A new wave of crises is looming for traditional media companies. Recent research by Accenture and Ovum reveals that media companies are losing cash exactly when they need it most.
With Opex spending rising faster than revenue, media companies are on the edge of a cash flow cliff
Competing in the new digital world requires traditional media companies to transform by designing, piloting and rapidly industrializing new content, services and tailored offerings that enrich the audience experience and scale the New.
These are resource-intensive investments, and most traditional media players do not have the required cash available. Instead, they will need to find and reclaim it from within their organization by transforming their core.
The process must begin with a clear vision for their digital future. Companies need to understand how they want to engage in the industry value chain—be it as a multi-channel operator, vertically-integrated direct to consumer provider or digital platform—and the capabilities they will need to achieve this. Following this North Star vision, they can set their course for sustained digital transformation.
Getting the right fuel for the journey
The value drawn from the existing, core business becomes cashflow that media companies can invest in the new, innovative products and services needed for lift-off of their new businesses and business models. Transforming their core to unlock this value is their first step on the S-curve journey, a process that helps media companies to jump from a mature business with declining growth to new businesses at the beginning of their growth phase.
We see three main approaches for media companies to transform their core operations to unlock the trapped value:
Beyond cost cutting: Strategic spending
While driving efficiencies across the cost base is critical to fueling traditional media companies’ transformation
to the New, it is not simply about cutting costs. Strategic spending is the goal.
Rallying the organization upfront around the future “to be” vision is a critical step. Company-wide buy in will be key to galvanize the business and cement the understanding that important financial steps are needed to propel new growth and opportunities.
Then, with fuel in their tank, media companies can embark upon the future steps of their transformation journey. From here, they can invest in new growth to pivot to their target end-state.