Pearson 25 October 1995
Park Hyatt, San Francisco

I just returned yesterday from Toronto, where the annual meeting of the Information Industries Association was underway.

I was on a keynote panel called “network wars” which became discussion of “how do you not get killed trying to create your corporate future as an information company.”

I’ll start with a brief synopsis of what we discussed there, because I believe it’s relevant.

Then I’ll talk about some more specifics about how I believe companies can best gird their loins for the chaos of the next few years.

The key question, which it seems that most people have forgotten both to ask and to answer, is, “Where’s the money?”

In a group such as the IIA, which has actually been marrying technology, media and information for longer than anyone else, this is a question that carries the kind of weight I don’t often see in the new media business.

The information services companies, more than traditional publishing and entertainment companies, seem to understand that we are now operating in a strange, transitional space where the normal laws of business physics are warping into something that we still cannot predict, no matter how hard we try.

They are looking for answers far more basic than, “How do I put advertising on the Web” or “How do I get distribution for my CD-ROM titles.”

Both very important questions, but my belief is that it’s premature to ask them.

I’ve covered technology for the past 12 years and the virus that ran rampant in high-tech has now infected the media business with a vengeance.

For years, the technology landscape was littered with struggling companies who believed that because they invented something, a market for it was just around the corner. In fact, consumers will want it by Christmas.

Media people, whose businesses are now materially affected by what happens in the technology industry, don’t know squat about technology but are dying for something new to sell their customers, who presumably are tiring of what they’re buying now. so they swallow the technologists’ hook line and sinker.

But as a friend of mine often says, “Never mistake a clear view for a short distance.”

Many wonderful things will happen, but they aren’t going to happen by Christmas. They may not even happen by the turn of the century, since historically it always much longer — and costs much more — than anyone expects to get anything done.

So the money for the foreseeable future — that is, next three years — will be in:

– Conferences, of course.

– Scamming money out of advertisers who are just about to figure out they aren’t getting their money’s worth from Web advertising

But seriously … the Internet and digital media are definitely here to stay. And for the next few years, the most significant fortunes will be made from …

- Tools, not media:
-Search engines,
-authoring tools,
-bandwidth enhancements (i.e., better compression etc.),
-encryption and digital commerce tools like digital signatures, digital watermarks

- Business to business private web services.
-Any technology that’s made it to the mass market has to pass through the business market first, and for good reason. 35 mm cameras, the personal computer, even today’s 64-bit video game machine technology started off as military simulations
-No such thing as a consumer-supported information service. AOL, free. Anything on the Web, free. MSN will be a failure for information vendors because they also will provide news free. Today’s print media — i.e., newspapers — is virtually free. And of course, television is free. So it’s not like we’ve exactly set up a model here for people to pay for information.
-No economic model for consumer svcs on the Web. In publishing, advertising cost-per-eyeball model completely disintegrates. Entertainment, no one knows what interactive entertainment is. And right now, everybody’s giving it away for free, so why would anyone start paying now?

- As those things slot into place, you will begin to see evolve a new, fully digital and probably interactive medium for consumers–both for information and for entertainment, but more importantly for entertainment.

And finally, the idea of repurposing old movies and magazines into online archives — no matter how many buttons you put on the screen for people to click — will die off.

How does this view of the future translate into strategy for a media company like Pearson?

Clearly the strategy issues are both corporate-wide and specific to each of the company’s individual operating units.

At the core of all strategy decisions, corporate or operational, should be a single axiom: it is more important to be right than to be first.

This is true because it is already too late to be first — and clearly no single “winner” has risen above the noise, so if you don’t feel fully engaged yet, you can and should stay focused on quality and more importantly, delivering something that your customers actually want, need and/or enjoy.

Two, the truth is that digital media has already become a marketing business. You already save money producing digital media because of desktop publishing and other technology improvements. In the future, the distribution of digital media over the various global networks will prove to be much cheaper than printing magazines and newspapers and pressing CD-ROMs.

But you won’t save a single cent on marketing.

Putting a brochure on the Web without marketing the site doesn’t do anything except add a drop to a very big bucket. You will have to work even harder to get brand visibility …

More on that later.

The whole endeavor may end up being a wash, cost-wise — the increased marketing costs may offset or even dwarf the savings in production and distribution.

But some people believe that electronic production and distribution are inevitable, if for no other reason than saving trees, so I think it’s safe to consider them as absolutes.

In terms of corporate strategy, it is absolutely critical to invest in technology infrastructure.

For example …

Does everyone have email? Does everyone have a connection to the Web? Do the executives in the company use the technology, not just the employees? Does everyone have a computer system of sufficient quality to use digital media? Is there a corporate database for shared resources?

These are a few critical first questions.

Next, it is vital that the company invest in finding people outside its operational companies who “get it” about interactive media and who can bring a fresh vision to and do a little reconnaissance.

It used to be, when all of this started, that companies would give the “new media” job to the person they couldn’t figure out what to do with, and six months later they’d cut the position because there was no market — duh — and get rid of the person.

Today, because of multimedia’s hype status, the “new media poohbah” job goes to a prized employee who probably doesn’t realize that he or she is in just about the same position, since there won’t be a real market for a while.

The result is almost always the same — some poor bastard who gets way in over their heads produces one or a handful of CD-ROMs and a Web site that cost a bundle to develop and hardly stir the waters when they’re released.

It’s critical to hire someone who is acculturated to computers and interactive technology — that would be Someone Younger than You and Me, I’d imagine — who may have some wacky, non-corporate ideas.

That is exactly what you want. Give them free rein and enough money that they can go out and find new people and new ideas.

What they come up with can inform you from a strategic standpoint as well as provide support and comfort to the operational units who may need a corporate champion who speaks their language.

Yes, this is a risk. But if you find someone who seems to be producing interesting ideas and prototypes, you’ll be far ahead of the game.

You may want to repeat this process in each of your operational companies, if you haven’t already.

You don’t need to give them each $15 million to develop a new Internet product line, but you need to give them enough to figure out what is going on, who is building the right tools, where the artists and geniuses are, and be ready to pull them into the organization as you’re ready.

Another critical concern will be learning how to leverage all your assets. As we know, digital media all looks alike–little invisible 1s and 0s in different forms, none of which ever have to take form in the physical universe and all of which are extremely suited to combining and recombining into various forms.

As we say in the software world, Is that a bug or a feature?

Through the narrow lens of many large media conglomerates, the ability to blend many different media and products digitally is definitely a bug.

I’m going to tell a tale out of school here that you will probably like because it is about a competitor, though the competitor will remain nameless.

There once was a large media company, very active in new media, who hired a very smart guy to cook up a project for the Internet.

He decided he would do something with all their gardening stuff.

It was a great choice. The company had two or three magazines where gardening was an integral part of their editorial, as well as many reference books on the subject and connections with famous gardens that were willing to contribute historical data and photographs to be part of this project.

The project was called the Virtual Garden, and it was hands-down the most useful and exciting Website I’d ever seen. (Somewhat eclipsed now by CD-Now, but you get the point.)

I could go to the Virtual Garden and read articles about anything I was interested in, as well as visit the New York Botanical Society and even look up plants and gardening problems in a live, online encyclopedia that was part of the site.

It was a brilliant concept. But each of the individual magazines and books pitched a huge fit that such a project would dilute their “brand.”

Today, if you visit the Virtual Garden and want to get to some of the magazine editorial about gardening, you have to wade through three or four pages of house ads for each publication. There is very little effort to get me, the consumer, right to the information I’m looking for.

I believe this is a great opportunity lost.

If you have products that can work together to come up with something of utility for a new medium, whether the net or CD-ROM, then you must make them work together. Otherwise you will get in the way of your customers’ needs, and continue to repurpose old stuff and never come up with anything fresh.

Branding is certainly not going to go away. But it’s clear that information will be the great commodity market of the 21st century.

And it is for good reason that this prospect strikes terror in the heart of information companies. Our greatest challenge will be to apply creative solutions to the problem of how you keep your brand alive and well-known in the digital media without torturing consumers with your efforts to do so.

In fact, I would say that the company who can be first to figure out something that consumers both like and will pay for on the net will change the industry as radically as Netscape changed the computer industry.

This is what I would aim for. Don’t be in such a hurry that you miss the boat. No one knows where this business is going, and operating under a premature believe that we already know what the media of the future will look like can do nothing but cripple us in the future.

The last thing I would leave you with is, Don’t be afraid.

Invest in underlying infrastructure and in seed projects and especially in smart, young people who have a better chance than you of seeing a budding trend or consumer desire. It is very difficult for a large company to navigate times of fundamental change. But I believe it can be done, and there is no reason why anyone here can’t prove me right.