By following a five-step plan, media and entertainment companies can optimize human resources, standardize key business processes and revamp aging IT infrastructure to ensure viability over the long term.
A Transformation Roadmap for Media and Entertainment Revitalization
• Cognizant 20-20 InsightsA Transformation Roadmap for Media andEntertainment RevitalizationBy following a five-step plan, media and entertainment companies canoptimize human resources, standardize key business processes andrevamp aging IT infrastructure to ensure viability over the long term. Executive Summary mation and reveals success factors critical to a meaningful business transformation effort. Technology has grown exponentially over the past 15 years within media and entertainment, Drivers of Transformation bombarding the film, TV, publishing and music industries with new competition, business models In recent years, digital disruption has upended and product landscapes that benefit a digitally traditional business models within the media and sophisticated consumer base. However, for entertainment marketplace. Content consump- incumbent media and entertainment businesses, tion across media channels, devices and demo- disruptive technology requires adaptation, and graphics is on the rise. Due to unprecedented those that fail to adapt risk obsolescence. Internet usage and adoption of Internet-enabled devices, consumers are now at the heart of a Successful adaptation often requires a complete digital ecosystem in which they actively create, business transformation — a daunting and distribute and consume content. complex effort that requires a comprehen- sive evaluation of corporate strategies, human As a result, the components of traditional resources, processes and technologies. Now industry business models — product develop- more than ever, understanding the complexity of ment, pricing and revenue models, marketing, business transformation is critical to longevity in advertising, branding, distribution — have all been the media and entertainment space. impacted by drastic changes sweeping these industries. Not only are core business processes Working with many of the largest global media being altered by technological advances, but the and entertainment companies, we have helped ways in which people use technology to perform players transform their businesses to adapt work within the organization are shifting, as well; to ever-changing environments, whether they effective sharing, collaboration, virtualization and are large, small, new or established. This white innovation are emerging as essential ingredients paper explores the drivers affecting change of business success. What follows are examples within media and entertainment, describes our of how these trends are reshaping today’s media five-phase methodology for business transfor- and entertainment landscape. cognizant 20-20 insights | december 2012
Broadband and Mobile Devices Regulatory and Policy StalemateNearly 65% of U.S. adults use high-speed Internet Laws aimed at curbing piracy remain in a state ofconnections at home, and broadband users rate flux and greatly impact media and entertainmentcontent consumption and sharing as two of the companies. In the U.S. Congress, the Stop Onlinemost important ways they use the Internet.1 With Piracy Act and Protect Intellectual Propertysmartphone adoption reaching nearly 30% of the Act sparked intense debate over the rights ofglobal mobile user base, consumers are increas- copyright holders vs. interest in an open Internet.ingly choosing to consume media through these While government bodies are stuck in stalemate,devices.2 The emergence of 3G and 4G networks regulatory compliance is only one part of aand enhanced network infrastructure has further complex, multipronged strategy that media andfueled this growth. entertainment companies can apply to impose control over the use and consumption of theirDigital Content Delivery Competition intellectual property.Digitization has introduced a fundamentalchange to the concept of media and entertain- Identifying the Need for Businessment products. Incumbent market players face Transformationincreasing competition from high-technology How do you know if your business is in need of acompanies offering hardware and software transformational effort? Through our work withsolutions for digital content delivery. Apple, media and entertainment companies, we haveGoogle and Amazon have created effective, self- observed the following key indicators:sustaining, self-reinforcing business models, andnewer companies such as Netflix, Hulu, Spotify Industry and Business Lifecycle Maturityand Pandora are paving the way for new content The biggest factors indicating the need fordistribution channels and business models. These business transformation within the media andmodels include on-demand, subscription, sell- entertainment industries are the maturity orthrough, streaming, ad-supported, freemium, decline of core revenue channels or models. Othersearched, recommended and curated. indicators, however, also have the potential to spur the need for transformation, including inno-Social Media and CRM vations in technology, new competitive entrantsAccording to a recent Nielsen Media report, social and even regulatory forces.networks and blogs now account for nearly 25%of total time spent on the Internet.3 Whether or For example, print publishing industry revenuesnot this time expenditure is complementary or have gradually declined for a large part of the lastcannibalistic to traditional media, the rise of social decade and are forecast to decline further, fromCRM has facilitated bi-directional collaboration $10.2 billion to $ 9.5 billion (in circulation revenue)and information sharing between companies and and $24.7 billion to $23.2 billion (in advertisingtheir customers. Accordingly, productivity gains of revenue) between 2010 and 2015.5social CRM have been estimated at 11.8% amongmarketing and sales executives and will continue Similarly, in the music industry, revenue fromto be adopted across corporate enterprises.4 album sales declined between 2000 and 2010, at an annual average of 8%.6 In these industries,Big Data traditional customers have moved onto onlineWith the rise of broadband and mobile devices, and mobile channels to consume content,digital content distribution platforms and social but incumbent companies in some cases lackmedia, data has grown exponentially across all the agility and capital — financial, human andindustry segments. Social networks, real-time otherwise — to follow suit. On top of this, disruptiveconsumer behavior and mobile and location- technologies and new entrants have completelybased services now represent important sources turned the traditional distribution of books andof information, not just for customer relation- music on its ear. This trend illuminates why someship management but for driving key business traditional publishing and music companies needdecisions. For instance, BigChampagne and wide-scale transformation efforts to remain com-Next Big Sound have become key sources for petitive.music companies to obtain data and analytics Disparate IT Systemsfrom social media “chatter” and make decisionsaffecting music marketing, artist repertoire and As media and entertainment companies havedistribution. grown over the years, the size and scope of cognizant 20-20 insights 2
their IT stacks have widened from legacy effort within a rapidly changing environment,mainframe systems to next-generation, cloud- it is crucial that the values and business strat-based solutions. Often, a lack of interoperability egy be revisited to ensure the most relevant andbetween systems and data creates information informed approach. Formulating strategy is theand process gaps. In addition, different vendors first step and a foundational effort for businessoften support different systems, preventing the transformation. The strategiescollaboration and clear communication needed and values identified will set Without unifiedto rationalize systems. Without unified enter- the tone for the entire trans-prise-level IT systems, interoperability or open formation effort, so it must be enterprise-levelinterfaces, companies can struggle to standard- actionable and easily commu- IT systems,ize processes and gain necessary efficiencies to nicated. interoperability orcompete with low-cost industry leadership. Our Cognizant Value Discovery open interfaces,Aging Systems, Inflexible Technology and Assessment (CVDA) is a propri- companies canFragmentation etary tool and framework that struggle to standardizeAs in any other industry, legacy systems form a informs, transforms and com-significant part of the media and entertainment municates an organization’s processes and gainIT landscape. In many companies, they contain strategy. The CVDA’s value is necessary efficienciesthe core business logic for several business in its ability to deliver a relative to compete withfunctions, but they are also costly to own, lack diagnosis of the current andvendor support and are difficult to integrate with planned strategies to prioritize low-cost industrynew technologies or modern distributed architec- the areas of change and focus leadership.tures. Such legacy systems often thwart attempts that the organization shouldby companies to adapt to local market needs, pursue. The CVDA evaluates the current and futurequickly exploit new opportunities or execute an enterprise transformation strategies against theambitious new business strategy. top four levers that deliver value in media and entertainment companies (see Figure 1):Similar to the ever-expanding size and scope of ITstacks, technical operations and IT groups within • Efficiency: Optimizing the cost structure ofmedia and entertainment companies have grown the business, streamlining processes, reducingand fragmented in disparate ways. The past five to waste and generating higher returns on10 years have seen stand-alone, innovation-incu- investment.bating “digital media” groups emerge, proliferate • Effectiveness: Improving productivity andand fragment, as social media, big data, mobility operational performance in such areasand cloud disciplines have called for separate as quality control, customer satisfaction,areas of expertise. Often, large media and enter- decreased time to market, etc.tainment companies struggle to enable collabora-tion among these groups or integrate their capa- • Virtualization: Sharing work processes, knowledge and technology both within andbilities into operating/functional business units. outside the enterprise in a collaborative andAn Approach to Business flexible manner.Transformation • Innovation: Fostering the capacity to createAfter observing these symptoms at many of our new products, services, channels and marketmedia and entertainment clients, we created a opportunities that will result in new revenuemethodology for developing an actionable plan streams.for business transformation. Our methodology Phase 2: Business Capability and Modeldelivers a three- to five-year plan that can be Definition and Assessmentimmediately translated into real transformationalchange for an enterprise. A business capability is what a business funda- mentally must do to achieve its objectives. InPhase 1: Defining Value & Strategies order to support a business transformation, anThe rapid proliferation of disruptive technologies, organization may need to nurture a set of capa-not to mention ever-changing consumer tastes bilities it does not currently have. For example,and behaviors, have greatly impacted media and many media and entertainment companies needentertainment company strategies over the past to translate customer experiences, workflows and10 years. Before embarking on a transformative engagement to mobile platforms. Studios, record cognizant 20-20 insights 3
Four Value Levers of Media and Entertainment Industry • Improved capital productivity/utilization Virtualization • Developing offerings through strategic partnerships and joint ventures • Cloud offerings Effectiveness Innovation • Productivity/quality • Innovation improvement • Revenue enhancement • Enhancement or expansion • New business models of existing capabilities and and capabilities business models Efﬁciency • Cost reduction and control • Lowering effort while improving output Figure 1 companies and publishers need robust methods cloud platforms will continue to disrupt the media of distributing and delivering content across landscape moving forward. (For more on this a variety of platforms and experiences. These topic, read our white paper, “Finding Your Place in are capabilities that 15 years ago, most of these the New World of Communications, Digital Media companies didn’t have to worry about. and Entertainment,” produced in collaboration with the MIT Center for Digital Business.) It is critical to After defining capabilities, the next logical step is to look at how Phase 3: Current State Assessment identify high-level to deliver value to customers. A With the rapid changes in content consumption, business models business model describes the media and entertainment companies have oftenthat describe what rationale of how an organization implemented business processes and capabilities creates, delivers and captures as Band-Aids, patches and extensions of legacy your organization value. As part of the transforma- workflows. However, conducting a fully trans-will deliver to your tion effort, it is critical to identify formational effort requires understanding ofcustomers, in what high-level business models that current-state business processes, at a high level. describe what your organization This effort helps identify an organization’s opera- markets and in will deliver to your customers, in tional strengths and weaknesses, current-state what ways. what markets and in what ways. landscape and value stream, to identify a starting For example, with fragmented point for a meaningful business transformation. digital distribution channels, studios, publishers, music and content creators need to evaluate and The current-state assessment is necessary to understand the dynamics of both subscription form a baseline for the future-state definition, as and pay-to-own business models, such as Spotify well as gain an understanding of the critical pain and iTunes, and how those models impact their points and improvement opportunities. Achieving business operations, technologies and processes. a successful current-state assessment relies on aligning the level of detail gathered within the When embarking on a business transformation current state with the future-state objectives. effort, it is crucial that business models and capa- bilities align to ensure an organization’s ability to Given the amount of change that most business operate in an ever-changing business environ- transformation initiatives intend to implement, ment. Forces such as globalization, the millennial gathering current-state information at a detailed mindset, “prosumers,” business virtualization and level is typically time consuming and does not nec- essarily serve the objectives of the future-state cognizant 20-20 insights 4
definition. It’s more important to get a baseline future-state workstreams is a critical componentunderstanding for the development of future- to the development of a business transformationstate processes, organizational structure and initiative in that the workstreams identified withinsystems rather than documenting a very detailed this stage will be the basis for the roadmap.version of a current state that will inevitablychange. With all the work involved with identifying necessary projects and workstreams that willOur customized, high-level value stream mapping transform the enterprise, current initiativesmethodology ensures alignment of the current- and projects will not completely halt once anstate assessment and the future-state definition enterprise transformation effort has begun. Asso that only the right level of information is large transformation efforts are often implement-gathered. This methodology supports the devel- ed over multiple years, it is equally important toopment of an end-to-end view of an organization understand how the business transformationand creates a focused and complete map of the initiative could impact ongoing initiatives, as wellenterprise processes that will be used to assist as how business-as-usual activities (BAU) will bein determining the impact of the changes being carried out during transitional periods.brought about by the transformation initiative. Since many of the processes and capabilitiesPhase 4: Future-State Definition, Gap Analysis addressed within the business transformationand In-Flight Analysis initiative are business-critical, it is crucial to theThe future-state definition phase is where trans- success and validity of the plan being developedformation moves from vision to definitive form. to have considered the dependencies, tollgatesBuilding off the current-state assessment, the and critical success factors that are associatedtransition and development of the future state with the future-state workstreams identified.defines the change needed to enable the business This dependency and coordination effort can becapabilities and vision developed in the first a challenge for many organizations, particularlyphase. The future-state definition brings together those that currently operate in a siloed fashion.the components of the business strategy, For example, numerous functions within an orga-business capabilities and current-state pain nization may simultaneously explore social mediapoints to develop a series of workstreams that initiatives in an uncoordinated fashion, makingwill serve as action plans to deliver the future- it difficult to integrate social media effectivelystate vision. This phase is not intended to design into the overall business strategy and cross-new processes or in-depth system requirements, department processes. Understanding the entirealthough it will create a structure to articulate the landscape of projects and programs within thefuture-state vision. organization helps create the most effectiveFor example, an entertainment company tran- transformation roadmap and plan.sitioning from delivering playout content using Phase 5: Transformation Roadmap Definitionexisting models to distributing that content viaemerging options may have high-level work- The definition of the roadmap is where all thestreams such as second-screen application devel- components of business vision, current-stateopment, modification of digital rights contracts and future-state efforts come together to formand management systems, establishment of new an actionable and meaningful plan to achieverelationships with content delivery networks, and meaningful transformation. Building this roadmapintegration with social media sites through APIs. collaboratively with all stakeholders will ensure input and support across all impacted groupsWhile identifying projects needed to fulfill the within the organization.organization’s future-state vision, the organi-zation must also review and continue, halt or Transforming Workstreams to Projectsrepurpose any inflight projects related to the This effort begins with transforming workstreamstransformation effort. into actionable projects that the organization can plan, resource and execute. Due to the nature ofThe mix of future-state workstreams should the workstream ideation and creation processclosely align with the focus and priorities during the future-state assessment, it is likelydeveloped in the strategy, capabilities and that the workstreams generated from this effortbusiness model phases. The development of will have overlapping areas, as well as pieces cognizant 20-20 insights 5
that will work better when reorganized into other transformation efforts can often be daunting, and projects or workstreams. Transforming the work- issues can arise when an organization is trying to streams into actionable projects is not an exact undertake too many large changes at once. science, but it is critical to consider which part of the organization can best manage the initiatives Change management and a quantifiable under- that are overlapping, since these will be the most standing of the change impacts can go a long challenging and contain the highest number of way toward informing how many projects and competing interests. initiatives an organization can manage at once. Our proprietary methodology can quantify the Resourcing the Projects amount of change and the associated impacts for Since the transformation effort will likely take an individual project or a collection of initiatives. significant coordinated effort across depart- ments, constructing a realistic resource plan Keys to Success for each project is absolutely necessary during Due to the scope and underlying complexity the roadmap creation phase. While this can be involved with most business transformation an overwhelming task, it is important to plan projects, it is important to identify success factors. and estimate the resourcing plans for the first We have observed that the following elements few projects lined up in the drive the success of most business transforma- It is critical to roadmap. This will help create tion projects: consider which part realistic expectations and • Executive sponsorship: Executives need to ensure a smooth transition of the organization and retention of momentum, communicate their engagement with, commit- ment to and support for the transformationcan best manage the from planning to implementa- initiative to the entire organization. initiatives that are tion. • Strong governance and management: Coor- overlapping, since During resource planning, dination and control over multiple projects is these will be the remember that each project critical to the success of an initiative this size. should be evaluated tomost challenging and determine the best resourcing • Continual justification and review: Quarterly roadmap review sessions ensure that the most contain the highest model. For example, will your important initiatives are addressed.number of competing top talent be allocated equally • Business value-based decisions: All adjust- to transformation projects interests. and day-to-day business? Will ments to the roadmap must be based on a business value decision. you choose to outsource a project entirely? Or is a project best served by a • Effective change management/marketing: hybrid model of internal and external talent? A Enthusiasm needs to be created for the road- mix of resourcing models is typically used across map, both with employees and external parties. enterprise transformation efforts in order to minimize the impact to the ongoing business, • Discipline around structure: Any new proj- ects need to be vetted in the context of the develop the needed innovation and successfully roadmap to minimize distractions. execute. Consider the timeline and objectives of the project to inform the decision around using • Appropriate staffing: Outside parties should be engaged where bandwidth or expertise is primarily internal or external resources for required. execution. • Structured project request process: A pro- Other Roadmap Creation Considerations cess needs to be created that streamlines the The projects and resources needed to complete a submission and review of projects not current- project will provide the necessary inputs to arrive ly on the roadmap. at costing, but a detailed estimate of high-priority projects is crucial for understanding the potential Looking Ahead magnitude of the business transformation effort. A rapidly changing landscape has created the Additionally, while creating the roadmap, it is need for media and entertainment industry essential to project and quantify the amount stalwarts to closely examine the people, processes of change the enterprise can sustain. Business and technology they are using to operate in this cognizant 20-20 insights 6