exist.

TV was supposed to put radio out-of-business. It was the “great disruptor.”

Why TV Didn’t Put Radio Out-Of-Business

While I loved my TV shows and even remember planning my life around TV GUIDE and the new fall shows, I still fell in love with radio and wanted to be a radio personality since elementary school and my first Zenith transistor radio.

Radio for me was never about Jack Benny or Groucho Marx or Amos & Andy or radio dramas like Orson Welles “War of the Worlds.”

Radio was exciting execution, engaging personalities and the best of new music from all genres.

Radio was addictive because it was so engaging.

Disruption Knows No Loyalties

It’s reported that as this decade began only 67 of the original Fortune 500 companies were still in business. Welcome to the 21st Century of Disruption.

The reality in today’s world of accelerating change is that the very success that rockets a company to raving success usually becomes the dagger that runs through its heart when the market environment shifts. Then new firms take over and former leaders fade into the history books.

The business truth is eventually every business sees its model fail.

Radio’s New Business Model after TV

Can you imagine a more difficult time than when TV swooped in and stole all of radio’s programs and talent? It was a time when people said things like “The last person to leave, please turn off the lights on your way out.”

It was a dark time for radio.

But not for all.

Only those who couldn’t see their way past the way it had been.

New broadcasters were quick to develop new formats.

1965 saw the birth of BOSS RADIO in Los Angeles with Bill Drake & Ron Jacob’s 93-KHJ.

At the same time 1010-WINS in New York would pioneer the all news format and everyone would know the phrase “You give us 21-minutes and we’ll give you the world.”

These new broadcasters would be the ones that inspired me to want to be a radio guy.

The Transistor Radio

Radio took advantage of the transistor radio. The youth of my day would all want a transistor radio of their very own and radio owned the youth generation.

The Car Radio

As we grew older and bought our first car, the car radio was a MUST HAVE accessory.

Movies like American Graffiti would romance the glory of the young and their radio.

The Internet of Things (IoT)

Today’s 21st Century finds radio with a new disruptor, the internet. It’s not a new product but an ecosystem.

Amazon and Walmart sell many of the same products and are quite competitive on price. The big difference is Walmart is a brick and mortar ecosystem and Amazon is internet based.

For radio to compete the industry needs to have a vision for how its product fits into a complex network of components, systems and user experience.

That’s the 21st Century radio challenge. (TV faces the same challenge.)

Today’s radio must seamlessly fit into a listener’s life on any platform the listener uses.

Disruption will crash and burn any business model that wants to hold onto the past.

Disruption will clear a path for those who are innovative, nimble and responsive to a changing marketplace.

For those broadcasters, the opportunities are limitless.

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The Post-Fact Society

68P.T. Barnum, among many others, is credited with saying: “I don’t care what they say about me, just make sure they spell my name right!”

Barnum knew it wasn’t important what people said about him as long as they were talking about him. Only the noise level about Barnum mattered.

When I saw this chart from The DataFace measuring the newspaper media coverage of the two presidential candidates, it was eye opening.  68a It mattered little that most of that coverage was negative. What mattered was they spelled “Trump” correctly.

Fake News

Once upon a time, news came from journalists who worked for newspapers, radio and television stations.

Then along came the iPhone and social media.

Now the same device that could receive text, voice, pictures and video could produce it too.

Social media platforms provided mass distribution without a filter (aka an editor).

This provided the perfect storm for the production of fake news. A cottage industry in some parts of the world, some American citizens soon learned that producing internet stories that would get lots of clicks could be profitable.

Radio & Fake News

Even syndicated radio host Sean Hannity got snared in the volume of fake news being generated and had to apologize for using fake news stories to attack Obama.

Ad Supported Media Fight for Survival

In an effort to make a little coin, trusted media sources began accepting advertising that would lead their readers, listeners, viewers to unaffiliated sources that would serve up this fake news. In so doing, they inadvertently now wore the stink of the fake news creators. The public quickly could not discern the researched and sourced news from the made-up variety.

One PM Central Standard Time

Radio and television journalism didn’t always operate this way. PBS produced an excellent documentary about the coverage of the assassination of President John F. Kennedy. The program was called “One PM Central Standard Time” and it covered how “the most trusted man in America” Walter Cronkite waited until Kennedy’s death was confirmed by  multiple sources before going live with the news to the nation over the CBS radio and television networks.

The Being First Obsession

Things changed when things started being published digitally. In this world, advertising paid based on clicks. Quantity beat quality. Sensational beat facts. Going viral meant big money to these new media folks. Plus the concept of “native advertising” means that advertising copy is presented to look like editorial.

All of these little changes contributed to consumers becoming less and less able to tell real news from what was fake news. Which has led to many not believing anything today’s media tells them.

And that’s a very sad state of affairs for journalism.

“Were it left to me to decide whether we should have a government without newspapers, or newspapers without a government, I should not hesitate a moment to prefer the latter.”
–Thomas Jefferson

21st Century Business Model Challenge

Starting with newspapers, then radio, then TV then digital, the business model has been one of ad supported media. The model is broken.

Disruption first destroys the old ways of doing things before the new ways are discovered and take root. We are living in that destruction period of disruption.

Our challenge lies in building a business model that will support solid journalism, quality entertainment and community service.

What others have shown us is that in a 21st Century world it will take a collaborative effort from people from all over the world to help build the new way.

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Radio’s Dilemma (or Opportunity?)

38Radio’s a business. Peter Drucker said “The purpose of a business is to create a customer.” A business also needs to make profit or it won’t be in business for very long. On that we can all agree.

Surprisingly, many business people who know this still go out of business, often because they focus on the profit part and not the customer part. Plus those businesses either never had or lost their competitive advantage.

Radio’s dilemma is it lost that competitive advantage. That being having an FCC license to broadcast. Not everyone could obtain a broadcast license – they were limited by the Federal Communications Commission (FCC) – or had the ability to profitably operate a broadcast property. Profitability is when you earn money in excess of your cost of capital.

The radio business made a lot of money. Many enjoyed cash flow margins north of 50%. Its success attracted more people into radio ownership because it “looked easy” and made a bundle of dough. As more radio stations came on the air, it drove up wages, increased competition and increased multiples for valuing radio properties when they were bought and sold.

If this type of growth and expansion was all that was taking place, the “circle of (business) life” would have seen the radio industry slow down as the overcapacity from all of the new radio stations fought over the not-as-fast-growing advertising pie. It’s similar to what happen to the casino industry as expansion took off in America after just Nevada and New Jersey were no longer the only two states to license casino gaming.

Enter the great disruptor; the Internet. Radio, as we all once knew it, would be changed forever. For the Internet would now provide the world with an infinite number of “radio” options, like Pandora, Spotify, iTunes, RadioTunes et al. All trying to be ad supported like OTA radio.

Clay Christensen wrote about what happens when an industry is disrupted in his book The Innovator’s Dilemma.  He tells the reader how incumbent companies often respond to their disruptors with disastrous consequences.

Radio looked at the Internet as a “free broadcast license” and put their OTA signals onto a stream and then tried to squeeze a little extra profit by running separate ads on the stream versus over the air. It created a little extra money for the radio business but created a less enjoyable listener experience.  Sean Ross recently wrote in his newsletter “Ross On Radio” how different and better a radio station he listens to online sounded when he actually traveled to the market and heard the same station over the air. The difference was in the breaks and it was HUGE.

It doesn’t have to be all doom and gloom.

Southwest Airlines has enjoyed four decades of profitability. Like Walmart, Southwest had a root purpose for existing. Sam Walton’s Walmart mastered logistics to keep prices to his customers low and Herb Kelleher’s Southwest focused on constant improvements to make travel by air more affordable to more Americans. Like all successful enterprises, they put the customer first and profits were the result of doing everything else right.

For radio to be successful on the Internet, it needs to create a better user experience that attracts and delights the listener or that creates a new and different user experience that will enrich the end users’ lives. Radio, over the air, FCC licensed radio has the best platform to promote its Internet products. The possibilities are infinite. But each product must have a purpose beyond just making a buck.

Businesses that grow have a purpose beyond profit. Businesses that focus their growth on profits won’t have either growth or profits.

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Radios Go High-Definition

37That was the headline that appeared in the Baltimore Sun on January 7, 2004. Unfortunately, unlike HDTV (High Definition Television) HDRadio never stood for “High Definition” radio. And maybe that was the first mistake. HDRadio was simply a name they chose for the digital radio technology.

The iPod was introduced in October 2001. Steve Jobs introduced this music delivery changing device this way. Only a month earlier, XM began broadcasting the first satellite radio programming to be followed four months later by Sirius satellite radio. So by 2004, digital radio was already late to the party.

KZIA-FM Z102.9 saw Kenwood USA sell its first digital receiver in Cedar Rapids, Iowa to take advantage of KZIA-FM’s HDRadio broadcasts. “This is a significant move,” Michelle Abraham, senior analyst at In-Sat/MDR, a market research firm in Arizona, said of the roll-out of digital radio equipment. “It may not seem duly significant in the beginning, but in a few years from now, it will be a huge leap.” The hope was it would prove to be competitive to the newly launched satellite radio offerings from XM and Sirius (now merged into a single satellite company). HDRadio was also seen as improving FM to have CD quality sound and making AM sound like FM. It was heralded to help struggling AM radio stations.

Solving a Problem That Didn’t Exist

What HDRadio did for FM radio stations was solve a problem that listeners to FM didn’t feel existed. No one who listened to FM radio was complaining about the quality of the sound of the transmission. (They were complaining about other things, like too many commercials.) And for AM radio stations, it meant people buying radios for a service that didn’t offer anything they really wanted to hear or couldn’t get from someplace else. AM radio was now the service of senior citizens who already owned AM radios, who grew up with AM radio’s characteristics and whose hearing was not the best now anyway. So HDRadio for AM wasn’t something they were asking for either. Worse, AM radio stations that put on the new digital signal found it lacked the benefits of skywave and often interfered with other company AM radio stations as the industry quickly consolidated radio ownership.

Industries Most Disrupted By Digital

In March 2016, an article published by Rhys Grossman in the Harvard Business Review listed “Media” as the most disrupted by the growing digital economy. Turns out if you’re a business to consumer business, you’re the first being most disrupted by digital. The barriers to be a media company used to be huge, but in a digital world they are not. The business model that media companies depend on has not adapted well to the digital economy.

Education – Disruption Ahead

Having moved from media to education I only got ahead of digital’s disruption for a while. But even those industries that had perceived high barriers of entry are finding those walls crumbling quickly. Grossman says fifty percent of executives see education being impacted in a big way in the next twelve months.

Where Are The Radios?

Edison Research did their latest “Infinite Dial” webinar and the slide that most impacted me was the one about radio ownership. From 2008 to 2016 the percentage of people in America that don’t own a single radio in their home has gone from 4% to 21%. When Edison narrowed this down to household between the ages of 18-34, non-radio ownership rose to 32%. Mark Ramsey’s Hivio 2016 Conference had one Millennial describe a radio set as being “ancient technology.” Ouch!

It doesn’t seem all that long ago that Jerry Lee’s WEAZ in Philadelphia was giving away high quality FM radios to increase listenership to not just his radio station but to FM radio. And KZIA in Cedar Rapids gave away HDRadios to allow people to hear their new signal. It now appears time for the radio industry to begin giving away AM/FM radios every time they are doing station remotes, contests or appearing at venues that will attract lots of people.

Elephant in the Room

But the elephant in the room remains the broken media business model. Newspapers, magazines, radio, and television – any media that is ad supported – will be challenged to find a way to capture revenue to continue.

As Walt Disney famously said “We don’t make movies to make money, we make money to make movies.”

To anyone in ad supported media, we would agree we do it for the same reasons.

The $64,000 question is how.

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Out, damn’d spot!

28Lady Macbeth says this line in Act 5, scene 1. The line has made for ironic jokes and marketing schemes. The Bard’s lady, where the blood spot becomes dyed into her conscience and where the king and queen persist in imagining that physical actions can root out psychological demons, Shakespeare’s Macbeth is an exposition of how wrong they are.

This all came back to me when I read about former CBS Radio President Dan Mason speaking at Radio Ink’s Hispanic Radio Conference in March about how many radio spots should run in a typical hour of radio programming; his answer was 8 to 10 units. Whereas the typical radio station these days is running 14, 16, 17 (or more) units every hour and Mason says that’s probably too much.

On Twitter Radio Ink tweeted “Is Dan Mason correct? You should be playing 8-10 units per hour.” I tweeted back “YES.” To which Dan Mason tweeted back “@DickTaylor @RadioInk not easy to execute in today’s environment but this is the goal we have to work toward!” And to which I then responded, “@radiodanmason @RadioInk Agreed. No one ever said it would be easy. But moving in this direction needs to be the industry goal.”

Then the next day Radio Ink printed this headline as their lead story “We Would Pay More For Shorter Stopsets,” from ad agency executives Blair Overesch and Jeff Chase of Walz Tetrick Advertising in Kansas City. Their clients include the World Champion Kansas City Royals and Dairy Queen. They bemoan how their clients become lost in long horrible-sounding commercial clusters.

The Birth of the Radio Ad

When the commercial radio was born in 1920 the only way operators of radio stations could figure out to support the expenses that came with running a radio station was by the sale of radio advertising. They copied the model of newspapers and magazines of that time. And here we are almost a hundred years later and nothing has really changed in this business model, except the birth of the Internet. The Internet of Things (IoT) has been the big disruptor of just about every business model.

Look Outside Your Industry for New Ideas

It’s said that Henry Ford came up with the idea of the automobile assembly line when he visited the meat packing plants of Chicago. There he witnessed how cows were disassembled. It was done on a disassembly line. And so the story goes that Ford had an “Ah hah moment.”

Radio needs an “Ah hah moment” when it comes to its business model. But what could it possibly be? Where would we go, as an industry, to find this new business model? Not in the world of ad supported media, that’s for certain.

Casino Gambling & Changing Business Models

Casinos in America started in Nevada in 1931. New Jersey would be the second state in America to legalize casino gambling in 1978. So for almost half a decade, Nevada – Reno & Las Vegas – had a monopoly on this type of gambling activity. New Jersey would also enjoy a boom from casino gambling during the 80s and early 90s as the seaside resort saw a new casino opening up every year. Casinos made money on gambling. Period.

What changed was the wave of states legalizing casino gaming all across America in their search for new revenue sources. Vegas and Atlantic City would find that trying to live off of just gambling handles was quickly eroding. Their business model was being disrupted.

The Most Profitable Resort in Las Vegas

Can you guess which Las Vegas casino makes the most money? It’s not located in the heart of the “The Strip” where thousands of visitors walk by every day. It’s actually Wynn Resorts.

Billions of dollars move through Las Vegas every year. Casino operators do everything they can think of to have visitors gamble away as much of their money as possible while they are in Vegas. But Wynn changed the casino business model for his properties. Steve Wynn decided that with the explosion of casinos across America, he needed to move in a new direction. He needed to become less dependent on high rollers sitting at gaming tables for the bulk of his revenue. Non-gaming activities at Wynn’s Wynn & Encore Casinos account for 67% of the company’s revenues.

Focused On the User Experience

Steve Wynn is totally focused on the visitor or user experience when he builds a casino. He gives his full attention to every detail. This type of focus can be seen in the Bellagio, a casino Steve Wynn built over 16 years ago and has since sold. It’s number two in revenues in Vegas.

Becoming Less Dependent on Advertising

The smart radio operator will take a chapter from Steve Wynn’s playbook and move their stations off of full dependency on the ad supported business model. Steve Price at Townsquare Media appears to be doing just that with ad supported radio at the hub of their strategy. Price said he wants Townsquare to be the largest local digital content business, the largest live event business, and the largest digital marketing services business in their radio markets. Chairman and CEO Steven Price says, “We believe our diversified strategy remains sound, demonstrated by the stability of our local advertising business and the outsized growth in our other businesses.  In addition, we further diversified our business, with approximately half of revenue now derived from sources other than the sale of terrestrial radio advertising.”

Monetizing a Media Company Beyond Advertising

It’s not about throwing the baby out with the bath water. Steve Wynn didn’t abandon gambling. In fact, Steve Wynn makes more money than every other casino operator in Vegas by doing everything just a little bit better than his competitors – both in Vegas as well as elsewhere. He just unhitched his properties from total dependence on gambling revenues. I believe Steve Price is pursuing a similar path as Wynn with his media company. I believe that Townsquare can run 8 to 10 radio ads in an hour and make money. Moreover, make money for his advertisers by putting them in a radio spotlight and increase TSL and audience ratings by making his listeners happy with the proper balance of advertising and entertainment. Done in this way it is a win-win-win.

What’s your plan?

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