How are innovation labs growing magazine media businesses?
The magazine media industry has come a long way since it initially cold-shouldered the internet and its disruptors. Media owners found, often to their cost, that the impervious stance just didn’t work. The floodgates opened and left many battling against tsunami tides. That was a long time ago now and the industry has moved on through the subsequent cycles of despair and acceptance. Today, the spark’s back, and it’s all about innovation – not just jumping on the latest web wagons, but knocking them out fast in innovation laboratories.
Finnish publisher Sanoma’s lab was inspired by Silicon Valley itself. Says Lassi Kurkijarvi, director of innovation: “We used to take too long thinking up new products. We made grand designs and then spent a lot of time building a product and, of course, the results weren’t always what the business plan predicted when real consumers got the products in their hands. What we saw happening outside was this big start-up movement where speed was of the essence. We realised that making had become much less expensive than planning and we wanted to see if we could pinch a method from the Silicon Valley startup accelerators. We saw that we could do this internally as well. And that’s when we started up our first mobile accelerator programme two years ago. Since then, we’ve done seven of these accelerator programmes – and they are still one of the key activities of the lab as well.”
The Sanoma innovation lab was established at the start of this year. “Of course, we, like many others have had previous innovation programmes, but they were heavy on the PowerPoint and less heavy on the action,” says Kurkijarvi.
In Germany, similar experiments were bubbling. Axel Springer initiated “strategic product development” in mid-2012, with the operation becoming fully operational at the beginning of 2013. “The [initiative] was based on the rationale that innovation as part of existing brands is often hampered by ongoing time and budget constraints. Furthermore, media companies in particular, faced with major challenges to their business model, have a pressing strategic need for R&D and systematic experimentation,” says Ulrich Machold, managing director Axel Springer IDEAS – a company born of the programme. “We aim to develop new digital media products, stand-alone or in cooperation with our existing brands, to test new concepts and harness the dynamics of technological entrepreneurialism.”
Burda International staged its first Innovators’ Suite in 2013. “This is not a programme, but a platform for inspiration and innovation for our international teams. Apart from exchange about our internal benchmarks, the centerpiece of the Innovators’ Suite is to incorporate external and proven business models into our local businesses with a strong focus on digital. The goal is to provide access to innovative digital products and startups from international markets and implement efficient cooperation models and integrations of emerging business models and technologies,” says Kerstin Schiefelbein, director digital and innovation, Burda International.
“Following an open innovation-related model and accelerating the path to successful partnerships is a game changing opportunity for Burda International,” continues Schiefelbein: “We are aiming for a more profitable way to innovate and benefit from lessons our partners learned in other markets.”
In keeping with the start-up model, core teams tend to be small. Sanoma has a team of six, with the flexibility to take on more as a project develops. Says Kurkijarvi: “For every new initiative from the accelerator or from the business, we then operate small startups. If I calculate the amount of people involved, we’re close to 40 people. So it is a sizable operation and I feel we’re quite well-resourced to achieve what we’re aiming to do.”
Sanoma has launched 15 startups and closed down six. “But that’s part of the process,” says Kurkijarvi, adding: “We have nine now at different stages – some already generating some real revenue. We hope to hit €1m with one of the ventures, a few others are showing some nice growth and, of course, some are in the early stages. We are quite realistic about the probability of success, so we aim to launch 50 startups in three years. Out of those 50, we expect five to succeed. It’s a case of having an idea, testing it and if it validates, get it up and running quickly and then also quickly shelving it if doesn’t work.”
The Axel Springer core team consists of eight people – a “variable geometry” of freelance, internal and other resources. “We not only enlist but rely strongly on outside expertise for the execution part,” says Machold. So far the company has launched eight new products and spun-out three independent companies, ranging from core media products to a mobile loyalty scheme.
Burda’s core team is based at HQ, says Schiefelbein. “Our first Innovators’ Suite was highly driven from the headquarters and we still support and drive the innovation processes. During our projects and partnerships in the last year, a decentralised team of local digital managers evolved and is working with partners. They are already cooperating in several countries and drive these partnerships and innovation processes locally.”
Burda is getting results: “Reflecting on the first year, we have launched seven concrete new business models in our markets which had their starting point at our first Innovators’ Suite in 2013. We repeated this format this year and realised two more co-operations in just three weeks.”
Having the freedom to experiment is liberating for the risk adverse. But thinking it through from the start helps. “We all know that ideas are a dime a dozen. We all have them, but we don’t know if they will work,” says Kurkijarvi: “What we do is apply the lean startup principles; always working out what are the riskiest assumptions behind an idea and looking at what will validate or invalidate those assumptions. Basically, even before building a product we aim to build customer insight to see if there is real need in the market first. Then we figure out how to make a product that could turn into real business. The aim is to get something as quickly as possible into the hands of the consumers and use that feedback to start understanding what we should be producing.”
Burda is seeing solid results. “Initiated by the first Innovators’ Suite, we have launched a parenting platform in Russia called moyrebenok.ru, which is a close co-operation of netmoms.de – the leading parenting platform in Germany,” says Schiefelbein. “Moreover, we created a sales partnership with TRND, the leader in word-of-mouth marketing, in Turkey, Poland and the Czech Republic. Also, our successful premium partner network for fashion retailers, where Poland was the pilot country, launched in Turkey recently. This is an exclusive partnership with tracdelight, Germany.”
Axel Springer IDEAS funnels all its efforts back into corporate product development. “We shape everything we do into individual products,” says Machold, “We are less concerned with organisational change or internal initiatives.”
Sanoma has seen some fast returns too. “It’s only been half a year for the lab. But, for example, in the Netherlands, we launched an accelerator programme together with the largest mobile operator KPN – and that has already created an interesting partnership. And we are also working with a large fast moving consumer goods company to create a platform for them. Basically, we won the pitch by saying ‘we don’t have a product for you but we have a process whereby we can find it together’. The lab has already opened up a lot of new doors for partnerships which have a significant revenue value for us as well.”
Cogs in the machine
There are clear differences – and advantages – to being part of a big organisation. It’s important to remember that, once the white coats are hung on the peg for the day. Says Kurkijarvi: “I believe we have a great team but, to be honest, we are competing against startups who usually have more funding and hunger – so we always have to find an unfair competitive advantage in what we do, like using our existing customer relationships. In some cases we can use our media power to accelerate, in others we use the distribution network we already have. These advantages define what we invest in. And, of course, we don’t want to stretch too far from the industries we’re in.”
It’s the same for the others. Says Schiefelbein: “Investing into innovation processes is very important for us and the results show that these investments will pay back in revenues as well as in knowledge and competences. It’s not necessarily about creating more innovation, it’s about smart innovation and unlocking untapped local potential with the help of the ‘outside world’. This is why we constantly look for ideas and technologies that fit with our brands, target groups and local market developments.”
So where’s it all heading? Will publishers hand the keys to the business back to the creatives, or will lab-style innovation continue to be a driving force in media? “We need to eat our own dog food, if you like,” says Kurkijarvi. “Basically we always tell venturers they have to be evolving and thinking on their feet – and that is what we need to do as a lab. After half a year, our lab is already something quite different. For example, we started with a quarterly stage of funding so ventures had a limited amount of time to reach certain targets. Now we’ve changed that process to a more money-driven process, closer to how real start-ups operate. And we are currently working to taking bigger steps from the accelerator programmes. We’ve been moving towards building an innovation community at Sanoma. We’ve trained close to 700 people at the company in startup, business model innovation, design thinking and customer development. All the new skills which we see are necessary in the digital world in product design and building.
“The goal is for the company to work in an innovative way, and we are already seeing people pick up the methods we are promoting and we are able to show that we are fast at validating and invalidating concepts that are being looked at by the lab.”
Alex Springer IDEAS is getting slicker: “We have gone from more of an incubator-like, thematically broad-base to a very core-business focused lab approach and have become ever leaner in terms of initial set-up time, product scope and capital at risk,” says Machold. But, he suggests that the lab is very much a cog in the corporate wheel.
Says Machold: “Axel Springer is consistently pursuing the objective of building up a fast-growing and profitable digital portfolio, and for this reason is networking today more than ever before with the current generation of founders: digital startups. Along with the transformation of our established strong media brands, our own new developments online and strategically-oriented acquisitions of web companies, this network is one of the building blocks of the company’s international digitisation strategy: Axel Springer SE wants to become the leading digital publisher.”
“We see, that due to the Innovators’ Suite concept, the digital development in Burda International countries could be pushed faster to a next level. The exchange and communication between the countries has developed and we do workshops and webinars for our Innovators’ Circle to stay in touch and consider interesting opportunities throughout the year,” says Schiefelbein.
In a technological world, the keys to the lab aren’t going to be handed back any time soon. The boffins have proved that they are dictating the terms today and that their calculated scientific approach is vital to give creative companies the edge.
“Mastering systematic, fast and efficient software development and creating an environment for rapid product innovation that also includes editorial teams is absolutely vital, yet not something many media companies appear to be particularly good at,” says Machold. “We must crack tech faster than tech companies crack content – and we can learn a lot from them in terms of speed, efficiency and how things must be based on the circumstances of the digital world, rather than what our world used to look like 20 years ago.”
Says Schiefelbein: “We will constantly improve our businesses, look for new business opportunities and develop our innovation processes. It’s not a time limited programme, but an ongoing and international process.”
“The world is changing so fast that I think there will always be a need for a kind of lab in a company,” says Kurkijarvi: “But what will it look like in three years? I know it will be completely different from what it is now. On the one hand the current role of the lab will be obsolete and will hopefully be picked up by the business and become part of their processes and on the other hand you need an entity to explore the different options. Innovation is needed to create options for strategy. That is why labs are essential.”
EMMA, the European Magazine Media Association, founded its own Future Media Lab in February 2012. Executive director Max von Abendroth came up with the idea as a way of bridging the gap between the fast development of the media sector and the very long-lasting legislative procedures at European Union level. “There was a need to anticipate what the future media landscape would look like and the idea was to do this by including all relevant stakeholders in such a debate, including politicians, but also technology companies, journalists, media professionals and academics.
“There is a big difference between the media companies which are inviting innovation and the Future Media Lab. We are not driving innovation by investing in start-ups, but we are trying to bring together all the people who have a good understanding of what innovation is about and link it to the political debate. That is the unique selling point of The Future Media Lab.
“It is a unique to have such a platform at the interface with media innovation and media policy, because that didn’t exist, at least not in Europe. The idea came from the pressure we felt from the daily work we were doing. We found it difficult to give answers to certain questions and we felt it would be better to involve the politicians in the debate about the future of our industry rather than just confronting them with final acquisition papers.
“I think we have managed to set up a good network of experts from the different areas that are now committed to thinking about the future of media and in the context of the policy work we are doing here. And I think it has also raised a lot of awareness within the media sector about the impact of new policies on the everyday businesses. The policy makers are now much more aware of what the thinking is in our sector – and not just magazines, the whole media sector.
“It is giving the politicians a better idea. I don’t think it is speeding up anything – and that wasn’t the objective – most of the things coming out of Brussels aren’t helpful to our sector. It’s more about slowing things down and reflecting better and just keeping the corridors of innovation in our sector as wide as possible.
“The feedback we get is that the media companies and professionals are sharing information too – and that was also the intention; to allow everyone to learn. The last January conference was a good example, because we talked a lot about innovation; but innovation from the perspective of the journalist and the innovation of media professionals. These are two different perspectives and people left the conference with a better understanding of where the other side is coming from.
“We are attracting an increasingly expert level of people. Rather than people just sitting there and listening, they’re there to share…since EMMA started the lab there has been more emphasis on innovation and not being scared of technological disruption.”