CNN and the “House of Brands” strategy …
Take a look at some of the key shows on CNN and one cannot but notice the network’s recent adoption of an explicit “House of Brands” strategy in an effort to better wage the battle for “viewer eyeballs”. The collage below shows some of CNN’s major shows and their distinct “brands” (e.g. AC360, Fareed Zakaria GPS, John King’s State of the Union, etc.).
By expanding away from the core umbrella “CNN” brand to a portfolio of brands for individual “products”, CNN is trying to form deeper association and identification with its viewers through a sub-segmentation approach. By forming show-specific brands (represented by a distinct anchor along with a catchy tagline reflecting the show’s underlying theme), CNN has increased flexibility to target and reach sub segments of the viewer pool by enabling a more tailored messaging and content theme. In effect, each show (or brand) has the ability to fight its own battle against other networks’ shows targeting the same viewer sub-segments. For example:
- Wolf Blitzer (Tagline: Situation Room – Target viewers who want to get the latest critical and heated news of the day)
- Campbell Brown (Tagline: No Bias, No Bull – Target viewers with the differentiated message that the show is all about keeping the government and businesses straight by calling out mis-information and broken promises)
- Fareed Zakaria (Tagline: GPS or Global Public Square – Target wonky viewers interested in foreign policy and globalization issues)
Although an effective strategy, the “House of Brands” focus could also backfire in the long run: in particular it can potentially weaken the mothership “CNN” brand in the minds of viewers. In addition, the adopted strategy will continue to strenghen the “cult of personality” in U.S media and shift market power away from the network to the individual anchors.
The More Things Change, The More They Stay the Same …
The mortgage CDO initiated market crash of 2008 has surprising similarities with the rail road induced market crash of 1873. Both are driven by greed induced risk taking in a rapidly changing market, with banks issuing mis-priced securities and bonds on top of risky and faulty assets that resulted in defaults and deflation which in turn triggered a multi-year recession. In the following passage from Ron Chernow’s House of Morgan, if one replaces the railroad concerns (Credit Mobilier, Northern Pacific) with (Freddie, Fannie, AIG), storied banking institutions such as (Jay Cooke) with (Lehman or Merrill) and there you go …
“Financial markets were at first unsettled by the scandal of the Credit Mobilier, builder of the Union Pacific Railroad … then debilitated by the Northern Pacific, the mighty house of Jay Cooke failed on Black Thursday, Sept 18, 1873. The failure ignited a full blown Wall Street panic … Affairs continue unprecedentedly bad. Five thousand commerical firms and fifty-seven stock exchange firms were dragged down …” [Ron Chernow, House of Morgan]
If nothing else, the repeat of history and the trends in between suggests the following:
i) In the non-ending Red Queen race, the financial innovations, technologies and policies will be insufficient to predict and manage the combination of human factors & secular market transformations that beget periodic market crashes.
ii) Due to the acceleration of secular transformations driven partly by globalization and technology, disruptions and market crashes will become more frequent.
Going forward, volatility will be our ally.
Obama, Hillary and a case of Innovator’s Dilemma
Like so many favored incumbents, Hillary Clinton could not escape the Innovator’s Dilemma in a competitive bid for the market place (the democratic primary in this case)
Coined by Harvard business professor Clayton Christensen, the Innovator’s Dilemma states that often it is the very strength and core offering of the established incumbent that ultimately lead to their fall.
The favored incumbent (Hillary) spend most of her resources and focus on her core offering (i.e. Experience & Judgement) since this is what her customers (know hereafter as voters) both expect and demand. When a competing new-comer enters the market (Obama) he tends to bring a differentiated set of offerings (Change); having fewer resources and reputation with the voters, the new-comer typically cannot be competitive along the core offerings (Obama claiming he can match Hillary on Experience & Judgement). At first, voters are not willing to trade off the incumbent’s core offering for the new-comer’s new offering (i.e. choose Obama’s message of Change over Hillary’s message of Experience during the early primary days). Lulled by a false sense of security, the incumbent underestimates the new-comer and gives him breathing room to find a niche haven (Hillary not identifying and attacking Obama as the key threat during the early primary days). From his beach-head, the new-comer, over time, continues to refine and improve along both the new and core offering (campaigning on the key message of Change but also selling voters on his Experience & Judgement). As the gap along the Experience & Judgement dimension narrows between the incumbent and new-comer, voters all of a sudden place more value on the new offering dimension (i.e. Obama’s score of 100 on Change + 30 on Experience is more attractive than Hillary’s score of 100 on Experience alone). By the time the incumbent realizes her lagging position across the new offering dimension, it is often too late. Voters now want a mixed offering which the new-comer is more favorably positioned to provide.
Not all off-shorings are created equal …
One major branch of the Globalization movement is off-shoring, whereby companies outsource some aspect of their business process (software testing & development, customer call center, etc.) to another country. For companies based in developed nations, off-shoring can not only bring significant cost savings but also provide a beach head opportunity to build the experience curve and develop assets to enter emerging markets to capture growth. This opportunity however is not created equal for everyone.
In particular, knowledge based firms from non-English speaking G7 nations will lose out. Qualified knowledge based talent pool from off-shoring destination countries often pursue English over other developed nation languages. In effect, English on the global stage has achieved significant supply side externalities, making it harder for other languages to rapidly diffuse across the white collar segment of the populace of the emerging economies such as BRIC.
All else equal, English speaking services firms will be able to more efficiently “dis-assemble” its supply chain and configure its scope of the firm compared to non-English speaking firms. This will translate to not only cost side advantages but also to being more aligned with a global market.
The illusion of fast pace in the high tech industry
Many have characterized the high technology industry, in particular software, as one of rapid change where one must be ever vigilant and paranoid, constantly scanning the horizon for emerging threats from competitors and partners alike. However, this mental model of the high tech industry is too broad in its analysis. If we focused our attention on those sub segments of the industry that are the most profitable, have the least number of substitutes and enjoy the highest level of consumer lock-in, namely those sectors that are build on standards and/or exhibit network externalities, a different pattern emerges.
Technologies that benefit from being a standard setter or exhibit externalities often enjoy consumer lock-in (demand side externalities) and channel partner lock-in (supply side externalities). Such technologies spawn an ecosystem of product offerings, partner complementary products and consumer preferences. Once such an ecosystem becomes a dominant player, they operate in a relatively low competitive environment and enjoy high margins. These ecosystems are hard to topple and thus industry change along that venue will necessarily be slow and innovation will likely be evolutionary rather than revolutionary (think MS OS or Adobe pdf viewer). Moreover, as these technology eco-systems grow larger in size (i.e. competitive value offering relies on multiple partners or consortia rather than a single firm), the pace of change/innovation will decrease further due to more complexity in coordination, incentives and goal alignment.
The high tech industry is not fast paced. It is characterized by a steady, perhaps rapid, background noise of evolutionary improvements and ecosystem adjustments, interrupted once in a while by a disruptive and loud eco-system crash and replacement. This is necessary for sustained profitability.
Root cause(s) of pharma’s R&D woes and possible fixes …
The Innovation Gap in Pharmaceutical Drug Discovery & New Models for R & D Success
In the past decade the pharma industry has experienced an innovation gap crisis characterized by relatively flat growth rate in new drug approval rates and a steady growth of over 2.5X in cost. Big pharma has tried to tackle the innovation gap with a series of strategic solutions: throwing money at internal R&D, horizontal consolidation, and increased in-licensing from the biotech sector, all with limited success. In our whitepaper, we survey the literature to pinpoint the fundamental root causes of the innovation gap and explore some of the emerging business models and solutions on the horizon and assess their opportunities and challenges in addressing the R&D crisis.
read online from “Kellogg on Biotech”
In the Name of Democracy
Blast of the past … Here is a short essay I wrote for a writing class a few years ago
In the Name of Democracy
On many occasions we hear institutions and nation-states wage conflict with others in the name of democracy. The primary objective to an institution’s leverage of the “democratic cause” is to garner support from its citizens. However any citizen who takes credence to this “call to arms” indiscriminately does so at the risk of paying great tribute to the vices of irrationality and injustice.
From a political standpoint, democracy is broadly defined as a government structure (along with its implementations) that speaks for and represents the ideas and common will of the citizens it governs. Consider a near future where all nations are “democratic” by our previous definition; under which banner will these “free” nations rally for support if they find themselves locked in severe opposite interests? Can we favor one democracy as been more righteous over another’s?
Unless the citizens of all nations are homogeneous in creed, beliefs, and culture, democracy alone will not be sufficient or even germane for long-term halcyon stability between nation-states.
The primary cause of all conflicts between individuals or nation-states does not rest in the politics that govern them but the diversity and differences themselves. If we are to cast our ballot for favoring a conflict, we must understand the reasons and our interests in its stake; and that it be based on, if not lawful, then at least moral and ethical convictions, and not in the name of democracy.
Mike Hu – Feb ‘04
