Corporate Entrepreneurship Essay
US Broadcasting Industry:
The US media industry was the second largest market around world at $255.1 billion and was forecast to grow at a compound annual growth rate of 2.3 percent till 2017. Within the media industry, broadcasting and TV was the largest category with a market of $142.6 billion. The industry players were competing mainly with one another for viewership to drive advertising revenue which was the primary source of profits. The traditional advertising driven business model started to shift due to a few trends. First of all, there were more ways for broadcasting advertisers to reach customers. The progressive consumerization of technologies such as social media tools had contributed to this trend. Secondly, new technology products made it possible for users to skip advertising.
Thirdly, the content creation was getting localized and the audience was fragmenting. Fourthly, more television advertising was purchased through consolidated conglomerates which had various resources with better insights about their target audiences. Lastly, the switch from analogue to digital TV broadcasting not only led to multicasting with more channels but also made the industry more favorable for new entrants. In general, the technologies were putting so much pressures on the traditional business of this industry.
Latinos in the US:
There were also unique factors for this largest minority group in US. Firstly, the Latinos were growing at 8 times the rate of the non-Latino population and contributed to nearly 17% of US total population. Other than that, the per capita income of US Latinos were higher than any of the BRIC and households and was growing at a faster rate than the number of total households in US. Thirdly, Latinos were on the path of “acculturation” and they were leading dual lives. However, the Latinos formed only 6% of the total marketing pie as an audience and there did exist a huge gap. As a result, Latino market had truly become the most potential market segment for various industries.
Entravision, Luminar and the Big Data:
Entravision, which had 56 TV stations and 49 radio stations in most popular Latino markets across US in 2013, was the largest independent public media company focused principally on the US Latino audience. Regards all the strong corporate performances and growths, Franklin Rios and Walter Ulloa, the founding chairman of Entravision, had agreed on to set up an analytics division called Luminar in Entravision. The main objective of Luminar was to act as the first mover which would leverage Big Data analytics at Entravision to offer exceptional marketing and advertising products as well as lead Entravision to transform from a media company into an information and analytics company.
Rios understood the impacts both the technological trends and the Latino demographic trends had made to the US broadcasting industry. He understood that the traditional market research tools had limitations which would not help him to further extract insights from the US Latino market and the search for alternatives led him to the Big Data. His Big Data initiative was strongly supported by Ulloa as he believed that leveraging Big Data at Entravision could not only help them to fully understand the Latino market to extract its huge potential values but also serves as a new element of corporate strategy to lead Entravision to stand out from its traditional media industry competitors. As a result, Rios and Ulloa decided to establish Luminar as the Big Data analytic division at Entravision.
At the same time, Ulloa’s own interest in the launch of Luminar we driven by these 4 objectives: Entravision should transform from a media company into an information and analytics company. Laminar would be the centerpiece of such a transformation of Entravision. The new data driven approach of Luminar would complement the traditional survey driven approach of Entravision. Luminar would in the long run to be a new revenue stream for Entravision. As the first mover in the space without any competitor in sight, Luminar and Entravision had gained strategic advantages over their competitors.
Using the Socio-technical framework to further understand Luminar and Entravision’s positions under the Big Data environment, it is important to consider Entravision and Luminaries respectively and then collectively to evaluate how closely they align with each other:
Structure: A listed company, multiple broadcasting stations, with traditional corporate function units such as Finance, Marketing, R&D, Sales and etc. People: Nearly 1,000 employees, familiar with the old industry norms, believe qualitative data was more important than quantitative data. IT: Majorly TV and Radio, mobile, digital, web, other interactive media Process: All kinds of traditional ways of delivering values to customers, community involvement, local content creation.
Structure: New corporate entrepreneurship, division of Entravision, President Rios reporting directly to Ulloa, initial investments all from parent company People: Exposed to technologies and innovations, data driven, IT: Huge amount of data from various sources, Hortonworks, MapReduce, high performance data analysis platform Process: New revenue streams, data analytics, using various algorithms
From the above Socio-technical framework analysis, there were huge differences between Entravision and Luminar in terms of structure, people, IT and process. Also, this distinct misalignment could seed potential roadblocks for Luminar’s future growth.
Rios was truly facing some problems before the launch of Luminar. First of all, the growth target set by Ulloa for Luminar to generate 10% of the revenues of Entravision in 5 years was achievable but was too aggressive and pressuring. He was confident that with no competitors in the market Luminar could reach this target, however, he did need more time to sort out other problems. Secondly, unbalanced interests lead him to question about the effectiveness of Luminar’s structure fit into Entravision as a fully embedded division. Moreover, there was no proper performance measurement system existing at that moment for Luminar to build up the credibility both internally and externally.
Furthermore, although Luminar could approach internally or externally, there was still no clear direction for Luminar regarding how to leverage Big Data analytics at Entravision. Lastly, Rios was also worried about how he could sustain a first mover advantage for Luminar and the business model could not easily been imitated by competitors. Based on all the issues Rios were concerning, the fundamental problem should lied on that there were no internal buy-in at Entravision because people were skeptical about Luminar. Therefore, how to successfully securing internal buy-in became extremely critical to Luminar’s sustainable long term growth.
Obviously, for Entravision, it had stable business and constant growth for years. At the same time, the strong demographic trend of Latino group was bringing more and more opportunities for future business of Entravision. Furthermore, the traditional marketing method based on qualitative data were still believed to be reliable. As a result, there was no evidence of any burning platform at Entravision and thus no urgency for any organizational change. The socio-technical framework analysis in the situation part also shows that there were distinct misalignments between Luminar and Entravision regarding the 4 organizational aspects including structure, people, IT and processes. These misalignments indicates that it could be really hard for Entravision people to understand, accept and then support what Luminar was about to do. Securing internal buy-in Entravision was really critical to Luminar. First of all, as its entrepreneur division, Entravision would be committing funds for the launch of the Big Data initiative and its growth.
The funds would be provided to Luminar on annual basis. Thus, if the internal buy-in was not in place, Luminar’s funds for growth would not be guaranteed regardless the performance of Luminar. Secondly, one of the major objectives for establishing Luminar was to make it as a central part of corporate strategy to transform Entravision from a traditional media company to an information and analytics company. Rios and Ulloa had to admit that this was also an attempt to change the underlying corporate culture of Entravision and culture change has been considered as the most challenging part for any organization change. Without internal buy-in, the transformation efforts would quickly fade out without changing the DNA of Entravision. Thirdly, the new data driven approach of Luminar was expected to be complemented with the traditional survey driven approach of Entravision. Without internal support from Entravision R&D department, Luminar would not be able to come up with more integrated and systematic solutions to its customer and offer its customer with better and insightful marketing solutions to target at the US Latino group.
In addition, Luminar relied strongly on the partnership with Entravision. Entravision’s market experiences as well as customer relationships could provide Luminar with a very resourceful platform to start their sales. If Luminar could not secure internal buy-in from department such as Marketing, Luminar would not be able to leverage this resourceful platform to make itself as a new revenue stream for Entravision. When we look back at the minor problems in the previous section that Rios was trying to figure out, it seems that most of them were resulted from the major issue that there were no internal buy-in in place.
For example, Rios was wondering what kind of structural fit Luminar should be, what caused this was exactly the different interests from internal stakeholders. If they all the internal stakeholders were supporting Luminar, the anticipated structural fit for Luminar to be a strategic division in Entravision should be the win-win solution. Other than that, Rios’ concern on performance milestones was also caused by the lack of internal buy-in because Rios needed to lead Luminar to achieve those milestones to establish credibility with not only with customers but also with employees of Entravision.
1: Financial stability
The first criteria for evaluating the best option is financial stability. Although Luminar was different from traditional type of startup companies which were always looking for sources of funds, Luminar still faced pressures from losing support from Ulloa and Entravision. If there was not any feasible substitution for funds available for Luminar, Luminar should try to ensure the current committed funds from Entravision.
2: Remove resistances from R&D, finance and sales department Internal resists came primarily from the three sources which are R&D, finance and sales departments. The winning option should effectively remove the roadblocks from all of these 3 departments. Luminar absolutely needed corporations from these 3 departments to support its long term growth. The R&D would be providing human and technical resources for Luminar to develop the Big Data analytic solutions. The finance department would be responsible for funding Luminar and measuring its performance. Sales department would help Luminar approach its new products and solutions to Entravision’s existing customers as well as any new potential customers.
3: Sustain long term culture change
This criteria requires the option to be able to sustain long term culture change inside Entravision. Basically, the option could further help the Entravision employee understand what Big Data is and what kind of benefits Big Data could bring to them. If the Entravision employees started to realize the solutions based on quantitative data is better than the traditional norms based on the qualitative data, they would start to accept Big Data and Luminar and finally start to change the culture.
4: Potence of creating business synergies and new revenue streams. This criteria is used to evaluate if the options have potential to create business synergies and new revenue streams. The Luminar was not even started so everything was still unknown. As a result, one of the easiest ways to secure internal buy-in would be showing that the option had potential to create business synergies and new revenue streams.
The above 4 criteria are listed according to their priorities. Criteria 1 must be satisfied as it is critical to all new business adventure. Criteria 2 also needs to be satisfied because unable to remove those major resistances could directly result in failing the process of securing internal buy-in. Criteria 3 also needs to be satisfied as it could further strengthen the internal buy-in by eventually encoding the data analytics into Entravision’s DNA. The last criteria is also important as satisfying it could deliver Entravision with even higher level of confidence in Luminar.
Since Luminar was not even started, the proposed options here are basically strategic proposals that Rios could present to Ulloa and the board of directors to show how he could possibly secure the internal buy-in.
1: Luminar as an independent startup company and acts as a strategic partner with Entravision For this option, Rios would propose that Luminar to become a separate company and maintain an arm’s-length with Entravision. As an independent startup company, Luminar would acquire its own resources such as R&D, HR, Operation, Marketing and Sales. With initial funds from Entravision, Luminar could go out and seek more venture capitals for its build up and future development. At the same time, the company can focus on its own corporate vision and objectives without worrying about any resistances from Entravision.
As a strategic partner with Entravision, Luminar could still take advantage from Entravision’s resourceful platform. For this option, since Luminar did not have any prototype available and with only the ideas in Rios’ mind, it could be really hard for Luminar to seek external venture capitals. In the meantime, securing funds from Entravision executives would also become harder as it is no longer a part of Entravision. As a result, this option has very high risk in securing the financial stability and could not satisfy the first criteria. Luminar would no longer act as a change agent in Entravision if it becomes independent. Thus this option would also not meet criteria 3. Although this option strongly satisfying criteria 2, it still can be easily opted out as it does not meet the most important criteria 1 and 3.
2: Luminar as a strategic division and focus on leveraging Big Data externally For this option, Luminar would keep the current structure fit to be a strategic division of Entravision. At the same time, Luminar would focus on leveraging Big Data externally by targeting with external customers. Rios already had initiatives in mind and he planned to develop three specific products based on Big Data at Luminar. The first product would be Analytics which could interpret data to help clients target their customers better. The second product would be a service that could “cookie-tize” offline transactions data to merge with online data and altogether to enable clients to expand the scope of their digital market. The third product could improve the accuracy of social media to provide customers with more fine-grind market insights.
Rios would initially use the three new products to aim at blue chip marketers and advertisers who were Entravision customers and provide them with competitive advantages. For this option, as long as Luminar could generate topline performance, Entravision would continue to invest in Luminar. As a result, this option satisfy criteria 1 as it keeps Entravision as the best investor to keep financial stability. Luminar’s focus on external customers might not effectively remove the resistance from its R&D department. However, by targeting at the blue chip key customers, any successful sales closure could turn the marketing team from resistance to support.
Regarding the financial department, as long as the revenue starts to come in, CFO and the financial folks would start to believe in Luminar. Thus, for the second criteria, this option could partially satisfy it. For the third criteria, as most of Entravision employees were still not able to see the benefits that Big Data could bring to them and with remaining major resistance from R&D department, this option could not effectively sustain the long term culture change. For the criteria 4, this option successfully satisfy it as it would definitely create new revenue streams for Entravision.
3: Further leveraging Big Data at Entravision through internal innovations. This option is basically built on the top of option 2 and Lumina would further leveraging Big Data internally. Luminar would still focus strongly on the existing external customers and developing those 3 products for offering. Other than that, Luminar would design and develop tools and solutions specifically tailored to internal departments. For example, Luminar could develop Big Data initiatives to help finance department to tracking real time cash flows as well as forecasting budgets. For HR department, solutions could be created for helping them in team building and performance evaluation. For sales department, Big Data could also help them in inventory management, forecasting, relationship management, closing deals and etc. Regarding the R&D department, Luminar could also offer solutions which were basically better than what they were having.
Meanwhile, Luminar could work with R&D department to achieve predictive analytics in the future. For this option, it would boost the corporate performance through both internal and external initiatives. It could definitely satisfy criteria 1. For criteria 2, this option further indicates what Luminar and Big Data could bring to those 3 departments. With both the external performance and internal benefits, the 3 departments would likely to start buy-in and thus this criteria is also satisfied.
For the third criteria, this option allows Lumina to distinguish most number of early adopters throughout the corporation and they could simply help with spreading the DNA out to rest of the corporation to sustain the long term culture change. For the last criteria, this option is truly able to show that Luminar would be potential to create business synergies by offering various internal initiatives and new revenue streams through those 3 mentioned products targeting external customers.
By comparing all of the above options, approaching the third option seems the most favorable as it satisfy all of the four criteria. When Rios was about to propose this option to Ulloa and the board of directors, they would be confident that Luminar could successfully remove the resistances and secure sufficient internal buy-in.
Short term: 6 months to 1 year
For the short term, Rios should clearly propose the winning option to Ulloa and rest of the board of directors. He needed to explain the proposal with great details which would help the directors to carry forward his ideas and messages down to each department of Entravision. The next thing Rios should do was to officially establish Luminar and start seeking for the resources to build up his team. The DNA of the Entravision was not analytical, thus, it would be better to attract resources from outside of Entravision. At the same time, Luminar should target at hiring analytic resources with strong Latino background as they know how to generate better insights from the Latino market. By end of the 6th month, Luminar should have the core team successfully built. After that, Luminar should start the data acquisition tasks.
The process he envisioned involved building a database of US adults and a subset of Latino adults in US. Then, Luminar would extract data from social media tools such as blogs, tweets and YouTube. Together, this would generate, from preliminary reckoning, about 125 terabyte of living, breathing data which could be analyzed in real time. Going forward, the data would be ingested into Hortonworks along with algorithms such as MapReduce and Luminar customized ones to profile consumer types with a high degree of precision. This fundamental technical platform for Big Data analytic should be established and tested to be reliable by end of year 1.
Medium term: 1 year -3 years
Starting this period, Luminar should invite representatives from each internal department and work together on the development of both external customer facing products as well as the internal customer facing products. Those representatives should be people welcome to any change and they would also be responsible for acting as the change agents for their corresponding departments. Those 3 products targeting at external customers should receive higher priority. By end of mid of year 2, the prototypes of the 3 products should be ready for test. Sales team should working closely with Luminar and get involved in the product development process. The reason why promoting sales team involvement is that it would offer enough information and training for them to change their messages to pitch customers.
And by end of year 2, the final delivery of these 3 products should be ready for any potential business opportunity to generating revenue. After the external products were developed, Luminar would shift their efforts to focus on developing those internal products. Those representatives from each department should be involved within the development process and feed update back to their own departments. By end of the mid of year 3, prototypes for internal products should be ready for testing and initial training. By end of the year 3, the final internal products should be in production and full scale of training should be in place.
Organizational change effort could be started parallelly in this period with the product development. Successful transformational change must have supports from the c-level, as a result, Rios should work with Ulloa to secure buy-in within board of directors and executives to support the organization culture change. Kotter’s 8 steps could be used to direct the change process.
By end of this period, Luminar should be able to successfully secure large scale internal buy-in and would offer them a health and sustainable environment for future growth.
Long term: 3 – 5 years
In this long term period, with further adoption of internal products within various departments, analytical DNA should started to spread over through word of mouth, performance dashboards and etc. The culture change process should also benefit from the above achievement. For Luminar, its primary objectives in this term would be maintain and improve both the external and internal products. At the same time, Luminar would focus on revenue growth and work hard to achieve that 10 percent of total revenues of Entravision by end of the fifth year. If Luminar turned out to be a successful corporate entrepreneurship adventure, Entravision should make Luminar as an example in the future to leverage another corporate entrepreneurship to facing any future revolutionary industry change.