Why are we doing non-telco case studies?
Digital transformation is a phenomenon that is not just affecting the telco sector. Many industries have been through a transformation process far more severe than we have seen in telecoms, while others began the process much earlier in time. We believe that there are valuable lessons telcos can learn from these sectors, so we have decided to find and examine the most interesting/useful case studies.
In this report, we look at German publisher Axel Springer, which has successfully transformed itself from a print-based publisher to an online multimedia platform.
While the focus of this report will be on Axel Springer’s transformation, the key takeaways will be the lessons for telcos to help them make their own transformation process run more smoothly.
STL Partners has done extensive research into the challenge of telco transformation and how to implement effective business model change, most recently in our reports Five telcos changing culture: Lessons from neuroscience, Changing Culture: The Great Barrier and Which operator growth strategies will remain viable in 2017 and beyond?
General outline of STL Partners’ case study transformation index
We intend to complete similar case studies in the future from other industry verticals, with the goal of creating a ‘case study transformation index’, illustrating how selected companies have overcome the challenge of digital disruption. In these case studies we will examine five key areas of transformation, identifying which have been the most challenging, which have generated the most innovative solutions, and which can be considered successes or failures. These five areas are:
- Value Network
For each section, supporting evidence of good or bad practice will be graded as a positive (tick) or a negative (cross). These ticks and crosses will then be evaluated to create a “traffic light” rating for each section, which will then be tallied to provide an overall transformation rating for each case study.
We anticipate that some of these five sections will overlap, and some will be more pertinent to certain case studies than others. But central to the case studies will be analysis of how the transformation process is relevant to the telco industry and the lessons that can be learned to help operators on the path to change.
Axel Springer’s transformation – a success story
German publishing house Axel Springer began to suffer from declining revenues in the mid-2000’s as changes in consumer behaviour and disruption from new digital rivals such as Google and Yahoo! led to falling readership. Axel Springer identified this threat immediately and reacted swiftly, making the bold move to cannibalise its core printed newspaper and magazine business by repositioning most of its existing content onto online and digital platforms. The company has continued this transformation with an aggressive acquisition strategy, enabling it to expand its footprint into new geographies and content areas.
Even though Axel Springer’s transformation required sweeping technological, strategic and cultural change, it has been a success. Since the disposal of several non-core regional publications in 2012, both revenues and EBITDA have grown on average nearly 5% per year, while the percentage of revenues from digital streams grew to 67% in 2016 from just 42% in 2012.
Why is the Axel Springer case study relevant for telcos?
Much of Axel Springer’s transformation has consisted of (and been driven by) the change from traditional (print) to digital (online) publishing. While telcos have grown up in the digital era, with much of their transformation being driven by changes in consumer behaviour, there are many parallels between Axel Springer and the telco sector. We will look at the key lessons that can be learnt in the following areas:
- Advances in technology
- Changes in consumption and customer habits
- The risk of cannibalisation
- New opportunities in content
- Working with social media
- Platform and partnership opportunities
- Culture change
- The importance of data
- Executive Summary
- Axel Springer’s transformation success – a summary of key lessons
- Axel Springer in STL Partners case study transformation index
- Why are we doing non-telco case studies?
- Axel Springer – background to transformation
- What was Axel Springer’s business model pre-transformation?
- Drivers of change – how the market developed and Axel Springer’s reaction
- Axel Springer in STL Partners transformation index
- Appendix 1: Axel Springer – company timeline
- Appendix 2: Axel Springer – recent acquisitions
- Appendix 3: Axel Springer – recent investments
- Figure 1: Total global internet users
- Figure 2: Traditional publishing company business model
- Figure 3: Post-digital publishing company business model
- Figure 4: Axel Springer total revenues 2003-2016
- Figure 5: Axel Springer total EBITDA and EBITDA margin 2003-2016
- Figure 6: The development of news and media consumption
- Figure 7: Axel Springer 2016 revenues by sector (€ million)
- Figure 8: Axel Springer percentage of revenues from digital streams
- Figure 9: Axel Springer revenues by sector 2012-2016
- Figure 9: Axel Springer investment in acquisitions 2012-H1 2016 in comparison to selected telcos