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This presentation was developed for BUS621 to demonstrate various business strategy tools. I selected Scripps Networks for my analysis.
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COLORADO STATE UNIVERSITY
BUS621: Tools for Decision MakingKinner Group 2
Shawn Inman
COMPANY INTRODUCTIONReason Selected• Scripps Networks Interactive has an opportunity to capitalize on the convergence of
media (services, content, and devices) which is rapidly transforming the marketplace. The company’s position as the dominant leader in lifestyle media and branding provides an advantage over competitors in forging the media convergence frontier.
Primary Industry• Scripps Networks Interactive is a leading lifestyle content and interactive services
company with high-profile television and interactive brands.
Major Products and Services• Lifestyle media- National television networks (HGTV, Food Network, Travel Channel,
DIY, GAC), related internet businesses, and other electronic content services. Revenues are generated through advertising, affiliate/ancillary fees, licensing of content, and licensing of brands for consumer products.
• Interactive Services- Internet-based online shopping comparison service Shopzilla, and related online comparison shopping brands Bizrate and Beso. Revenues are generated mostly from referral fees paid by participating online retailers.
Five Main Points:
1. Digital convergence is rapidly evolving the external environment for content providers… failure to adapt business strategies and objectives will likely lead to failure.
2. The leading edge of value in digital convergence is defined by the customer.
3. Customer intimacy (Scripps Networks’ center of gravity) provides competitive advantage for Scripps Networks in seizing new opportunities presented by digital convergence.
4. Refocusing on customer intimacy value as defined by digital convergence will lead to synergies in business activities and create opportunity for growth.
5. Strategies designed for flexibility and responsiveness to consumer needs in the age of digital convergence will not only sustain Scripps’ lifestyle content leadership, but possibly create new frontiers for growth.
EXECUTIVE SUMMARY
Problem statement
Scripps Networks’ position as a leading lifestyle and interactive services company is threatened by the convergence of digital media (services, content, and devices).
Reason for selecting this problem
• Although threatened by this problem, the company is uniquely positioned to capitalize on the convergence of media (opportunity).
• The absence of action will equal failure - “Doing nothing” is not an option
• This problem is the essence of strategy. By applying various “tools for decision making”, we can determine areas where the company needs to seize the advantage, defend established positions, and cease disadvantageous activities.
SPECIFIC PROBLEM TO ADDRESS
Approach Selected and Applicability
• The Value Discipline model determines the company’s targeted value objective in the convergence era, and provides context for further analysis.
• Position, Fit, and Trade-off tools (Activity Map) are used to understand how the company’s activities are related.
• TOWS matrix provides the primary approach for strategic direction:1. Assess strengths, weaknesses, opportunities, and threats (SWOT analysis) . 2. Develop Internal (IFAS) and External (EFAS) Factor Analysis summaries to populate the
TOWS matrix.3. Determine viable strategic approaches based on the result.4. Use EFAS/IFAS analysis to inform other areas of analysis
• Porter’s 5 (6) Forces is used to determine focus area for sustaining competitive advantage
• The BMG Canvas provides perspective on how the business model will likely evolve around the new strategy.
Other Analysis• Researched current issues in media/digital convergence.
TOOLS TO UNDERSTAND THE PROBLEM
A CHANGING ENVIRONMENT
Digital Media is Converging:• Convergence: the ability of different network platforms (broadcast, satellite, cable,
telecommunications) to carry similar kinds of services; and the merging of consumer devices such as PCs, telephones, and televisions
• Convergence is collapsing previously distinct media distribution channels into a single delivery chain through internet protocols (network driven as opposed to device-independent)… video is now digital data.
• Content owners are both facilitators and beneficiaries providing consumer’s new media needs
Consumers are Evolving:• The percentage of video consumers who are multi-mode, multi-device, and multi-
tasking is growing• Although seeking free content, they are willing to “pay” for online experiences by
providing information• Opportunities for access will no longer be limited. In a time-constrained world,
consumers will seek on demand content through multiple channels.• Social networks are a powerful component of the evolving consumer
DIGITAL CONVERGENCE
Characteristics of the converged environment:• Untethered –Access to content in a time, place and method of their choosing• Participatory – Social networks, community-based content• Dynamic – Packaged according to consumer needs• Hyper-linked – Will allow for easy transition for consumers to follow their interests,
video browsing• New tools (platforms) – Managed access to content and creation• More friction between Content Owners, Content Distributors, and Device Makers
• Accurate and appropriate royalty revenue?• Transactions adequately captured?• Responsibility for unauthorized use of intellectual property?• Control of content… platform compatibility?
(Apples refusal to enable Adobe’s flash)• Consolidation and migration between various business models • Complex business models and necessary inefficiencies during evolutionary period
Advertising in the converged environment:• Information databases are improving advertising by understanding the target
consumer… making it more personalized and accountable, less annoying
IMPLICATIONS
Lifestyle Media is Emerging:
• Lifestyle media, as defined in a PriceWaterHouseCooper study, is a personalized media experience within a social context bridging the world of unlimited content to the world of limited consumer time and attention
• The components of the business model most affected by this transition are consumer control of content (interactive and on demand), as well as gathering information about consumer activities and trends.
PROPSECTS FOR GROWTHApproach Description Growth Prospect Examples
Mass Media Content with broad appeal
Saturated, unlikely Hit TV Shows, big movies
Segmented or niche media
Content for special interest groups or audience segments
Limited growth opportunity due to serving smaller niches (long tail)
Discovery ChannelSCRIPPS NETWORKS
Lifestyle media*
* Different context than used by Scripps in defining their business segment. This is term defined in PWHC in “Rise of Lifestyle Media”… seeks to capitalize on convergence opportunity
Customized, interactive content with a greater social context
Considerable, serves new consumption model
Early indicators: YouTube, MySpace, etc
HYPOTHESISDevelopment and implementation of strategies that
synergize impact of digital convergence will solidify Scripps Networks’ customer intimacy niche as a provider of lifestyle
content and present new opportunities for growth.
Sub-Hypothesis 1Digital convergence
requires business objectives to be
established around new dimensions of customer
intimacy in order to sustain competitive advantage.
Sub-Hypothesis 3Strategies leveraging
strength for opportunity (SO) are best for navigating
the digital convergence landscape.
Sub-Hypothesis 2Static “position and fit” of
business activity in the digital convergence era
will lead to failure.
Sub-Hypothesis 4Flexibility to meet
customer needs will foster a “living” business model that evolves naturally in the digital convergence
environment.
TOWS MatrixPorter’s 5 (6) Forces
Position, Fit, Trade-offsEFAS
System Activity MapFinancials
PWC Study
Value AnalysisIFAS
PWC Study
BMG CanvasCustomer Empathy Map
PWC Study
LOGIC TREE AND DATA
Scripps’ center of gravity is Customer Intimacy• Scripps has a devoted niche of consumers desiring their lifestyle content• Because of related demographics for viewership (for example, Food Network:
female, average age 40-45, shoppers), these targeted consumer segments are very valuable to advertisers
Digital convergence is redefining what it means to be “Customer Intimate”• According to a study by PriceWaterhouseCooper, Costumer Intimacy is the key
to ongoing success in a digitally converging world.• Convergence is opening new frontiers for social networking and interactive
content… Being costumer intimate will require fulfilling those needs• In order to retain advertisers, Scripps will need to stay on the value frontier for
lifestyle content.
SUB-HYPOTHESIS 1: ASSESSMENTSub-Hypothesis 1
Digital convergence requires business objectives to be
established around new dimensions of customer
intimacy in order to sustain competitive advantage.
VALUE FOCUS INDIGITAL CONVERGENCE
Operational Excellence
“Best Cost”
Product Leadership
• SNI’s success is built on customer intimacy for advertisers and consumers
• Lifestyle content mass media, but niche segments• Large target audience due to mass penetration• Retaining customer intimacy leadership requires
a “convergence” mindset to defend against rising competition
Deliver the same “Best Solution” in new and innovative ways
Customer Intimacy in a
converged digital world
Convergence forces multi-dimensional perspective… customer-based, socially networked, advertising friendly content for on demand, flexible distribution
Mass Media Competitors
Arising internet-based competitors
Frontier
Internal Factors Weight Rating Wt'd Comments
1 2 3 4 5
Strengths
*Leader in lifestyle content 0.10 5 0.50 Category killer
* Consolidated niche in lifestyle content 0.10 5 0.50 Acquisition of Travel Channel
Brand recognition 0.05 3 0.15 Among the best
Brand exploitation 0.05 2 0.10 Limited use for some reason
* Negotiating position with partners 0.10 5 0.50 Excellent… demonstrated
Experienced management 0.10 5 0.50 Ken Lowe has been there from radio to internet
Strong financials 0.10 4 0.40 Cash position is ok, debt is 1 year of oper profit
* Customer and trends data (Interactive) 0.05 3 0.15 Leveraged for targeted advertising
* Access to distribution channels 0.05 4 0.20 Pursuing all available
Weaknesses
Revenue sensitivity to economy 0.10 2 0.20 Huge swings in advertising trends/revenue
Slow global expansion 0.05 2 0.10 India expansion plans abruptly ended
* Unprepared for unbundling regulation 0.05 1 0.05 No alternative plan
* Reliance on search engine agreements 0.10 1 0.10 Convergence challenge
* Inability to protect intellectual property 0.05 2 0.10 Convergence challenge
Totals 1.05 3.55 * [Note: Convergence issue]
Internal Factors Analysis Summary (IFAS) Table
SUB-HYPOTHESIS 1: TRUESub-Hypothesis 1
Digital convergence requires business objectives to be
established around new dimensions of customer
intimacy in order to sustain competitive advantage.
Conclusion:
• According to a study by PriceWaterhouseCooper, Customer intimacy is the core value discipline for winning in the digital convergence era
• Independent analysis including value disciplines tool and IFAS show that customer intimacy should be the core focus
• Customer intimacy requires active assessment and flexibility to the needs of the consumer… the only way to sustain competitive advantage
TRUE: Digital convergence requires business objectives to be established around new dimensions of customer intimacy in order to sustain competitive advantage.
Digital convergence forces action… status quo is untenable• Threats will eventually be realized in a static scenario (EFAS):
• Internet competition leading to reduced affiliate and advertising fees• Friction with partners over antiquated fee structures and content format• Advertisers seek the power of social networking• “Unbundling” will crush business model and revenue generation• Internet giants will seek other content partners and give rise to new entrants to
challenge lifestyle leadership
Position, Fit, Tradeoff assessment• Position – Needs-based positioning, unique lifestyle content with companion websites,
delivering mostly through traditional channels, essentially no competition in traditional distribution channels
• Fit – Lifestyle content and delivery to consumers and advertisers simple and reinforcing fit. Interactive services are very segmented and generally unrelated.
• Trade-offs – Avoids competition for saturated mass audience and focuses on viewers most attractive to advertisers
SUB-HYPOTHESIS 2: ASSESSMENTSub-Hypothesis 2
Static “position and fit” of business activity in the digital convergence era
will lead to failure.
External Factors Weight Rating Wt'd Comments
1 2 3 4 5
Opportunities and Threats Friction with partners and potential competitors
* Multiple network/device distribution 0.10 3 0.30 Challenge of fee structures, friction with partners and potential competitors
* Distribution format 0.10 1 0.10 Challenge of fee structures
* Social networks 0.10 3 0.30 Smaller startup could leverage social network
* Web-based content 0.10 3 0.30 Competition is still fierce in this arena
Opportunities
International expansion 0.02 3 0.06 Best avenue for near term growth
Use of customer information 0.05 2 0.10 Targeted advertising is very profitable
Brand exploitation 0.02 2 0.04 Licensing of brands to quality products
Horizontal expansion 0.02 5 0.10 Travel Channel… strategic homerun
Partnerships for vertical integration 0.05 1 0.05 Cooperative
Threats
Change in public and consumer attitudes 0.10 3 0.30 No plans for trend change in place
Government intervention (Domestic) 0.05 2 0.10 Unbundling, other regulation
Government intervention (Foreign) 0.02 2 0.04 Prevents growth
Financial market turmoil 0.05 3 0.15 $254 million cash, $884 million debt
Online security failure 0.05 3 0.15 Damage to brand name
Unforeseen technologies, game changers 0.05 3 0.15 Difficult to imitate content would provide time
Cable provider consolidation 0.05 1 0.05 Distributors can negotiate smaller fees
Internet search engine dominance in advertising 0.05 1 0.05 Interactive media is driven by arrangements with search providers
Theft of intellectual property 0.02 3 0.06 Digital format challenge
Totals 1.00 2.40 * [Note: Convergence issue]
External Factors Analysis Summary (EFAS) Table
Lifestyle-Oriented Content
Interactive Services
Delivering Content
Targeted Customer Segments
Interactive companion websites
Video On Demand Services
(Converged)
Cable Delivery
International markets
Satellite Delivery
New Distribution
Technologies
HD Content
Licensing of
Brands
Comparison Shopping Services
Information collection
Consumer Feedback
Interaction Platforms
Marketing and
Optimization
Selling targeted
advertising
Online Communities
Activity-System Map
LEGEND: Primary activity Secondary activity In development
Red is convergence activity
CONCLUSION:
Business model activities must evolve to deliver optimum value• Current -
• Lifestyle content development is the centerpiece activity• Other activities orient themselves in support
• Future -• The red circles and lines of the system activity map show frontier activity• Convergence activities (early development or non-existent) such as
platform-based interaction, social networking, distribution technologies, HD, more profitable use of interactive services, etc. will migrate and realign as new dominant , higher order, strategic themes
TRUE: Static “position and fit” of business activity in the digital convergence era will lead to failure.
SUB-HYPOTHESIS 2: TRUESub-Hypothesis 2
Static “position and fit” of business activity in the digital convergence era
will lead to failure.
TOWS Matrix• When combining IFAS and EFAS factors, convergence issues dominate the matrix
(highlighted in red)• Convergence issues are simultaneously a threat and an opportunity
• More passive “avoiding”(ST/WT) or “weakness” (WO) based strategies might mitigate convergence threats or buy time, but not prevent threat/risk realization
• Convergence issues dominate the SO strategy category• SO is a strategy that uses Strengths to take advantage of Opportunities• Nearly all opportunities are directly related to convergence• Strengths are not specifically related to convergence, but provide means to seize
opportunitiesPorter’s 5 (6) Forces
• Most concerning issue is threat of new entrants provided by scalability of content on the internet for distribution.
• Bargaining power with customers (advertisers and affiliates) is currently high• Advertising revenues very sensitive to economic conditions… decreases power• Affiliate distributors of content have bowed to pricing pressure in the past year, but
could change as consolidation continues
SUB-HYPOTHESIS 3: ASSESSMENTSub-Hypothesis 3
Strategies leveraging strength for opportunity
(SO) are best for navigating the digital convergence
landscape.
TOWS Matrix
Convergence-related in red
Strengths• Lifestyle content leader (no
traditional “network” competitor) (S)• Brand recognition (S)• Strong negotiation position with
distributors (S)• Rich customer data (S)• Experienced management (S)
Weaknesses• Revenue sensitive to economy (W)• Slowing global expansion (W)• Unprepared for unbundling (W)• Reliance on Google for internet
operations (W)
Opportunities• Convergence issues EFAS (O&T)• Vertical Integrated Partnerships (O)• Horizontal acquisition (O)• International Expansion (O)• Brand exploitation (O)• Customer database utilization (O)
SO Strategies• Wedge into convergence arena using
lifestyle content leadership and brand recognition
• Use negotiating strength to forge partnerships for vertical integration
• Use management’s experience to consult/convince partners of way forward… achieve shared vision
WO Strategies• Convergence strategies may provide
alternate revenue sources• Sustain intl operations, build goodwill,
be alert for opportunity, do not over pay
• Convergence mindset may solve potential “unbundling” issue
• Expand horizontally only if ROI is substantial and <3 years
• Share data with google in exchange for services
Threats• Convergence issues EFAS (O&T)• Consumer retrenchment, thrift (T)• Government regulation (T)• Consolidating distributors (T)• Powerful internet players (T)• Online security risk (T)• Intellectual Property theft (T)
ST Strategies• Use negotiating power to ensure
property rights are respected• Use management and strong
negotiating position to illuminate risk of negative action by increasingly strong distributors
• Lobby government (grrr)
WT Strategies• Sustain/encourage cash flow
positive ops (cash cow)• Avoid confrontation with internet-
dominating companies• Develop back up plan for forced
“unbundling” of content• Do not choose sides in distributor
consolidation
IFAS
EFAS
Porter’s 5 (6) Forces
Industry Competitors
Virtually non-existent… convergence
is changing this
Other Stakeholders• Some Union employees
or performers• Government regulation,
potential “unbundling”• Comcast, EW Scripps,
financial relationships
Bargaining power of Suppliers
• Key performers deciding to demand more
Threat of Substitutes
• Substitute products/service could come from online community that people identify with
Threat of Potential Entrants
• Low barriers to entry from internet
Bargaining power of Buyers
• Continuing consolidation of cable/satellite providers as well other non-traditional content delivery companies (ATT U-verse) reduces bargaining power
• Recent bargaining has been successful
• 2008-2009 proved advertisers will essentially stop advertising
Note: Convergence concerns are in red
CONCLUSION:
Opportunity is best pursued from a position of strength• Passive/avoidant strategies are insufficient for dealing with a changing societal
and task environment• Strength/Opportunity approaches are best when the environment provides no
option for delivering value otherwise, and will sustain bargaining power over buyers
• Failure to seize digital convergence opportunities would cede ground to competitors (new entrants, substitute products, and erode customer intimacy value leadership
TRUE: Strategies leveraging strength for opportunity (SO) are best for navigating the digital convergence landscape.
SUB-HYPOTHESIS 3: TRUESub-Hypothesis 3
Strategies leveraging strength for opportunity
(SO) are best for navigating the digital convergence
landscape.
Growth on the digital frontier requires flexibility to meet customer needs• Traditional segmented or niche business models may be inadequate• “Lifestyle” media orientation requires application of new innovations in
customer intimacy to unleash new sources of revenue
Customer needs must be constantly assessed • Understanding and empathizing with the customer is an important part of
staying on the frontier of digital convergence• Customers define the way forward... You must listen
Scripps Networks’ business model has several elements (BMG)• Multi-sided Lifestyle segment – Content distributors, consumers , advertisers
• Content is essentially the platform (traditional business)• Multi-sided Interactive segment (Free, multi-sided) – Consumers/advertisers
• Comparison services and consumer information come together• Future business model components will take advantage of convergence
SUB-HYPOTHESIS 4: ASSESSMENTSub-Hypothesis 4
Flexibility to meet customer needs will foster a “living” business model that evolves naturally in the digital convergence
environment.
PROPSECTS FOR GROWTHApproach Description Growth Prospect Examples
Mass Media Content with broad appeal
Saturated, unlikely Hit TV Shows, big movies
Segmented or niche media
Content for special interest groups or audience segments
Limited growth opportunity due to serving smaller niches (long tail)
Discovery Channel
Lifestyle media*
* Different context than used by Scripps in defining their business segment. This is term defined in PWHC in “Rise of Lifestyle Media”… seeks to capitalize on convergence opportunity
Customized, interactive content with a greater social context
Considerable, serves new consumption model
Early indicators: YouTube, MySpace, etc
Scripps Networks –Expansion required to meet consumer needs
VALUEPROPOSITIONS
CHANNELS
RELATIONSHIPS CLIENTS
• REVENUE STREAMS• COST CENTRES
KEYPARTNER
KEYRESOURCES
KEY ACTIVITIES
SCRIPPS NETWORK’S BMG CANVAS
ADVERTISERS(NICHE)
LIFESTYLE CONTENT
CONSUMERSEGMENT
CONTENTDISTRIBUTORS
ONLINE COMPARISONSHOPPERS
SELF SERVICE
CO-CREATIONCOMMUNITIES
AUTOMATED SERVICES
CABLE
SATELLITE
PHONE DATA NETWORK
ONLINE
ONLINE
PRODUCTION OF LIFESTYLE CONTENT
PLATFORM(LIFESTYLE CENTRIC, ONLINE COMMUNITY)
PLATFORM(INTERACTIVE SERVICES)
INTELLECTUAL PROPERTY AND
BRANDS
HUMAN
CUSTOMIZATION
NEWNESS
CONVENIENCE/USABILITY
AD SPACE, TRAFFIC,
TARGETED SEGMENT
CUSTOMIZATION COMPARISON
SERVICES AND PRODUCT REVIEWS
ONLINE RETAIL MERCHANTS
CONTENT CREATION PARTNERS
CONTENT DISTRIBUTORS
COOPETITION WITH VERTICAL
PARTNERS
VALUE DRIVEN!FIXED COSTS
ADVERTISINGSUBSCRIPTION (AFFILIATE FEES)
LICENSING ONLINE REFERRAL FEES
ONLINE ADVERTISINGFREE
FR
EE
Tr
adi
ti
on
al
Co
nv
er
ge
nc
e
CONCLUSION:
The digital convergence world is and will be defined by the customer• Understanding and listening to the customer will sustain competitive advantage
The digital frontier is still evolving• Predicting future business models is a losing proposition. Even if you are right, you can
be wrong by being early.• Understanding the characteristic of the societal and task environment will provide
context clues for how to evolve the business model• Interactive elements (red and blue on BMG) will create more potential value requiring
even more focus on synergy of activity
Bottom line: Business models must learn and adapt to changing consumer needs and environment… a “living” business model
TRUE: Flexibility to meet customer needs will foster a “living” business model that evolves naturally in the digital convergence environment.
SUB-HYPOTHESIS 4: TRUESub-Hypothesis 4
Flexibility to meet customer needs will foster a “living” business model that evolves naturally in the digital convergence
environment.
• Sub- Hypothesis 1: Digital convergence requires business objectives to be established around new dimensions of customer intimacy in order to sustain competitive advantage. TRUE
• Sub- Hypothesis 2: Static “position and fit” of business activity in the digital convergence era will lead to failure. TRUE
• Sub- Hypothesis 3: Strategies leveraging strength for opportunity (SO) are best for navigating the digital convergence landscape. TRUE
• Sub- Hypothesis 4: Flexibility to meet customer needs will foster a “living” business model that evolves naturally in the digital convergence environment. TRUE
MAIN HYPOTHESIS IS TRUE: Development and implementation of strategies that synergize impact of digital convergence will solidify Scripps Networks’ customer intimacy niche as a provider of lifestyle content and present new opportunities for growth.
SUMMARY OF SUB-HYPOTHESES FINDINGS
• Customer needs are being redefined by digital convergence. • Scripps Networks’ current focus on customer intimacy and leading
position in lifestyle content provides only temporary advantage. • In order to stay ahead of future competition, Scripps Networks
must focus on new and innovative way to deliver a superior customer intimacy value proposition as demonstrated by the Value Discipline tool.
CONCLUSIONS
CONCLUSIONS
• Digital convergence is a threat and an opportunity. “Doing nothing” will ensure the threat is realized.
• In order to successfully navigate the frontier of digital convergence, Scripps Networks must constantly assess position, fit, and tradeoffs as identified in the system activity map in the context of a digitally converging external environment (EFAS).
• Supporting activities providing 2nd and 3rd order effects may become more central (1st order) to the activity system, such as online communities and new distribution technologies.
CONCLUSIONS
• Scripps is uniquely positioned to use its strengths to take advantage of opportunity through appropriate SO strategies as shown in the TOWS matrix.
• Other strategies (WO,WT, ST) are not appropriate because they are more passive and avoidant. They may become applicable if asymmetric approaches are employed by potential entrants or substitutes (Porter’s 5 (6) Forces) that Scripps is unable to immediately defend against.
• For now, leveraging strengths to take advantage of convergence opportunities is the best approach as shown.
CONCLUSIONS• The BMG Canvas shows Scripps Network’s traditional business model is
sustained by advertising and affiliate fees (Black) through cable and satellite.• The current Interactive business segment (Free, multi-sided) is also shown
(Blue)… capitalizing on consumer data and targeted advertising.• Future interactions of the various BMG building blocks will likely be more
interwoven and synergistic as shown (Red).• The exact nature of the digital convergence BMG canvas is not known… only that
Scripps will need to rapidly adapt by listening to consumers (customer empathy map) to understand their needs and provide for them through a “living” business model
• Establish/eliminate/refine customer intimacy objectives to maintain consistent focus on digital convergence customer intimacy
Pros & ConsPotential exist for disruption of current
business activities
Major RisksSeemingly inconsequential business activity
may have unintended consequences
Barriers to ImplementationPossible resistance from current corporate
culture
Next Action Steps to Make It HappenEstablish an action team to develop and
institutionalize customer intimacy activities
RECOMMENDATION #1
• Utilize/develop feedback tools for understanding customer needs in the digital convergence environment... Advertisers, Consumers, and even partners.
Pros & ConsFeedback interaction can be annoying to
customers… use minimally intrusive methods
Major RisksProactive business interaction with the
consumer is risky… be sensitive to boundaries of tolerance
Barriers to ImplementationPrivacy concerns
Next Action Steps to Make It HappenEstablish an action team to develop and
institutionalize customer intimacy activities
RECOMMENDATION #2
• Establish relationships with vertically integrated partners, even affiliate clients, to forge relationships for future unknown partnership opportunities in digital convergence
– Timewarner– Comcast– Direct TV– DISH– Internet search companies– Mega online retailers– Etc.
ProsReduces risk and affords potential economies of scale.
ConsSome potential partners are also buyers… there could be conflicts of interest
Major RisksPartnerships may preclude action or realignment of
business activity if conditions change
Barriers to ImplementationPartners may not desire to engage.
Next Action Steps to Make it HappenAs part of a broader strategic initiative, determine
where the most value added potential exists for partnership
RECOMMENDATION #3
• Develop an online “lifestyle” centric platform that provides for an online community, rapid access to archived information, video content, and even user-created content.
ProsOnline communities are considered central to social
networking synergies and part of a growing customer need. This may well seed the future critical business activity of Scripps
ConsPlatform development is very expensive. Affiliates
who pay for content may not be excited about free distribution of older content
Major RisksFailure of the platform service would result in sunk
costsBarriers to ImplementationExpense and “know how”Next Action Steps to Make It HappenSeek strategic consulting advice from digital
convergence experts
RECOMMENDATION #4
• Train corporate executives and top managers to understand the concept of a “living” business model and implement it.
ProsRapid adaptation and seizing of opportunityConsSelf-critical behavior may be rejected, viewed as weak.
Major RisksMissteps can be costly, may silently convince
managers “living” business model is failureBarriers to ImplementationCorporate culture, limited conceptual understandingNext Action Steps to Make It HappenJust say yes, CEO!!!
RECOMMENDATION #5
Request for decision to:
• Establish action team to assess current operational alignment with customer intimacy goals
• Begin development of conceptual “lifestyle” centric web-based, interactive platform for eventual establishment of loyal online community and social network
• Train corporate executives and managers in strategic tools for decision making and start a process of continual collaboration for realizing a true “living” business model.
DECISIONS REQUESTED
SUMMARY
Five Main Points:1. Digital convergence is rapidly evolving the external environment for content
providers… failure to adapt business strategies and objectives will likely lead to failure.
2. The leading edge of value in digital convergence is defined by the customer.
3. Customer intimacy (Scripps Networks’ center of gravity) provides competitive advantage for Scripps Networks in seizing new opportunities presented by digital convergence.
4. Refocusing on customer intimacy value as defined by digital convergence will lead to synergies in business activities and create opportunity for growth.
5. Strategies designed for flexibility and responsiveness to consumer needs in the age of digital convergence will not only sustain Scripps’ lifestyle content leadership, but possibly create new frontiers for growth.
• Business Model Generation, Osterwalder, Alexander
• Customer Intimacy and Other Value Disciplines, HBR, Treacey, Michael
• Essentials of Strategic Management, Hunger and Wheelen
• The Rise of Lifestyle Media, PriceWaterhouseCooper Study
• What is Strategy, HBR, Michael E. Porter
• Scripps Networks Interactive 2009 Financial Report
• Zacks Investment Research, SNI Stock Anlysis
REFERENCES
BACKUPS
High Impact Medium Impact Low Impact
High Probability
•Convergence of media: Services Devices Distribution•Change in consumer attitudes •Interactive trends
•Customer Information utilization
Medium Probability
• Regulation and unbundling• Cable/SAT consolidation
•International expansion•Internet search enginedominance, high fees• Financial market instability
Low Probability
•Online security failures•Game changing technology
•Theft of intellectual property
Issues Priority Matrix
COMPANY HISTORYScripps Networks Interactive (SNI)
• 1878- Edward W. Scripps borrowed $10,000 from his and started “The Penny Press” in Cleveland, OH, and expanded to other cities.
• 1907- Scripps successfully challenged the Associated Press by starting United Press International (UPI) and improved the company’s ability to expand.
• 1935 to1980- Scripps solidified its position as a top newspaper publisher, and began to build its reputation as a leading operator of local television stations.
• 1981 to 1980- Scripps began buying and building cable television systems.• 1988- The Scripps family sold shares to the public at $8/share.• 1990s- Scripps began to evolve its business model toward information and
content by founding Home and Garden Television, and divesting cable TV systems to Comcast (sold in 1996).
• 2001- Scripps continued to develop “lifestyle media” businesses through new launches and acquisitions.
• 2005- Scripps acquired Shopzilla to enter the online interactive business segment.
• 2008- In order to focus on growth segments, Scripps split off Scripps Networks Interactive (SNI).
• 2009- Scripps acquired a 65% controlling stake in The Travel Channel.
FINANCIALS AND TRENDSRevenue• In 2009, Lifestyle Media revenues increased 4.2% to $1.4 billion corresponding to a
1% increase in segment profit.• For the same period, the Interactive Services segment revenue decreased to $174
million from $238 million the year prior, a 27% decrease.• Lifestyle media segment accounted for 89% of revenue in 2009 as compared to 85%
and 84% in the prior years (increasing %).• Interactive services segment accounted for 11% of revenue in 2009 as compared to
15% and 16% in the prior years (decreasing %).
Other Trends• SNI has generally pursued horizontal growth strategies through acquisition which
include Shopzilla (2005) and The Travel Channel (2009).• The company’s business model centers around engaging audiences that are highly
desirable to advertisers by producing content for television, the internet, and other platforms.
• The company seeks to aggregate large audiences through the organization of searchable and highly useful consumer information.
• The company is actively seeking new sources of revenue with a strategy for diversification.
RESEARCH DATAScripps Networks is the leader in lifestyle content:
HGTV – • 99 million households, 96 countries and territories• Website is a leading home and garden destination - 3 million visitors/month
Food Network – • 99 million households, 150 countries and territories• Website is a leading food and cooking destination - 13 million visitors/month• Record growth in 2009
Travel Channel – • Recent acquisition rounds out “lifestyle” category• 2009 was a record year for primetime and total-day ratings
Other networks – • DIY – Do it Yourself Network, 53 million homes, website top 15, 2 million
visitors/mon• FLN – Fine Living Network rebranded as the cooking channel• GAC – Great American Country, 58 million homes, music-based
• Scripps’ only network with direct competition!Other websites –
• HGTVPro.com – 1 million visitors/mon• RecipeZaar.com – 400,000 recipes (Online community!), 4 million visitors/mon• FrontDoor.com – Online real estate listing service
• Double digit growth in advertising and affiliate fee revenue• Advertising revenue extremely strong at 33.7%, but reflective of sensitivity to economic
volatility
RESEARCH DATAScripps Networks has leverage with industry partners:• Dispute with AT&T U-verse was ended quickly after AT&T customers threatened
service termination as demonstrated by backlash on U-Verse’s Facebook page• Dispute with Chicago’s Cablevision ended after sustained ratings of Food Networks
episodes were aired through special arrangement with Tribune owned affiiates• 2009 affiliate renewals were up substantially and more inline with industry peers
• 2009 - $322 million revenue• 2010 - $430-$440 million projected revenue• Travel Channel expected to add $100 million
• Viewership is at all-time highs, and remained high during the great recession
Interactive Services struggles, but improving:• Shopzilla – Online comparison shopping service
• Includes bizrate (consumer feedback) and beso (specialty) websites• Comprehensiveness of search results and double-digit growth in merchant leads
show improvement• In the third quarter of 2010, Shopzilla and other interactive shopping sites
generated year over year profits for the 1st time in history.• An additional benefit of ownership is consumer information data
CUSTOMER EMPATHY MAPWhat does she
Think and Feel?
What does sheHear?
What does sheSee?
What does sheSay and do?
PAIN GAIN
• Consumer: Life is stressful…I need an escape through lifestyle entertainment, convenient, stress free, when I need it.
• Advertisers – I need good return on my expenses
• Consumer: Clunky websites… long searches for desired content.
• Advertisers: Stalled recovery… am I getting good bang for my buck?
• A family member just posted a recipe on facebook
• Everyone is joining social networks• Digital is here… buy an iPhone• Office friends are going on a trip• The company is throwing a potluck dinner
tomorrow and I have nothing to bring
• Consumer: Research, then purchase … looks for assistance locally at store
• Goes for cheap and easy• "free“ is my best offer
• Clunky slow websites/interface• Search difficulty• Poor review content• Digital download problems• Long surveys• Shared information leading to
telemarketers, etc
• "Easy" stress free options• Personalized options• What I want, when I want it, and how I
want it... sometimes that means free• Social interaction, local and internet
engagement• I’m a valued customer
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