SpectatorBytes

Digital media organizations that think in terms of “building vs. buying” will struggle to compete in the marketplace going forward, especially when the answer tends to be “build.”

Over the past couple of years, it’s clear that one of the reasons why large digital businesses struggle to sustain growth is that they fail to maintain a differentiated competitive advantage.  In simpler terms, organizations stop evolving their skill set around the core aspects of their businesses, and try to begin to build new skill sets in non-core product areas.

Once a digital media business reaches scale in audience and revenues, a broad set of opportunities opens up to them. It is at this point in time when most large digital businesses begin to ignore the realities of the marketplace and start to lose their competitive edge. Three major behaviors start to take place:

1. The overall organization feels emboldened to pursue new business opportunities which may appear to complement their core business but for which it does not have the necessary skill set to compete in the marketplace. Good examples include: content websites, which build their own video solution, advertising networks that build their own internal production companies.

2. Product and tech teams begin to focus primarily on new product development rather than on evolution of the core products. This leads to the creation of large teams, which have diverse capabilities but limited depth.  These large, vast teams then focus on new product development rather than on integration of 3rd party innovations.

3. The organization exposes itself to competitive attacks as success tends to breed complacency. As organizations become distracted with new business opportunities, they are not able to keep pace with external market innovation. Investment in resources has been spread so thin that the core business is left exposed. In many cases, the natural reaction is to dismiss the new entrants even when they have achieved significant success. Thus, creating an opportunity for these new entrants to be truly disruptive. Think of the effect that Google Maps has had on Mapquest.

Many of these organizational behaviors are a legacy of the early days of the Web when the ecosystem of third party vendors had not been fully developed and most of the expertise resided inside the large digital companies. Now, this is no longer the case. Specialist product teams with deep expertise in areas such as publishing, video, mapping, advertising solutions, etc. tend to reside outside of the large organizations. Large digital businesses are increasingly struggling to both attract and retain top talent at all levels.

Furthermore, new product development has become so inexpensive that large companies will increasingly struggle to out-innovate the market.
As a result, it is important that organizations rethink their set of product and technology priorities to ensure that they can continue to compete in the new environment.

There are a few ways to rethink how organizations can better handle the new dynamics:

- Install an infrastructure that allows dedicated teams to operate with a significant degree of independence from one another (open platform, well-defined set of resources, clear success metrics)
- Emphasize focus on integration of new technologies rather than new product development
- Focus new product development in areas where the core product demands innovation and the external market has not invested in such innovation.
- Pursue a limited number (one or two) “new product” initiatives per year
- Stop thinking in terms of “building vs. buying.” Start thinking in terms of how to virtualize a company’s operations and organization. The external ecosystem of services is now well-developed and companies should take advantage of their expertise and innovation.

Organizational change is never easy. However, the sooner an organization recognizes the need for evolution, the higher the chances are of long-term survival and delivery of sustainable growth.