Have you noticed over the last decade that just about anything that isn’t nailed down has been digitised. Today we can access nearly everything from anywhere on anything – from getting the news on a tablet, trading shares on a mobile or accessing software services from the cloud. Plumbers are relatively safe, but most other businesses have to change.

The difficulty for business managers though is not just deciding how to make the change to digital, but how to make money out of it...

Pew Research Centre in the United States found that digitisation is burning money

Newspapers lost $10 in print ad revenue last year for every $1 they gained online. Just five companies, none of which existed a couple of decades ago are now taking 68% of online ad revenue: Google, Microsoft, Yahoo, AOL and Facebook.

Marketers know that they need to integrate traditional mediums with digital. Few businesses actually do – and some still think online is primarily for brands with young customers.

Businesses may be surprised to discover that the place where Australians spend the most time online, is also the most popular with women 25-45 years old.

The papers continue to spend money on journalists and creating the content, while these new companies continue to grow their revenue off the papers’ labours. Now because of their growing databases, fuelled by an understanding of people’s behaviour and preferences gathered from social media use, the digital intermediaries can now target ads more precisely than the old publishers.

The things we can now do on Facebook are incredible. In the past only advertisers who could afford to buy expensive data and research could precisely target their consumers. Now any advertiser can pretty well plan as effectively as the global giants by tapping into the growing wealth of intelligence of the social media technologists.

The Pew report says: “Two trends in the last year overlap and reinforce the sense that the gap between the news and technology industries is widening. First, the explosion of new mobile platforms and social media channels represents another layer of technology with which news organisations must keep pace. Second, in the last year a small number of technology giants began rapidly moving to consolidate their power by becoming makers of 'everything' in our digital lives. Google, Amazon, Facebook, Apple and a few others are manoeuvring to make the hardware people use, the operating systems that run those devices, the browsers on which people navigate, the e-mail services on which they communicate, the social networks on which they share and the web platforms on which they shop and play. And all of this will provide these companies with detailed personal data about each consumer.”

Business journalist Leon Gettler points out “Newspaper groups like Fairfax are the canaries in the coal mine for other industries facing similar challenges, from book shops and publishing to health care, industries where barriers to entry are low and where information is the main product. The trend to digitisation will accelerate with 'Generation C', people born from 1990 on who expect to be constantly connected through every possible device now entering the workforce, and with costs of computing and technology equipment dropping.”

“In every organisation, from media to retailers like David Jones, Myer and Harvey Norman, the biggest challenge always comes down to the tension between those who advocate a more aggressive approach and those aligned with legacy traditions, those who want to go fast and those who want to slow down.”

Adaptability: the new competitive advantage 

As the pace of change accelerates, adaptability becomes the new competitive advantage. Long established leaders like Kodak, Borders and Fletcher Jones are a lesson in what management can expect if they don’t change their business model to integrate digitised marketing with their traditional methods.

Sources: Leon Gettler, Business Spectator, 28/3/12
Pew Research Centre, How Newspapers Are Faring Trying to Build Digital Revenue, 5/3/12