 Hi everyone, my name is Paul, I've got a lot to go through so we'll kick off. This is the country that I live in, this is New Zealand, this is in fact the South Island, we've got two islands, we've got the North Island and the South Island, it avoids confusion, we named them that way to avoid confusion. So this is, I live on the North Island in fact, I work for a company called Fairfax Media and we are one of the largest media and publishing companies in Australia and New Zealand. We are in the newspaper business, which I don't know if you've heard is in a bit of bother, things have changed for us quite substantially, so this talk is about us and what we're trying to do to survive the situation that we're in and I described the situation a bit more, it's a case study essentially. I don't have answers, I only have ideas for how we can progress this. So innovate or die trying, can you hear me okay? You're all good? Great. My wife insisted that I put this photo in, I'm sorry this is me pre-beard, kind of beardish, but I'm agile lead at Fairfax in Wellington, Fairfax New Zealand. So we've got agile teams, I was really pleased to see Mary's talk earlier that we tick a lot of those boxes, we're hypothesis driven, we are working towards continuous delivery, we can always improve, we do a lot of good things and the internal teams are set up really well and now we also work with a lot of vendors as well and we consider those vendors to be our partners and we try to develop long term relationships with our vendors, we don't want to have this short term project mentality, we want to develop that relationship. I've been in the business of software for about 25 years now, initially a software developer, about 10 years ago I moved into an agile space after working for a big government project which didn't go too well, we failed, we didn't fail to deliver, that was a horrible thing, we actually delivered on time and on budget but when the customer actually saw what we delivered they said it's not what we wanted, which is the worst feeling in the world when you build something for a customer that they don't actually need or want and it took another 6 months, so it took us 10 months to get to that point and then another 6 months to rework it into something that was actually usable and I thought at that point I left, took 3 months off, thought there's got to be a better way of doing things, I really had it had enough I came back in, I got pulled back into several startups, I started one of my own and then another startup where we were allowed to do things how we wanted and we took things in an agile way and to us agile just meant collaboration with the people we were building things for and regular collaboration, they were actually part of our team, that kind of thing so that's my story, I joined Fairfax a couple of years ago I was looking for a challenge and I think I found one most people know who Kodak is, right? I don't think there's anyone young enough in the room to know who Kodak aren't they were a big Kodak and Fujifilm, there were two big players in the world as far as film was concerned everyone has photos like this, I'm sure you've got stacks of photos like this in your attic somewhere or lying around somewhere or in albums and what people don't realise is, well, one Kodak when it bankrupted in 2012 that's the first thing, but the other amazing thing is they actually invented a digital camera they invented a digital camera in 1975, this is the first digital camera here it's got a, this is the inventor by the way, he was 24 when he invented it and they've actually got a cassette on the side here this is like a normal audio cassette that we all had in those days and it took 23 seconds to download the photograph once it was taken, it was a very small CCD, it was all based on CCD technology one of the first uses for camera, definitely the first use for camera, sorry but it was one of the first uses and he took it to the executive and they looked at it and said no one's going to watch, no one's going to want to look at photographs on their TV surely why would anyone want this? and the marketing and executive basically said that they weren't going to progress this idea they also realised what a huge disruption it was going to be on their business and they didn't want that disruption they pretty much owned the entire product line from start to finish from film to printing and processing and so on and even when Steve and a colleague invented the first digital SLR in 1989 I think it was they got the same reaction from the board, no they just didn't want to know the technology wasn't, to be fair the technology probably wasn't in place they couldn't see that the technology was there to enable this kind of approach to photography but they still maintained that it would be a huge disruption on their existing business model and they didn't want to disrupt their existing business model it's really hard to do that by the way, really hard, I know from experience so our code at the moment in the printing or newspaper industry we had a very similar experience and that's why I wanted to put code out there because it's a very close analogy to what we've done we entered the digital market ourselves but we were scared of digital the newspaper was making so much money for us our revenues were huge from advertising primarily but we just didn't want to challenge that business model and even though we could probably see it coming we still had our heads in the sand so this is a bit of a history of us in Wellington we're approximately 150 years old in New Zealand so printing started back in 1865 with the evening post then a competitive kicked off in 1907, the Dominion these were bought by Rupert Murdoch's company in 1972 by then there was about 40 or 50 publications he eventually merged the evening post and the Dominion into what we now know as the Dominion post it's a morning paper we went live with our online offering in 2000 Murdoch sold to Fairfax Family in 2003 in the US in the meantime advertising revenue was reaching its peak of about $50 billion a year for newspaper in 2007 most of us know that there was a global financial meltdown and advertising revenue went off a cliff I'll come back to that and then iOS apps, Android apps and so on and by 2011 advertising revenue was halved in the US to $25 billion and it wasn't until then that we got our mandate to transform into a digital first company we'd been resisting for that long the writing had been on the wall for that long but we still resisted and it wasn't until 2012 when our new CEO came in he had a digital background he said right what are we doing this is no longer a print industry a digital industry and you guys need to transform this business we still have printing plants of course our latest upgrades to our printing plant cost $20 million we've actually consolidated we share print plant with our major competitor we share distribution costs for them as well New Zealand is not a big country I guess most of you already know that but there's only 4 million of us distribution is quite high though it's about $40 million a year for example for print alone it's quite a major task we've just recently had a huge success in the sense that we've launched our digital first authoring platform which means effectively we've got an operational backbone which enables us to print focus on digital publication first and foremost but then allows us to syndicate content through to other formats quite easily and it allows the journalists to be in one application and one way of entering their content and they become a digital first newsroom so just a graphic for you to see what happened in 2007 this is well it reaches its peak here in the US this is in billions of dollars and then 2007-2008 when the meltdown happens it goes off the cliff and everybody expected it to come back but of course it didn't come back it just has declined further and further along the bottom here the grey line we've got the digital revenue and that's what we make from digital advertising not significant at all for us not to support the business that we have anyway or the current business model that we have and then of course the middle line is Google and their global revenue and they're currently about $60 billion in global and about $16 billion in the US so Google and a number of other social media types took advertising away from us essentially we also lost other sources of income like classifieds for example which went to eBay and Craigslist and locally for us it would be Trademe we don't have eBay in New Zealand as such which is the major player and a number of other factors contributed to this so digital disruption the adventure begins Jean Ross she's based at MIT Sloan and she has a theory that she calls smack it and she says it sounds it feels like it sounds smack it you know it's social media mobile analytics and internet of things and she says these have all come together to the confluence of these technologies that's provided the opportunities for disruption in this market or in any market there's also things that are followed up behind this like cognitive computing and biometrics for example all of these things contribute to different ways of delivering or changing the value proposition of something that you already do and enhancing it to make it better so it's much easier for someone to obviously enter our market and compete against us our printing press costs a hundred million dollars plus in one plant no one could afford to enter our market and compete against us in that situation journalists were tied to a newsroom or a news outlet and they wanted to work for the best news outlet then they had to be the best at what they did but now that's all gone the internet's leveled everything for us and technology is a great leveler it makes it much cheaper for people to enter and compete against us the other contributing factor of course is Moore's law and the fact that Gordon Moore predicted in 1965 and revised in 1975 that transistor density on integrated circuits were double every two years and combined with David Hess his observation he's also Intel or was Intel that the increase in speed of transistor technology would mean that raw computing power would double every 18 months now hard for us to think what that means that's an exponential growth and that exponential we don't really think easily in exponential terms it's easy for us to think in linear so 30 linear steps, 30 meters pretty easy for us to see whether that's taking us it's going to take us to the end of this basketball court exponential steps though are harder for us to see five exponential steps take us to the end of this basketball court but if I was to ask you guys how far do you think 30 exponential steps would take us anyone, any ideas? it's a long, long way so not just once around the moon but well, around the moon and back again and out to the moon again or 26 times around the world it's one billion meters so exponential is huge and there's a really interesting guy called Ray Kurzweil he's at the Singularity Symposium or you can find him online at Singularity Symposium and he is one of the guys who predicted the internet back in the 80s and he basically said that he attributes his ability to predict the future in terms of technology because he thinks exponentially or he tries to extrapolate his thoughts in exponential terms so linear this is not the path we're on technology is accelerating and the curve that we're on is accelerating faster and faster as we've to give you another example this is the 1995 Cray 2 computer it's about half the size of the Cray 1 which was 1975 that's about approximate real size compared to an iPhone 5 which has 2.7 times the processing power of the Cray 2 and it's about a thousand times smaller you know for me, growing up with this the Cray 2 was like the standard everyone wanted to get near a Cray 2 but now I've got an iPhone 6 in my pocket I don't even know at least four times, five times more powerful than that so back to Jean Ross at MIT she says there's really only two ways and she believes there's two strategies that you can take but you can only take one, you can't take both because you're going to confuse the problem if you do and she said funny enough you'd probably end up in the same place if you took one of these strategies or the other you'd probably end up in the same place but the first one is customer engagement you focus on how you're going to change your value proposition to create a customer experience that no other company can deliver and you're probably going to enhance it with technology but you're focused on the customer experience and what the customer gets this example here is a company in the Netherlands called Burtsog they're a community care nursing care organization they wanted to solve a problem and the problem was a tiered health care system where people on the front line were giving health care quality or health care based on what the person had paid for so if they'd only paid for a basic health care package they would only get basic health care and that meant a professional a registered nurse being on the front line making decisions about what care that she couldn't give or he couldn't give to somebody in their care which is of course a huge conflict of interest for someone who's in a caring profession so they formed back in 2000 it's in middle 2000 so I think it's 2005-2006 they formed with a specific purpose of offering a single tier care health care system they operate in small teams they have a maximum of 12 nurses or 12 caring professionals in each team they organically became agile in the process because they have very few managers no sorry strike that they have 50 back office staff they've grown to approximately 12,000 carers in their teams now so it's a large organization very little back office in comparison and very self-organized what it does mean is they can deliver health care in the previous system as well people in care could see up to 40 different people in the old system now they get a maximum of 12 people and of course that tight-knit group of 12 is able to have some coherency and consistency in their health care strategy the alternative is a digitized solution and digital offers unique experiences in terms of like enhancing existing products I think it was Mary yesterday as well who talked about GE I believe and the fact that GE have large through the digital solution approach as well they wrap existing large assets like turbines and jet engines with sophisticated data gathering technology which then feeds that back to someone who can optimize and enhance the performance of that large asset Uber did a similar thing they took a market that already existed they haven't changed it substantially it was not disruptive as such they've provided the digital solution which makes it much easier and safer to order a cab and go somewhere, go from A to B that's the job that we're trying to solve here is how do we get from A to B and Uber have made it super smooth as far as I'm concerned anyway it's a much easier much easier experience than ordering a taxi so Fairfax back to Fairfax in our digital strategy and how we're facing disruption we've gone for this approach where this has occurred quite naturally for us but it seemed like we had to lean out our processes and we've created this concept of the lean newsroom or publish ready newsroom so what we're doing is trying to reduce waste as much as possible and support we've got 600 journalists in our team in New Zealand we've published 1200 stories a day we've got quite an operation and any time that we can save those guys in terms of publication is obviously saving costs overall for the company what we used to do is go through a series of sub-editing steps so in traditional print editing or journalism the journalist creates the basic story, outline maybe something quite substantial but then it goes through the sub-editor looks at the title and makes sure the title fits the page they make sure the copy fits the page and so on there's a whole series of steps which means that the original journalist often has really doesn't recognize the final piece of work that's published or printed we've taken all that away now it's just a single person who's responsible from beginning to end publication including on the print side still where we have the print side where those stories are going through to print so we built a software platform we feel like we're quite ahead of the game I'm sure other people are doing similar things in our industry because it does seem quite natural that we had to do this like I said it's what we would call our operational backbone it's what keeps us alive in terms of being able to produce content this is our critical system if you like and this is where we have to have uptime we have to produce content to to survive this is our newsroom by the way we work in an activity based working environment so nobody has a fixed desk we all come in in the mornings we've got lockers we can pretty much work related to the activity that we're doing if we need to work with these guys we've integrated our technology teams with the newsroom in the process of making it a much tighter relationship we don't see us as separate anymore we actually operate we'll locate within this space and work with them as close as we can it's amazing what you learn by osmosis when you're sitting in the environment your customer is working in we've gone down the path of sustaining innovation every company does someone like Clayton Christian talks Clayton Christian from Harvard talks about sustaining innovation versus disruptive most established companies naturally fall into a sustaining innovation model which is what I mean by sustaining innovation is we seek to enhance the profitability of our existing products by going to our more involved and sometimes more demanding customers and trying to increase the profit for them making niche products essentially for people who want to pay us for them so this means that we're looking to move up into our market in other words and we're doing that with a lean start approach like I said earlier we've gone hypothesis driven development driven so we think about problems that we want to solve we test out these problems as quickly as we can well we test out the solutions that we think might work for these problems as quickly as we can we encourage a metric driven culture we want to see results you measure you get what you measure basically so it's really important to think about the measurements so just to give you some more background information we're not in a bad position considering the population of New Zealand is only 4 million we've got half the population as an audience we're not in a bad place we just have to commercialize our product we've got content heaps of content but the problem is in any innovative kind of endeavor is how you commercialize these are the two examples of what we do in terms of like validating ideas as quickly as possible it's a concept called the button to nowhere which means we haven't fully built the product it looks like a fully working product on the surface of it we're really just getting you to click through to a certain point where we can say for example we asked you if you want to log in or maybe register because you want to sign up for this product at which point we present you with a screen which says sorry we haven't finished building this out yet but thank you for your interest please enter your email and we will get back to you when we've finished but we've got some very valuable information at that point which we know people are interested or we can judge the scale of the interest in it the other approach we use is called the Wizard of Oz so I think most of you might be familiar with the Wizard of Oz but it's basically it looked like the genuine thing a big scary guy who was all powerful in fact it was just a guy behind the curtain working a few mechanical bits and pieces so again we build something out but it looks like it's all powerful but in fact it's mechanical in nature or manual in nature behind it but we're just looking for feedback as quickly as we can the other approaches of course are things like A-B testing and so on we just want to learn as much about an idea before we commit to developing it out the third sort of step to our strategy is taking an integrated approach this is really trying to say stop these silos, we don't need silos we're a digital company digital is now everybody's responsibility it's not an IT thing I shudder every time I hear the word IT because I've worked in IT departments this is a whole organization responsibility and we need to start thinking like that it's not one it's not one silo that's responsible for this the important thing with this though is that we like to maintain this concept of the church and the state in the newsroom which means you want to separate those two out you don't want the newsroom to be biased by the commercial because then you get things like sponsored content and native advertising it suckers you guys as the audience into something that looks like a journalistic piece but in fact it's an advert maybe informative but it's an advert even though heaps of people are experimenting like the Guardian the New York Times with that approach we are well aware that we shouldn't be messing with our audience in that way and we need to find alternatives to commercialize things out so we do separate that idea of the newsroom and the commercial and the way we do that is by focusing our internal teams on the newsroom and our external partners on the commercial the content and curation and discovery is at the heart of this for us that's why a lot of people come to us for the news they could get the news many other places hopefully they come to us because they're like minded and they like the content that we're providing they like what we're reporting it's very much like I'll talk to you later about the analogy I've got so Clayton Christensen from Harvard he said the important thing you have to do in this position is think what's the job that you're trying to what's the job that your customer or audience is coming to do when they're on your using your product and he states it quite clearly people don't want to buy a quarter inch drill they want a quarter inch hole just in the same way that when you hire an Uber you don't want a car you want an A to B journey you don't want to be a car owner so we've started shaping our thought processes around what is the job that we're trying to what is the job that the person is trying to do on our site and a lot of that stuff for us is looking at content discovery in terms of people they want to find content easily they don't want to search they don't want great they don't want to have to work to find the things they're looking for fourth step for us is to become a modern broadcaster so we're diversifying into multiple channels we're going through talks to merge with a competitor at the moment in New Zealand no longer a competitor but seen as an ally we actually share printing presses with them already and now we're looking to acquire we'll merge each other into this they will provide radio for us we'll provide internet and newspaper across the country and this is some of the things that we're exploring in terms of other alternative revenue streams this one over here is a community-based website which allows people to sign up and they get news and information in a hyper-local sense you know this is my community this is my friend group and social group in that community it puts them in touch with their neighbours essentially and also events and news that relate to their local or their locality Stuff Nation is a what we call user-generated content it sounds quite sterile but it's people blogging on our site for us so it's curated content in the sense that they are they're blogging and the fifth thing for us to do is to perform some organisational surgery there's something that Gene talks about a lot we've talked already about maintaining the separation of church and state and we view editorial as the audience draw card and commercial as the way of making money but we really need to chop out the silos and think of ourselves as one big organisation that well whatever size the organisation needs to be to support the business model that we're trying to create so that's what we're currently doing that's our approach at the moment we also realise that this thing called disruptive innovation which Clayson Christensen talks about is something that we have to be fully aware of because what disruptive innovation what Clayson means by disruptive innovation is when a technology enables somebody to come in and undercut your market and do something in a cheaper way than you can already do it and essentially what they're doing is taking out your they're either coming in underneath you and taking your customer that isn't feeling so loved because you're not focused you're focusing your sustaining innovation up here and your low profit customers are basically ignored and that means somebody can come in and take that customer from you using a cheaper or better technology approach it's also possible for them to come in from an adjacent market and adjacent markets in our environment will be something like social media that was an adjacent market no one really saw how much that would take the news away from us or news feeds away from us this is the only video store that's left in my city I thought I'd put this up here because this is something that we need to think about these guys are essentially the reason they survived is related to the curated content they nearly went under they nearly closed but the community rallied around them and they're a bunch of movie nerds they love movies I've been in multiple quizzes with these guys we've never ever beaten them we're always second to the guys from Arrow Street they know a lot about their stuff you walk into the shop and you can say I've seen these films and this and I like these directors and they will recommend something to you and they're usually always right they're always spot on in terms of this and their recommendations which is why they've survived it's a similar situation with bookstores you know a lot of what we would call bookstores back in the day or maybe 5-10 years ago and now what we see is stationery shops we'd buy our stationery from them but we'd never go in there to buy a book from them anymore but we still have those books stores that curate content and they know their stuff and you go in there because you want a recommendation and so for us that's where our disruptive thinking is happening at the moment we need to start really innovating around this the problem with innovation well as someone suggested these guys when they were on the threat of going under their collection were so important someone suggested putting it in a museum and that really is the writing on the wall for these guys that they need to change their business model quickly and maybe find a better way of recommending movies to watch that they can commercialize in the same way we have to find a way of commercializing commercializing our content because pretty much that content is available in multiple sources but we believe it's the recommendation that will get us the money or the audience at least so just some things that are on our radar this is our home page over here we probably won't have a home page soon virtually nobody goes there anymore they all come directly from Facebook or Twitter they're all linked in from somewhere else they go directly to an article page they go directly to a landing page they don't see our section pages we're going to a distributed content model so we have the home page we have a fairly good looking adaptive home page as well but we just don't see a future for it at the moment the other aspect of that of course is that social media has created a news news of its own if you like you have a group of people that you trust to feed you relevant or trustworthy information and that becomes a truth for you that information is you see that as news and an example this is a Guardian article how technology disrupted the truth this was talking about the British Prime Minister and the fact that the Daily Mail was reporting based on social media that the Prime Minister committed an obscene act with a pig's head it just wasn't true there's no proof out there that it actually happened but social media made it a truth and the Guardian is saying is this valid news what's happening in this regard but that's a problem for us to deal with I think and I don't know how we're going to solve that problem we have other things to consider on our radar we've got the internet of things we don't know how that's going to affect us and then we've got Watson over here and other cognitive computing kind of approaches that might take away they might be a Watson might be a perfectly good curator of the news for someone so what can we learn I think these are my takeaways for you is that digital disruption is only going to accelerate and consider restructuring to adapt to the rate of change that's going to happen lean start-up experiments or something like that are only going to help you need to separate maybe an R&D department to look at new revenue streams and the reason you need to separate your R&D department out is because you can't disrupt yourself just like Kodak couldn't disrupt themselves with their digital camera it's just not in an established organization DNA to disrupt its own business model so the approach that's suggested is that you take maybe a small team in a skunk works type operation and you spin them off in a separate organization maybe they report into a board member but they essentially have a separate budget and they're a separate entity for all purposes because they will be the people that will be building the commercial future for you if you like or alternative commercial futures it's a bit like the the approach where you think the conformity bias I think it was is where you're saying well we all believe that this is what's going to play out and this is how it's going to happen and that might be the majority rules but your R&D department is the one looking at the alternatives and the minority approach to really seriously how we might be disrupted in the future and disrupting our own business model I put this slide up this source is from Russell Reynolds Associates the percent of the executives who respond that their business will be moderately or massively disrupted by digital in the future media is up there it's happening across the board and I don't really want to be a harbinger of doom for you guys but you need to think about this you need to think about your digital first strategy it will come to you it will affect everybody the way we have changed with technology is not going to go away it's only going to accelerate so three things to think about is will you focus on customer experience or a digitalized solution how will you sustain your current approach how will you face digital disruption in your market and that's all from me I think we've got plenty of time for questions so please yep so it's interesting there's a small detail so I see the company grows so in 2012 Android in 2012 you say there's a new CEO coming in and you want to implement digital strategy so I hope you know what the detail about what happened before 2012 because I consider that I will have some sort of digitalization but I'm not sure whether it's really the strategy you mentioned those apps happened really it was a rogue product manager who decided to spin up his own team and start creating the apps much to the chagrin of the newsroom who didn't want it at the time because they saw it as distracting so one they saw the website as taking away business from the paper business and then they saw the Android and other mobile apps taking away business from the digital the website so it all got really it was really really confused so they what happened was they still had their heads in the sand they were still trying to ignore the digital we were in the position in New Zealand where we were actually a couple of years behind the rest of the world I don't know if that's literally but things seem to happen we get warning that things are happening and I just don't think the message it got through that we needed to become a digital first organization until it was clear that media companies in the UK and so on were seriously disrupted there's companies like the independent in the UK who have gone completely online they have no more they don't print anymore they don't have enough numbers to print and so on does that answer your question? but basically heads in the sand rogue product manager built the apps anyway it wasn't until 2012 when we actually had a strategy around digital is there another question? hmm that they needed to, sorry I think it's a good question I'm not sure if I know the exact catalyst but it was definitely that we got a new CEO who's got a technology background and I just think he just took the full by the horns and like that was it I think that's essentially the as much as I know of the story yeah we do so we use we use the Adobe platform for we use the Adobe platform for content management and they've got a great experience manager which allows us to gather analytics and we've got some great insights people to tell us you know basically we're looking at different strategies around our analytics gathering that we can target new markets basically it's like the one of the situations that you mentioned there's been almost that they haven't used actually for ID as to pay infrastructure are there any other cases of for the people that are into this so the one example there's a few examples of companies doing this but there's the one I've got clear sort of clear sight of was one that Clayton which was the first online bank online trading bank they they had this idea for online trading but they realized it was seriously going to undercut their business so for example if you wanted to trade in those days you had to telephone a broker and it cost you $80 to do the transaction but they realized that online trading would be significantly cheaper and that people would be self-serving around that but it would totally disrupt their existing model so what they did was they basically looked for a volunteer group to take this idea forward they took them out of the building one day and marched them across to another building and they set up their online trading brokerage and then they basically that company got so large and profitable that they consumed the other trading bank cool thanks very much everybody