Four rules for designing new media & entertainment business models

From Disney to ITV to WarnerMedia, media & entertainment (M&E) leaders are quickly moving from their legacy linear business toward a direct-to-consumer (D2C) model. To make this transition, these businesses have made some dramatic moves: significant restructuring to maximize cost efficiencies, mergers and acquisitions, and outsourcing unprofitable parts of the business to shift investment to the D2C model.

While different, all these strategies share one thing in common: They require an extensive focus on redesigning the existing operating model or designing a new target operating model.

Although the design of the resulting operating model will look different for every media & entertainment business, five key components are always the same:

• Structure, people and culture: How does the organization structure itself to deliver services, who is accountable for the work, what is its way of working, and what are its values?
• Processes: How does the organization deliver services to the wider organization and develop consistent ways to execute delivery?
• Governance and metrics: How does the organization make, sponsor and enforce the right decisions offered? How does it measure success?
• Sourcing and procurement: How does the organization source material, personnel and other services from suppliers and how is that relationship managed?
• Data and technology: How does the organization decide on its data and technology needs, and align these with its business strategy?

Designing the Operating Model

While there’s a specific structure and approach to designing a target operating model, the redesign doesn’t always have to include all five key elements. Other times, all five elements require assessment, as was the case with our recent engagement with a leading news media organization. Knowing which elements to look at depends on the underlying driver for the redesign, such as a strategic and operational shift due to a newly incoming CEO or a renewed focus on digitizing the organization.

Regardless of how many elements are involved, we’ve learned there are four golden rules for media & entertainment businesses to apply when designing a target operating model.

1. Start with capabilities. The most valuable place to start is by looking at the current operating model through the lens of capabilities: for example, when looking at the “data and technology” component, the key capabilities would be IT strategy and governance, enterprise architecture, infrastructure solutions and information management. The next step is analyzing whether the capabilities are in place today – i.e., whether the people, processes and tools exist within the organization. A common mistake organizations make is basing the design of their target operating model on this as-is analysis. Doing so, however, narrows the scope of the design and limits the organization from achieving its true potential. A better approach is to design the to-be state independently of the as-is assessment. Once the target state is designed, the benefit of doing the as-is analysis comes into play, as it enables the organization to map the journey from the current-state assessment to the to-be blueprint: what and when transition states are needed, what needs to happen first and the dependencies for getting to the transition states.

2. Avoid analysis paralysis. The most commonly made mistake in assessing and designing the target operating model is spending too much time analyzing the “current” operating model and capturing the way things are done today. In our experience, this activity is not the most valuable part of an operating model design and should be kept short. Organizations should spend more time designing the target state by conducting brainstorming and ideation workshops on what the future can look like. This is a time when businesses should be creative and ambitious. Remember: reviewing and re-designing the operating model of your organization is an incredible opportunity to explore and change how you’re working today and establish the future of the organization. It often determines whether the organization is set up to be resilient, future-proof and scalable.
3. Adjust your approach and find your quick wins. Not every part of the operating model design and implementation can be done in the same way. For example, we strongly advise businesses to approach the “people and organizational structure” element with sensitivity, using a waterfall approach, while the process element can be done in a more agile and experimental way. It’s important to know when and where to experiment. In our work with a global media company, we knew the target people structure needed to be clearly defined and decisive; as such, we invested time in designing it with utmost care. With the process element, on the other hand, it was beneficial to be flexible and iterative in finding the most efficient and effective processes by experimenting with different ideas and solutions. This approach resulted in an intensive analysis of the to-be organizational structure, involving cross-functional communication and collaboration with other external stakeholders such as unions. Simultaneously, we were able to significantly simplify the ways of working and budget approval processes by using flexible experimentation, which drove efficiencies and reduced overall spend. The key is to identify quick wins as soon as possible, such as with processes or data and technology, and show value in those areas where you can experiment, while taking your time with the more sensitive components of the operating model. Areas we've identified as high potential for realizing quick wins are app and software rationalization and the decommissioning of assets. For example, when the target state is defined, a rapid analysis of applications, software or assets can be done to quickly identify the ones that will no longer be relevant.

4. Design with your teams, and with outside-in thinking. Transforming an operating model should not be a siloed effort. It requires senior sponsorship, as well as buy-in across the organization. The most successful operating model designs are created through input from people within the organization, in combination with external expertise. By working with external advisors, businesses can bring in industry-specific knowledge and key lessons learned from other engagements (what works and what doesn’t). They can also learn the latest concepts and models and receive guidance on identifying which of these will work best for their individual case and accelerate the design of the target operating model.

Exciting but challenging times lie ahead for the media & entertainment industry. Investing in an innovative and forward-looking target operating model and taking decisive, bold actions now will enhance the current shift to D2C, drive competitive advantage and enable a much more robust and thriving organization in the long run.

Daniel Martin, a Director within Cognizant Consulting’s Europe practice, contributed to this blog.