There is a need to rethink the regulatory framework, in a way that is persuasive. The argument essentially is that regulatory structures in the US were built in the New Deal in 1930s to regulate the known risks of the financial services industry as it was then. In the last few years, some of the regulations between investment banking, commercial banking and some others were taken down.
The industry has grown much more complex and it has outrun its regulations. Regulations were some sort of a cover-up, a towel around the waist. But the waist was getting bigger and the towel couldn’t cover all. So we need some rethinking on regulations to understand the changes in the industry at the national level, and we clearly need more sophisticated understanding of what kind of regulations come with globalisation.
The right amount of regulation and the right amount of risk have to be balanced but we clearly have to go to the 21st century regulatory regime, some sort of transnational as opposed to national regulatory regime, so that there is some sort of quilt of regulations.
Recognising that the business world is changing and there is more pressure on every company to make faster decisions about more complex matters. Bill Gates called his book Business@the speed of thought but the problem is when the business grows at a faster rate than the speed of thought. It puts terrible pressure on decision making.
The second challenge is fuzzy boundaries. We have left the time of vertical integration, we have outsourced a lot of elements of the value chain, and we have also outsourced processes. In order to get work done in a global organisation you are dealing with a multi-dimensional matrix. The issue is how to deal with these fuzzy boundaries when the power and influence are all messed up.
The next challenge is the growing power of consumers. It is become increasingly difficult to arbitrage the ignorance of the customers. So how do you get the price, and how do you get a price in these circumstances and in the face of the fourth challenge the extreme competition. Till sometime ago, competition was clicks not bricks, then people thought it was China and India, and now it’s both.
The fourth challenge is the challenge of decision making in uncertain conditions, which is ‘you don’t know’. It’s not even about odds or risks but conditions where you just don’t know.
We have to get through the night and who knows how long and dark the night will be.
The challenge for media is that the advertising model is breaking down everywhere. One need not fear internet advertising. Web advertising is much less profitable, while print advertising is profitable but not growing. It is not sure whether web advertising can be profitable. When the supply is theoretically unlimited then how do you create scarcity and get the price. It’s a stark question that’s facing media.
There are pressures on advertising profitability and they’ll be there for a long time to come. That means you have to do the difficult thing, which is get people to pay for the content directly.
Media has been in the business of getting little money from our readers and a lot of money by re-selling the audience and we have to find a new way to deal directly with the audience.
Some managers in Booz are doing a research study for American Business Media, a B2B publications association, and one of the things they are saying is that you really have to start thinking more about the readers. It’s going to be fairly difficult.
Ultimately if you are selling cost per thousand and saying that my thousand are better than your thousand, then we are still in the headcount game. But if you are actually working on the reader and on the reader service and then you try and resell in a much more focused way, then you may end up with a more differentiated product. One cannot be sure whether everybody will make it across that transition. —