Bain & Company’s Crucial Report for Digital Adaptation

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The well-known consultancy firm Bain & Company claims at we are at the end of the beginning in our transition towards the digital adaptation of businesses. Millennials have barely experienced physical media and companies really need to understand this.

Young consumers rely very hard on social media to select their consumed content. This notion does not imply that the older generations are not making a similar transition, the pattern is large, but it is true to a different degree for the ages 15-25. For this group, two-out of – three individuals choose their media based on social recommendations. The same number for those aged 35 and older is 50 % (which also is an impactful number, of course). In addition, the older generations are increasingly catching up and the gap is continuously diminished between age groups.

However, the privacy and integrity issue is evidentially of less concern to the young ones right now; the group is at large willing to give up a little data privacy in order to receive better offers and recommendations. In any case, Bain makes clear that it might not be useful to distinguish too rigidly between different ages – there are other considerations that are more important. The overall pattern and crystal clear trend towards the digital world is much handier in crafting viable business models.

We have for several years been witnessing transformation in most kinds of media, from movies to music, news, video and books. For instance, the genre of children’s books is increasingly searching for new ways of captivating the target group. Combinations of text, video, music and interaction are shaping new books for the young in creatively interesting ways.

There are differences in profitability for different kinds of media though. Powerhouses such as music service Spotify and movie service Netflix are struggling with the costs of offering everything to everyone, at the same time as the companies are spending vast amounts of money on in-house programming. On the other hand, video game developers are thriving; especially the ones creating and distributing their products in the form of apps for tablets and smart phones. In this case, profitability is soaring.

However, it is necessary to distinguish between the natures of each business. Whereas Spotify and Netflix might struggle with costs, they both have solid businesses with clear revenue models. Game developers rely on the ability to recreate success again and again, leaving them very vulnerable to the limitations of their in-house creativity.

But how is it to be a large media company with a variety of digital business? How will these navigate in the formation of a world with thin margins, community orientation and trial-and-error products? They need to create a balance between agility and stability. This means combining large longer-term franchises and investments with powerful boosts of smaller, cheaper and more innovative projects, no matter the longevity of the applications. Profitability counts, and powerful wins and on – the – toes agility in smaller projects is key in gathering financial gunpowder for the long-term ambitions.

Finally, as a larger share of the world’s media consumption shifts to developing markets where consumers have less money to spend on music, video and other formats, media companies will need to look beyond their traditional advertising and consumer payment models to new opportunities that make better use of the data captured in digital transactions.

Read the full report “The rise of Generation #hashtag” from Bain & Company here

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