TEACHING NOTE __ Digital Transformation at La Presse

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Volume 16 Issue 1 March 2018 HEC208

Digital Transformation at La Presse (Teaching notes)

Notes prepared by Camille GRANGE, 1 Sandrine PROM TEP, 2 and Sylvain SÉNÉCAL 3

1. The case

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1.1. Overview

La Presse (Quebec)

Main industry

Media; Newspaper (daily)

Type of case

Real; Analytic

Time span

2010–2016

Main storyline

This (real) case takes place in the context of the newspaper industry, which is being turned upside down by powerful socio-technological changes. It focuses on La Presse, one of the leading actors in the Canadian newspaper industry, which, faced with a survival crisis, has set out to innovate and reinvent its business model, including its value proposition, channels, costs, revenue streams, and key resources. The core driver of this reinvention is the design and marketing of its new digital product, the La Presse+ tablet app.

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Company

Part A: Crafting a New Digital Strategy ● Disturbing forces in a disrupted industry ● The technology-driven transformation of a business model Part B: Implementing the Digital Strategy ● Risks associated with developing a new digital medium in the context of a large-scale digital transformation project ● Managerial interventions that can help mitigate such risks

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No

Subjects to be discussed

1

Camille Grange is an assistant professor in HEC Montréal’s Department of Information Technologies.

2

Sandrine Prom Tep is a professor in ESG – UQAM’s Department of Marketing.

3

Sylvain Sénécal is a professor in HEC Montréal’s Department of Marketing.

© HEC Montréal 2018 All rights reserved for all countries. Any translation, reproduction or alteration in any form whatsoever is prohibited. The International Journal of Case Studies in Management is published on-line (http://www.hec.ca/en/case_centre/ijcsm/), ISSN 1911-2599. These teaching notes are intended to be used as the framework for an educational discussion. As such, they represent an illustration of one type of pedagogical solution and in no way exclude other solutions. Deposited under number 5 40 2018 002 with the HEC Montréal Case Centre, 3000, chemin de la Côte-Sainte-Catherine, Montréal (Québec) H3T 2A7 Canada.

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Digital Transformation at La Presse (Teaching notes)

Declining industry Digital disruption Digital strategy Digital transformation Business model reinvention Risk management

Audience

Business school students in courses addressing topics related to IT strategies (e.g., MBA), digital transformation (e.g., master’s degree in the fields of information technology, business technology management, innovation)

1.2. Summary of the case

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Keywords

“Digital Transformation at La Presse” follows a leading Quebec newspaper in its efforts to digitally transform its strategy and operations. The case has two parts. Part A, Crafting a New Digital Strategy, focuses on La Presse’s response to industry pressures through a digital strategy requiring it to develop a brand new digital medium, La Presse+. Part B, Implementing the Digital Strategy, focuses on how that transformation was implemented.

No

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Part A starts by describing a key date in La Presse’s history (and perhaps that of the entire newspaper industry): January 1, 2016, the day La Presse became the world’s first newspaper to go 100% digital on weekdays. The case begins with an overview of the newspaper, its market position, the foundational idea behind its new business model, and its strategic use of technology over time (section 1). It goes on to describe the changing conditions in the newspaper industry (section 2). By learning about key statistics and media trends at both the local (Quebec) and national (Canadian) level, students gain a clear understanding of the rupture that has been occurring in the industry. Section 3 presents the digital strategy developed and implemented in the 2010s together with the relevant characteristics of the new digital medium – La Presse+ – created as a catalyst for this reinvention. The section ends with some of La Presse+’s performance statistics as well as food for thought regarding the sustainability of La Presse’s digital strategy. Part B focuses on the implementation of the new digital strategy. Because Part A and Part B may be used independently, Part B begins with some background information about La Presse, the newspaper industry, and key aspects of the paper’s new digital strategy. It then covers technological (section 2), business (section 3), management (section 4), and marketing (section 5) considerations and organizational interventions that were key to implementing the strategy.

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In short, the case provides a wealth of background information with which to address a variety of relevant management concepts (e.g., disruption, business model reinvention, digital transformation, digital strategy) and to study how they manifest in a real business environment. While many teaching cases are about companies in transition or seeking to grow, this case is about a company’s response to a survival crisis – a company that engaged in and leveraged opportunities offered by digital innovation to catalyze radical change.

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Digital Transformation at La Presse (Teaching notes)

1.3. Teaching objectives

Part A is intended to help students do the following: 1. Identify the context factors that prompt digital transformation within the news media industry 2. Understand how companies can offer a strategic response to digital disruption by transforming their business model using digital innovation Part B is intended to help students do the following: 1. Develop awareness of the many challenges involved in the implementation of a digital transformation 2. Better understand how to deal with the associated risks and challenges

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1.4 Target courses and students

Part A is well suited to courses on strategy or that intersect information technology and strategy at the graduate level, including those courses targeting executive MBA audiences. Part B is suitable for courses on implementing digital strategies such as those for MBAs majoring in information technology or in more technology-oriented master’s programs. 1.5 Data collection sources and methods

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The case was developed using several information sources: (1) public data and statistics – mostly about the media industry, (2) newspaper articles and public reports about the media industry and its competitive environment, (3) presentations by and interviews and discussions with key stakeholders at La Presse (Pierre Arthur, senior director, marketing research at La Presse; Frederick Fortin, director, strategy and products at La Presse; Jean-Marc De Jonghe, VP, digital products, at La Presse & executive VP and chief, digital strategies and operations, at Nuglif, and Mélanie Thivierge, director of information in charge of the Arts and Pause sections at La Presse.)

No

1.6. Related cases

Applegate, Lynda M., Daniel Nylen, Jonny Holmstrom, and Kalle Lyytinen (2012). “Bonnier: Digitalizing the Media Business”, Harvard Business School Case 813-073. o This case analyzes the digital innovation strategy developed by Bonnier, the oldest publishing house in Scandinavia.

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The Bonnier and La Presse cases are similar in some ways. Both are about media companies dealing with a turbulent environment associated with the disruptive effects of digitalization in the late 2000s/early 2010s. In addition, both cases examine organizational responses to worrisome key indicators such as declines in print subscribers and print circulation and to the promising, but uncertain, opportunity offered by Apple’s introduction of the iPad as a new media consumption device. The cases differ in that the Bonnier case focuses on the digital innovation process (e.g., the design of a digital magazine) and its management (e.g., establishing a centralized R&D department), while

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Digital Transformation at La Presse (Teaching notes)

the La Presse case focuses on the “what” and the “how” of the business model transformation associated with developing a new tablet-based medium (La Presse+). Moreover, La Presse is a regional business that publishes and distributes newspapers in Quebec; in contrast, Bonnier is a giant international publisher of books, magazines, and daily and business newspapers.

2. Case analysis and teaching strategy for Part A 2.1. Overview

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In this section, we suggest ways for students to prepare for class (section 2.2), outline an overall teaching strategy (section 2.3), and provide detailed suggestions for analyzing the case and managing a 120-minute class discussion (sections 2.4 to 2.8). We suggest focusing on the following subjects: 1. Digital disruption in the newspaper industry 2. Transformation of La Presse’s business model 3. Sustainability of La Presse’s digital strategy 2.2. Class preparation

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a) For conceptual and theoretical guidance, we suggest assigning the following readings: Grossman, Rhys (2016). “The industries that are being disrupted the most by digital”, Harvard Business Review, March 21 (mandatory). o This article explains that media organizations are the most disrupted and identifies three levers that organizations can pull to “keep pace”: catalytic roles, culture, and commitment. Osterwalder, Alexander and Yves Pigneur (2010). Chapter 1 of Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers, Wiley (mandatory). o This chapter presents an overview of the business model canvas, a tool to help analyze and transform business models. o Alternative or complementary: Students could consult free online videos presenting the business model canvas 1 and the associated value proposition design. 2 Marsden, Paul (2015). “The 10 business models of digital disruption (and how to respond to them)”, Digital Intelligence Today (supplementary). o The purpose of this reading is to highlight properties of key digitally enabled (revenue) models, such as subscription, freemium, free, marketplace, on-demand, etc., and strategies for responding to disruption.

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b) For hands-on experience, instructors can ask students who are not familiar with La Presse’s digital products and those of its competitors to do some of the following exercises: 1. Interact with the website (lapresse.ca), the mobile app, and the tablet app (La Presse+).  Identify key differences in terms of content and user experience. 2. Interact with Le Devoir’s tablet app  Identify key similarities and differences between the two apps. 1

https://www.youtube.com/watch?v=RpFiL-1TVLw

2

https://www.youtube.com/watch?v=b_X18bmpHaw

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Digital Transformation at La Presse (Teaching notes)

If students don’t have access to a tablet, they can either install an Android emulator on their computer (e.g., Andyroid.net) and get the La Presse+ app through it or view the videos 1 showcasing the app on the La Presse+ website. c) Because students will benefit from understanding the history of newspaper production, they can also watch two short videos presenting state-of-the-art 2 and pre-computer 3 newspaper production.

Finally, it is recommended that instructors ask students to work on a few of the questions found in Section 2.4–2.7. 2.3. Teaching strategy (120 min.) Time

Breaking the ice

Objectives

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Part

Discussion format

5 min. Become familiar with the context. Have Full group students share their experiences as news and media consumers.

I

Digital 15 min. Understand the nature, dynamics, and impact of Full group disruption in the the disrupting forces in the newspaper industry. newspaper industry

II

Transformation of the business model

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70 min. Identify the key features of La Presse’s business Full group and model (value proposition, delivery, and capture) small group before the changes brought about by La Presse+. Analyze how it changed with the newly developed medium (La Presse+).

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III Sustainability of 25 min. Think about the next steps: the avenues for La Full group the digital Presse to keep refining its digital strategy and business model strategy 5 min. Identify the key takeaways that students can Full group apply to other cases of digital transformation.

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Wrap-up

1

http://plus.lapresse.ca/decouvrez.html

2

https://www.youtube.com/watch?v=cAeeF8Upb-4

3

https://www.youtube.com/watch?v=G8cCS3o62iI

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Digital Transformation at La Presse (Teaching notes)

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2.4. Introduction − Breaking the ice (5 min.)

Examples of questions to launch the discussion:  How do you use media to acquire news? Do your parents get their news in the same way?  How has media consumption changed in recent years/the past decade?

Begin by asking students basic questions about their own experiences with newspapers or other news products. Encourage them to explain how, why, and when they consume news. Some may acknowledge that they have never consumed news in the traditional way by buying a print newspaper or even paying for news content.

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Although you may be tempted to discuss the La Presse+ product and key factors related to the readership experience at this point, our advice is to keep that discussion for Part II, which addresses the company’s reinvention of its business model. 2.5. Part I − Digital disruption in the newspaper industry (15 min.) In Part I, the goal is to help students do the following: 1. understand the structural changes that have affected the newspaper industry 2. identify the forces that drive such changes (e.g., economic, technological, sociodemographic) and lead to the results that can be observed today. How to achieve these objectives:

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The instructor could start by asking the following open question: How would you describe the newspaper publishing industry today?

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Students will likely mention the most salient performance indicators suggesting that the industry is undergoing a period of deep crisis. The sustained decline in circulation and revenues are clear symptoms of a declining industry, for example. 1 It should be relatively easy for students to identify “readership (i.e., audience) and its (negative) growth” as a key factor, given the importance of advertising (and thus, audience) in traditional business models. Students may quickly conclude that the traditional printed newspaper business model is no longer viable; the following two follow-up questions (FQ) could then be used to help them refine their analysis and link it to the external forces driving this change:

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FQ1: What changes have occurred on the supply side? o The use of digital marketing channels has significantly lowered barriers to entry in this industry; competition has increased and become more agile (with several 100% digital newcomers). A few distinctive properties differentiating the growing number of actors in the news publishing business should be highlighted: medium (print vs. digital), originality (content creator vs. aggregator), authorship (professional journalist vs. lay person), and social embeddedness (community features that channel content).

1

https://en.wikipedia.org/wiki/Decline_of_newspapers

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Digital Transformation at La Presse (Teaching notes)

FQ2: What changes have occurred on the demand side? (Note that we include not only readers but also advertisers on the “demand side” because we consider the market to be multi-sided.) o These new offerings from digital platforms have greater potential to meet the needs of information consumers (readers) and advertisers than do traditional newspaper publishers. They can help advertisers better target their ads and monitor performance (e.g., Facebook and Google do that extremely well and, as a result, capture a growing share of advertising spending). They also offer readers instant access to free informational content.

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This discussion should help improve students’ understanding of industry dynamics by strengthening connections between the changes that have occurred (or that are still occurring) and the somewhat alarming performance metrics highlighted in the case (revenues, circulation). Table 1 summarizes the key points that may be raised during this discussion. The instructor can record these ideas on the board while students share their views on the disruptive forces affecting the newspaper industry. Instructors may choose to end the discussion here or, to facilitate the transition to Part II, may ask a question about La Presse’s response to this situation. Table 1 – Analysis of the newspaper industry Demand: readers and advertisers (A) Supply: competition (B) “Unlimited” competition (worldwide) and more and more informational content available to readers Unbundling: niche services (e.g., Craigslist) have replaced classified ads Consolidations Growing popularity of pure players (e.g., Huffington Post) Newspapers now compete with all online media including big technology companies such as Facebook, Google Business impact (combination of A, B, and C)

Offer on-demand, personalized access to news anywhere, anytime Distribute highly targeted ads to specific audiences Facilitate close monitoring of advertising performance Help customize and automate news production and distribution

Revenues in three key areas – (i) circulation, (ii) classified ads, and (iii) advertising – have declined significantly. This is not just due to the economic crisis of 2008. A cost-cutting strategy is no longer sustainable. The traditional print model is broken/has no future.

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No

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Decreasing audiences: people read fewer printed newspapers. This won’t change with digital natives! Readers’ needs are changing: they want more social interaction and like to obtain information from many sources (using aggregators such as Flipboard); they expect online content to be free. Advertisers are losing interest in print advertising; they increasingly invest in online advertising (better targeting, more precise tracking). Digital technologies (C)

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Digital Transformation at La Presse (Teaching notes)

FQ3: What was La Presse’s position and what were its options? o Instructors may wish to stress that La Presse could have minimized the threat (the slow, steady, erosion of its audience) or trivialized the risks generated by industry changes (e.g., rapidly changing news consumption habits). As the case notes, La Presse’s print circulation was decreasing, but the paper still maintained a strong hold on the Quebec market. Students can see from Exhibit 1 of the case that, in 2008, La Presse circulation accounted for 18.9% of Quebec’s total daily circulation, ranking second behind Journal de Montréal with 19.8%. But Crevier and his senior management team realized that, while they might continue to profit from print editions over the next few years, the existing strategy was not sustainable. They knew that, if they wanted to remain in the game in the long run, they would have to make some radical changes, a conclusion that students should reach as well.

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2.6. Part II − The transformation of La Presse’s business model (70 min.)

In Part II, the goal is to help students do the following: 1. identify the key differentiating features of La Presse+ as a new digital medium 2. gain a better understanding of La Presse’s business model before La Presse+ (a distinction can also be made between the time before and after the partnership with Transcontinental) 3. understand how La Presse+ changed La Presse’s business model 4. consider how La Presse+ helped address the threats and opportunities identified in Part I Ultimately, the goal is to consider all aspects of a business model: how value is created, delivered, and captured. The instructor may wish to use Osterwalder and Pigneur’s business model canvas to structure that analysis.

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In terms of time management (70 minutes for Part II), we suggest the following timeline, which we describe in further detail below: 1. Full-group discussion of the business model prior to La Presse+ (15 min.) 2. Full-group discussion of La Presse+’s key features (5 min.) 3. Small-group discussion of the changes to La Presse’s business model imposed by La Presse+ (10 min.) 4. Full-group discussion of students’ small-group work (20 min.) 5. Full-group discussion of the new business model’s fit with industry changes (20 min.) 1

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The instructor can launch the discussion with the following question: What service and value did La Presse offer its customers before 2013? This should prompt students to distinguish value offered to both readers and advertisers. Some key points that students should raise are as follows: 1. Customer segmentation: readers (French-language speakers; high income); advertisers (companies with customers in Quebec or the agencies representing them) 2. Value propositions: high-quality daily news and information (for readers), high-end customers (French-language speakers, high income) (for advertisers). 3. Customer relationships: limited and indirect (mail)

1

An alternative approach for students already familiar with business model analysis would be to frame the discussion around a direct comparison of the business models, as follows: (1) small-group discussion of La Presse’s business model: what changed with La Presse+? (15 min.), (2) full-group discussion of students’ small-group work (35 min.), (3) full-group discussion of the new business model’s fit with industry changes (20 min.).

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Digital Transformation at La Presse (Teaching notes)

4. Channels: printed newspapers and digital platforms (both web and mobile) 5. Revenue: classified ads (about 10%), advertising (about 65%), circulation (about 25%), all of which are falling sharply 6. Key resources: the newsroom (highly skilled, well-known journalists), strong brand, supported by a powerful group (PowerCorp) 7. Key activities: covering news, writing articles, writing editorials, publishing; maintaining digital platforms (web and mobile), printing newspapers (before 2003) 8. Partnerships: with Transcontinental (printing and distributing, after 2003) 9. Structural costs: salaries (50%), printing (15%) and delivery (35%)

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Instructors can record student input on the board or, if they have access to a computer and video projector, they could use a free, easy-to-use tool (e.g. Canvanizer) 1 to complete a pre-2013 business model canvas online. This choice (board vs. online tool) will depend on the instructor’s available time and preferences.

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Second, the instructor could lead an open class discussion on the following question: How is La Presse+ different from the website or the mobile app? Students should be able to come up with a long list of examples, and their hands-on (pre-class) assignment should be helpful in this regard. We believe the following points are worth discussing: o La Presse+ presents stories rather than just raw news o Content is interactive: topical news stories are linked to tabs devoted to related news, photo galleries, interactive maps, and interviews o La Presse+ content can be consumed in different ways (different times of day, at home or at work vs. on-the-go situations) o News content is smoothly integrated with advertising Third, instructors are encouraged to divide students into small groups of 3–4 students to work together on La Presse’s new business model following the launch of La Presse+. The instructor could distribute blank one-page copies of Osterwalder and Pigneur’s template together with pencils to support students’ analysis or ask them to use the above-mentioned free, cloud-based software.

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Fourth, after the small group discussion, the instructor could ask students about the results of their analysis and help them synthesize the key changes they have identified. To assist with this task, Table 2 summarizes La Presse’s revised business model with La Presse+. Finally, the instructor could follow up with questions about how well this new model responds to industry challenges identified in Part I. The analysis conducted in Part I, together with the data provided in the case about La Presse+’s performance to date, will inform students’ analysis. The instructor could ask the following questions:

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FQ1: How has La Presse+ addressed the issue of audience shrinkage? o The innovative information consumption experience: market research shows that readers are more engaged with La Presse+ than with other digital channels; the audience has grown at a rate never before seen. 1

https://canvanizer.com/new/business-model-canvas

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Digital Transformation at La Presse (Teaching notes)

FQ2: What value does La Presse+ offer advertisers that its print edition or other digital platforms cannot offer? o Advertiser value: La Presse is able to more fully leverage the potential of digital technologies to control ad placement and track ad performance. It also covers a larger set of advertising objectives (from upper to lower funnel).

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FQ3: What are the pros and cons of La Presse+’s current monetization strategy? o Monetization strategy (free for readers): a good discussion may identify both pros (e.g., this is what most other media are doing; having a paywall is a strong turnoff for readers and is detrimental to audience development) and cons (e.g., this makes La Presse more vulnerable to another economic crisis than would a paywall strategy; a paywall might enhance data collection capabilities and thus the potential to extract valuable insights from data for ad monetization purposes).

Students may observe that La Presse is not locked into its current approach: it could still decide to place a price tag on additional content in the future. The instructor could also note that while some Internet users are willing to pay for online content (e.g., in China), 1 this is often not the case in Canada, where users expect online content to be free. Newspapers are thus largely forced to rely on advertising to generate revenues.

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FQ4: What impact did transitioning to La Presse+ have on operating expenses and revenue? o Costs versus revenue: transitioning to La Presse+ eliminated expenses related to distribution, printing, paper and ink, slashing 45–50% of production costs, while losing only about 25% of revenue from print circulation.

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No

FQ5: How does the audience of La Presse+ differ from that of other channels? o Audience renewal: La Presse has managed to attract a younger audience compared to its print audience, due partly to high rates of tablet adoption in 2010–2015. In 2015, 63% of La Presse+ readers were 25 to 54 compared to 43% of print readers (see Figure 3 of the case). Students may note that the tablet momentum has passed, and instructors are encouraged to use this point to transition to the third and final part of the case discussion.

1

https://www.bloomberg.com/news/articles/2017-05-23/why-the-chinese-will-pay-for-content-that-americans-won-t

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Digital Transformation at La Presse (Teaching notes)

Key partners

Transcontinental (for printed weekend edition) Nuglif (to market the La Presse+ platform)

Key activities

Value proposition

Maintain old features and develop new ones for the La Presse+ platform

For advertisers: coverage of conversion funnel (awareness, consideration, action), guaranteed ad visibility and impressions, high reader engagement, measurable ad performance

Publish news (research, coverage, interviews, editing)

Customer relationship

Customer segmentation

Readers: indirect via Readers mail (print), and more direct and personal Advertisers (digital) Advertisers: personal assistance

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Inform advertisers and encourage them to transition to La Presse+ (AdLab)

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Table 2 − Business model template of La Presse after La Presse+

For readers: topquality news reading experience in La Presse+: emotion, intimacy, relevance

Key resources

Channels

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La Presse+ platform Newsroom Developers

Tablet Mobile app Web Print (weekend)

Structural costs

Maintenance of La Presse+ and other digital platforms Customer acquisition (readers & advertisers) Printing and distribution (weekend print edition)

Revenue Subscription revenue for print edition Advertising revenue Selling the La Presse+ platform to other newspapers

No

2.7. Part III – Sustainability of La Presse’s digital strategy (25 min.) In the final part of the discussion, students are asked to assess the success of the La Presse+ project while thinking critically about the viability of the new strategy and its business model.

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The instructor could begin by asking students about the performance of La Presse+. The students may observe that performance indicators for La Presse+’s launch and growth have been encouraging. The data shows that the performance of this new medium quickly surpassed that of the printed edition. The instructor could then ask about the possible limitations of La Presse’s current digital strategy, orienting the discussion around the following concerns: 1. Tablet dependency, i.e., reliance on tablets as the digital strategy’s key technology and supporting medium 2. Limited interactive (social, co-creation, personalization) affordances on La Presse+ app © HEC Montréal

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Digital Transformation at La Presse (Teaching notes)

3. Seemingly unexploited potential to monetize content on social media platforms 4. Seemingly unexploited potential to market the technological platform to other companies (including newspapers)

No

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(1) The first and most obvious concern that students should mention is the model’s reliance on tablets given that smartphones are now the most frequently used media consumption devices. At the time of writing this case, we had not received official word about whether or not La Presse is working on such a project (although we suspect the company is considering it). 1 The instructor could remind students that when the La Presse+ project was launched, the smartphone had not yet become the dominant content consumption platform and ask about the possibility that La Presse could transfer La Presse+ to mobile phones or design a new product for them. The discussion could touch on the following points: ● Some students might suggest that a tablet-focused strategy is too restrictive, putting its audience at risk, and that La Presse+ should be extended to smartphones and phablets. ● Other students might counter that the differentiation of La Presse+ relies on having a captive audience (readers spend about forty minutes per day reading La Presse+). Tablets are used at times that favour such engagement, i.e., quality reading time in the morning and evening. In contrast, smartphones tend to be used to gain fast access to breaking news and, for that purpose, the information source is less important. Using La Presse+ on smartphones could thus compromise its value proposition. ● But all students should acknowledge three things. First, as smartphone technology improves (e.g., screen sizes increase), smartphone devices are increasingly likely to be used for quality reading time as well. From that perspective, the model of La Presse+ being delivered on smartphones could work. Second, improving smartphone presence is an important growth avenue for La Presse; advertising content could be more harmoniously embedded in the news display format than it is now on the La Presse mobile app. Third, while the information provided in the case does not support a thorough analysis of how La Presse should deal with the current tablet dependency, two possibilities may be suggested: (i) applying La Presse+’s value proposition and technology to smartphones (while being sure not to compromise the tablet app’s growth and revenues), and (ii) creating a new product to fill other gaps in La Presse readers’ daily rituals (e.g., while commuting).

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(2) The discussion could then turn to how La Presse+ may be at a disadvantage compared to other digital players in terms of interactive (social, co-creation, and personalization) capabilities. The instructor could thus ask whether the La Presse+ app is as interactive as it could or should be. ● Referring to Table 1 of the case, students might observe that popular new pure players o incorporate alternative “news producers” that co-create content (e.g., Medium), o better exploit the social features that afford better interaction between content producers and readers (e.g., HuffPost) ● To attract millennials, La Presse+ could (and, perhaps, should) start leveraging social interaction beyond current sharing features. The addition of features allowing for

1

http://www.infopresse.com/article/2017/5/9/pierre-elliott-levasseur

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Digital Transformation at La Presse (Teaching notes)

content personalization would encourage readers to become more actively involved in their news consumption experience.

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(3) The instructor may wish to discuss the seemingly unexploited potential to monetize content on social media platforms. Students may observe that Facebook is a “growing monster”: it has almost limitless resources to design and exploit state-of-the art digital experiences, including those delivered via smartphones. In addition, its recent release of Instant Articles (IA) reveals its plan to use publishers’ content to keep its audience captive on its platform. Facebook IA aims to transform news posts shared on Facebook into immersive multimedia experiences and offers a potentially valuable new revenue-generating channel for La Presse. The instructor may stress issues of control and dependency, asking, “Who decides what content is prioritized on Facebook’s newsfeed?” Students should quickly realize that Facebook is in the driver’s seat and could decide to promote IA or any other type of content (e.g. posts from friends) at the expense of others. Finally, they should grasp the complexity of the issue (i.e., there is no obvious way for La Presse to deal with this) and realize that La Presse is now competing on a totally different, highly dynamic, playing field compared to where it was a few years ago.

No

tC

(4) Finally, the instructor could mention La Presse’s attempt (via Nuglif) to market the platform technology and expertise it developed for La Presse+. The case does not say much about how successful this endeavour has been; it is a sensitive issue about which the company declined to elaborate. However, the initiative is mentioned in the case, and this should pique the students’ interest. ● La Presse has become a software company. 1 It could reach out to news publishers in geographic markets outside Quebec or to companies in niche markets other than newspapers needing a software platform to create, manage, and publish content for their audiences (e.g., in the areas of education, lifestyle, sports, or the arts). ● The instructor can ask about factors that may cause other newspapers to be reluctant to adopt La Presse+’s platform technology. (Students may notice that Nuglif’s website highlights just one success story, that of La Presse+; The Toronto Star’s Star Touch app shut down in July 2017). o As the case illustrates, a key barrier for prospective clients is likely to be the need to totally revamp their operations and economic model. Not all traditional newspapers have the necessary financial resources to support such an initiative. o The model of a tablet-based newspaper has quickly lost its appeal given the growing dominance of smartphones. Other newspapers might hesitate to invest (at a loss) in creating a new medium to be delivered on outdated technology, making it hard to develop a large audience and convince advertisers to design ads specifically for this format.

Do

2.8. Wrap up of Part A: Key takeaways (5 min.) After working on this case, students should realize that investing in technology to effect a digital transformation involves much more than just building a new app. In the case of La Presse, it required inventing a new business model by importing key resources (e.g., storytelling talent) and 1

https://a16z.com/2016/08/20/why-software-is-eating-the-world/

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Digital Transformation at La Presse (Teaching notes)

properties (e.g., a profitable audience) from the previous model and enhancing the new model with features from digital platforms (e.g., accessibility, reading experience, news and ad content consumption measurement tools). Students should also understand that surviving in an industry that is severely disrupted by digital technologies requires that organizations and their leaders (1) clearly understand what digital technologies afford and what changes they generate in their environment and (2) craft a digital strategy that exploits such affordances and changes. Another key takeaway for students is that with digital media, every year brings a new battle. Although La Presse successfully escaped the vicious circles associated with the declining newspaper industry, another competitive battle has just begun.

3. Case analysis and teaching strategy for Part B

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3.1. Overview

Part B aims to help students better understand the multifaceted challenges involved in implementing a digital transformation and how to deal with the associated risks.

tC

We view digital transformation as an ongoing process of leveraging digital technologies to develop new capabilities, processes, products, or business models to meet a changing set of customer expectations and cope with an increasingly fast-changing, IT-dependent, and globally scaled competitive environment. There is a strong IT component in any digital transformation journey or project, and they are thus inherently risky endeavours. We propose to examine the challenges of undertaking a digital transformation through a risk analysis. This entails specifying key undesirable outcomes together with their expected causes and analyzing tactics that can help avoid pitfalls. This is a particularly well-suited foundation for the purposes of this case for two reasons. First, it helps demonstrate the variety of challenges involved in an extensive digital transformation (i.e., when much of the business, operational, and economic logic of an enterprise is being reshaped). Second, it provides a rigorous but fairly straightforward method for evaluating and managing risk in an IT project that students can practise in a real-life situation.

No

In this section, we suggest ways for students to prepare for class (section 3.2), outline an overall teaching strategy (section 3.3), and provide detailed suggestions for analyzing the case and managing a 75-minute class discussion (sections 3.4 to 3.7). 3.2. Class preparation

We suggest that instructors assign the following readings:

Do

Rivard, Suzanne and Benoit Aubert (2009). “A Primer on Risk Management”, Cahier de la Chaire de gestion stratégique des technologies de l’information, October (mandatory). o Discusses the basics of risk management, explaining key concepts (e.g., risk exposure, risk factor, undesired outcome, mitigating tactic) and a risk-analysis method. “The Pros and Cons of Agile and Waterfall” available at https://www.pmis-consulting.com/agileversus-waterfall/ (supplementary). o Compares the agile and waterfall approaches to developing software

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Digital Transformation at La Presse (Teaching notes)

Instructors can ask students to prepare the case by considering the following questions: • What are two highly undesirable outcomes associated with the development of La Presse+? • What factors could have (or did) increase the likelihood of these undesirable outcomes for La Presse in 2010–2013? • What did La Presse do while implementing its digital strategy to mitigate the impact of these factors? 3.3. Teaching strategy (75 min.) Time

Breaking the ice

I

Evaluating risk exposure

II Managing risk

Discussion format

5 min. Highlight the core elements of the context and Full group of La Presse’s digital strategy

35 min. Identify the La Presse+ project’s undesirable Small group outcomes and the factors that could lead to and full group them 30 min. Analyze the tactics used by La Presse to Full group ensure the success of La Presse+ 5 min. Identify the key takeaways from the case

Full group

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Wrap-up

Objectives

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Part

3.4. Breaking the ice (5 min.)

No

Begin by asking students to identify the key characteristics of the newspaper industry and of La Presse’s digital strategy. Instructors may refer to sections 2.5 (industry) and 2.6 (strategy) of the teaching notes for details. The following questions may be useful:  What changes have affected news publishers over the past decade?  What was La Presse’s position, and what strategy did it adopt?

3.5. Part I − Evaluating risk exposure (35 min.)

Do

Students should be familiar with the risk exposure assessment method presented in Rivard and Aubert (2009). Implementing this method involves three key steps: 1. Identify key potential undesirable outcomes associated with the development of La Presse+. 2. Identify risk factors that increased the likelihood of those outcomes. 3. Link risk factors to undesirable outcomes and infer risk exposure.

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Digital Transformation at La Presse (Teaching notes)

The instructor can then divide students into small groups of three to four students each to conduct a risk exposure assessment (20 minutes). Detailed instructions for this exercise are provided below. Table 3 presents one possible outcome of this exercise.

Step 1. What are key undesirable outcomes (UO)? It may be difficult for students to identify unanticipated outcomes (i.e., number and degree of seriousness). For the purpose of this exercise, we suggest asking them to specify the three most undesirable outcomes associated with the development of La Presse+, then to focus on one undesirable outcome per key stakeholder/product user (journalists, advertisers, readers):

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UO#1. Creating an app that the targeted readers won’t like or choose to use UO#2. Creating a medium that advertisers won’t choose for ad placements UO#3. Creating a set of editorial software tools that the editorial team won’t use effectively

Note that these UO could result from a variety of causes including design-related factors such as wrong assumptions, bad execution, and poor functioning. Irrespective of their drivers, the key point is that their potential impact would be negative for La Presse. Step 2. What are the risk factors (RF)? Students should then draw up a list of risk factors: pitfalls that directly or indirectly increase the likelihood of undesirable outcomes. Rivard and Aubert (2009) state that these factors may be endogenous (e.g., related to the project’s size, novelty, or complexity) or exogenous (e.g., the economic context), but we suggest focusing on the internal factors, which are most obvious in this case. We suggest the following:

No

tC

RF#1. The development of a new technology from scratch RF#2. The reliance on a new device/platform with no history/guarantee of adoption or success RF#3. The development of a complex software ecosystem with several interdependencies RF#4. The absence of a successful pre-existing model to mimic or be inspired by RF#5. The lack of pre-existing software development know-how at La Presse RF#6. The little available knowledge about what a “unique reading experience” on a tablet entails RF#7. The platform specificity of ad formats RF#8. The scope of changes (to editorial processes, practices, skills) required by La Presse+ Step 3. What is the level of risk exposure of the La Presse+ project? Students should then determine the impact of the risk factors they have identified on the likelihood of the undesirable outcomes identified in step 1. This will allow them to determine the risk exposure of the La Presse+ project.

Do

While all students should arrive at the same conclusion (high risk exposure), their lists of UO and RF will differ. In debriefing the exercise (15 min.), instructors could ask one or two teams to share their analysis with the class. By completing the process of evaluating risk exposure for La Presse+ and comparing their results with that of others (including the instructor), students will strengthen their ability to analyze the risks associated with the development of a new digital product of the scope and strategic importance of La Presse+.

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Digital Transformation at La Presse (Teaching notes)

Table 3 links risk factors to undesirable outcomes. Many risk factors are highly likely to lead to serious undesirable outcomes, so the probability of a serious UO is high. It can thus be concluded that the risk exposure of the La Presse+ project is high. Table 3 – Assessing risk exposure 1

Undesirable outcomes (UO) UO1 Creating an app that the targeted readers won’t like and choose to use

UO3 Creating a set of editorial software tools that the editorial team won’t use effectively

RF#1

x

x

RF#2

x

x

RF#3

x

x

x

RF#4

x

x

x

RF#5

x

x

x

RF#6

x

RF#7 RF#8

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Risk factors (RF)

UO2 Creating a medium that advertisers won’t choose for ad placements

x

x

x

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3.6. Part II − Managing risk (30 min.)

Do

No

Part II builds on Part I by examining how La Presse mitigated risk to decrease its risk exposure. Table 4 provides support for the analysis of the impact of La Presse’s efforts to reduce the potency of risk factors. The following question can be used to launch a discussion addressing the four key tactics included in the table: What did La Presse do while implementing its digital strategy to help mitigate risk?

1

Adapted from Bernard, J.-G., Rivard, S., and Aubert, B.A., “L’exposition au risque d’implantation de ERP éléments de mesure et d’atténuation”, Systèmes d’information et management, Vol. 9, No. 2, 2004, pp. 25−50.

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Digital Transformation at La Presse (Teaching notes)

Table 4 – Key steps taken to reduce risk exposure of La Presse+ Tactic

Links to RFs

Adopting an agile methodology to develop La Presse+ and its software ecosystem

RF#1 RF#3 RF#4 RF#6

-

Testing assumptions and interfaces using neuroscience

RF#2 RF#6

- identification of what worked and did not work in terms of the app’s design and quality of reading experience

RF#2 RF#7

- increase advertiser confidence in the value of advertising on La Presse+ (e.g., engagement, conversion)

RF#5

Using people as change agents

RF#8

- hiring of new team to build required expertise (developers, UX experts, graphic design, videographer) - evangelization of product to ad agencies - creation of monetary incentives for advertisers to start using La Presse+ - development of tools to support ad design on La Presse+ provision of proofs of concept (via AdLab)

- leverage the most motivated employees as ambassadors; contamination (bottom-up) process to obtain buy-in

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RF#7

early and continuous delivery of software changes to requirements even late in development frequent production of prototypes and proofs of concepts active participation of users in development (tests)

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Allocating substantial resources to supporting both technical and nontechnical activities

Impact

Tactic 1: Adopting an agile approach to software development

Do

No

Students should realize the importance of the agile approach. By proceeding with small iterations, prototyping, and designing a physical environment that facilitated this type of work, La Presse was able to develop a product by April 2013 that met the needs and habits of consumers in 2013 (not 2010). Adopting a traditional waterfall approach requiring the early identification of informational and functional requirements before moving sequentially to the analysis, design, and development stages would have yielded a very different product – one that would have met the needs of users in 2010, when the project was launched, but not in 2013, when the project concluded. Table 2 identifies specific means (e.g., the early and continuous delivery of software, making changes in requirements possible even late in the development) through which the agile approach helped mitigate the impact of several risk factors. Tactic 2: Testing assumptions and interfaces

La Presse was willing to accept a level of uncertainty in the La Presse+ project. Uncertainty is unavoidable in any digital transformation project of this scope, but it was especially high in this case. La Presse+ was betting on a platform (the iPad) with no track record of adoption or success. As Pierre Arthur observed, “nobody had ever done that before.” The iPad had not yet been

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Digital Transformation at La Presse (Teaching notes)

introduced when the project began, so there was no model for creating a great reading experience. While the project was clearly risky, the company was able to mitigate some of that risk by adopting an agile approach, following a rigorous process, and using neuroscientific methods (e.g., eye tracking) to test the validity of the assumptions and hypotheses upon which the strategy was based. A large budget (C$2 million) was allocated to R&D, and partnerships with imarklab and Tech3Lab were instrumental in facilitating the rigorous analysis of two important criteria: ● Advertising format performance: to convince advertisers to adopt La Presse+ for their advertising needs ● User experience (UX) evaluations: to ensure the new platform could be “used and enjoyed by anyone ranging from 7 to 77 years old within 5 minutes” (the primary user experience requirement)

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If necessary, the instructor could use this follow-up question to deepen students’ reflection: Why was this research crucial to the project’s success? Students should be able to answer this question by reviewing the core aspects of La Presse’s new business model, especially the value propositions for readers and advertisers and the associated revenue streams. The business model’s logic relied on a key balance: curating an audience that was more engaged with the ads (as compared to other digital platforms) and that had better recall rates while at the same time being more satisfied with the La Presse+ reading experience. Both sides of the equation were crucial to the success of the new business model. An additional lesson for students derived from tactics 1 and 2 is that while rigour and agility are often thought to be antithetical, this was not the case for La Presse’s digital transformation. It was vital for La Presse+ to offer a bug-free experience. Tactic 3: Allocating substantial resources to both technical and non-technical activities

No

tC

The company’s staff and advertisers both required special attention and costly resources. Students are likely to observe that staff renewal was critical to the La Presse+ project. La Presse became a software company, hiring a large team of developers and UX engineers and designers to build, maintain, and extend the software ecosystem underpinning La Presse+. La Presse also created a whole new workplace environment to facilitate the work and buy-in of all stakeholders. Regarding advertisers, the instructor could ask students what La Presse did to ensure the success of the new economic model. Four strategies mentioned in the case highlight the company’s efforts to encourage advertisers to transition to the new medium: (i) development of a creative toolkit providing guidelines and best practices for creating ads on La Presse+, (ii) massive investment in R&D via the adlab to provide evidence about ad performance on La Presse+ and convince advertisers that the value proposition of La Presse+ was based on empirical evidence, (iii) evangelizing work with ad agencies to convince ad agencies to allocate a budget in their media plan for advertising on La Presse+, and (iv) monetary incentives offered to try out La Presse+ during its first year of operation.

Do

Tactic 4: Using people as change agents The processes and skills required to create informational content for La Presse also underwent a major shift. Inspiring and exploiting the engagement of a few employees eager to try out and adopt the new medium (i.e., a bottom-driven, organic approach) was an effective way to empower newsroom staff and highlight the app’s value potential (workers tend to trust their peers more than they do their superiors).

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3.7. Wrap-up of Part B: Key takeaways (5 min.)

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Digital Transformation at La Presse (Teaching notes)

4. Prior use of the case

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After working on this case, students should understand that technology alone is not sufficient for a successful digital transformation. They should realize that success requires organizations to build resources and implement practices that are aligned with and conducive to the deep and multifaceted changes required to implement a digital transformation via business model reinvention. The La Presse case demonstrates that implementing strategies (e.g., an agile approach to software development) in line with the context of the digital transformation (e.g., high uncertainty) is key. In addition, successfully innovating in a disrupted industry requires both substantial investments at a time of deep uncertainty and a rigorous approach to assumption testing, trial and error, and prototyping to help mitigate risks. The La Presse+ project driving La Presse’s digital transformation was extremely costly (C$40 million), so this model of digital transformation would not necessarily be replicable by other publishers. Finally, user adoption is often a key success factor, so it is vital to carefully choose and implement strategies that will encourage adoption by readers, advertisers, and staff, including user tests, training, and demonstrations.

This case was tested in two sessions about extended transformations/business model reinvention through digital transformation in a graduate course on digital transformation. The earlier version we tested was a single case instead of a two-part case (A and B).

tC

First, students liked the case. We tested the case at a Quebec university, and they particularly enjoyed studying the case of a local organization. They were thus highly engaged, and this was their favourite among eight cases studied that semester. Despite its length, they found the case to be well written and easy to read. They also enjoyed working on the case of an established business struggling to survive in a highly disrupted industry. As consumers of news and online media themselves, they could easily relate to it.

No

Second, although students liked having access to industry data, they would have liked more data on La Presse’s financial performance to be able to determine whether or not this was a profitable move for them. We were pleased that students wanted more data to evaluate La Presse’s digital transformation and new business model; unfortunately, this data is not publicly available.

Do

A final point about our testing of the case concerns time management. We had greatly underestimated the time needed to study the entire case in class and had little time to discuss implementation issues (which were secondary in our course, fortunately). We have thus divided the case into two parts (A & B) and are confident the suggested teaching strategies are now more realistic.

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Digital Transformation at La Presse (Teaching notes)

5. Selected bibliography Digital disruption in the newspaper industry

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Bidel, Susan, Luca S. Paderni, and Samantha Merlivat (2014). Enhancing Publishers’ Revenues with Pay Walls, Forrester Report, July. Grueskin, Bill, Ava Seave, and Lucas Graves (2011). The Story So Far: What We Know About the Business of Digital Journalism, New York, Columbia University Press. Accessible online at https://www.cjrarchive.org/img/posts/report/The_Story_So_Far.pdf. Herring, Matt (2009). “Network effects”, The Economist, December 17, accessible online at http://www.economist.com/node/15108618. Oh, Hyelim, Animesh Animesh, and Alain Pinsonneault (2015). “Free versus for-a-fee: The impact of a paywall on the pattern and effectiveness of word-of-mouth via social media”, MIS Quarterly, Vol. 40, No. 1, 31–56. Steglich, Florian (2015). “Disruption in the newspaper industry – A framework”, Medium. https://medium.com/@fst/disruption-in-the-newspaper-industryAccessible at f821aab38d26#.ohi8zlx4y. The New York Times Innovation Report (2014). https://www.scribd.com/doc/224608514/TheFull-New-York-Times-Innovation-Report. Tow Center for Digital Journalism, Columbia University’s Graduate School of Journalism. http://towcenter.org/#/type/research. Digital innovation and transformation

No

tC

Christensen, Clayton M., David Skok, and James Allworth (2012). “Breaking News – Mastering the art of disruptive innovation in journalism”, Nieman Reports, Vol. 66, No 3. Christensen, Clayton, Michael E. Raynor, and Rory McDonald (2015). “What is disruptive innovation?” Harvard Business Review, December. Dos Santos, Brian, Robert Fichman, and Zhiqiang (Eric) Zheng (2014). “Digital innovation as a fundamental and powerful concept in the information systems curriculum”, MIS Quarterly, Vol. 38, No. 2, 329–353. Nylén, Daniel and Jonny Holmström (2015). “Digital innovation strategy: A framework for diagnosing and improving digital product and service innovation”, Business Horizons, Vol. 58, No. 1, 57–67. Westerman, George, Didier Bonnet, and Andrew McAfee (2014). Leading Digital – Turning Technology into Business Transformation, Harvard Business Review Press, Boston, MA. Yoo, Youngjin, Richard R. Boland, Jr., Kalle Lyytinen, and Ann Majchrzak (2012). “Organizing for innovation in the digitized world”, Organization Science, Vol. 23, No. 5, 1398–1408.

Do

Business models

Johnson, Mark W., Clayton M. Christensen, and Henning Kagermann (2008). “Reinventing your business model”, Harvard Business Review, December, 50–59. Magretta, Joan (2002). “Why business models matter”, Harvard Business Review, May. Osterwalder, Alexander and Yves Pigneur (2010). Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers, Wiley Ovans, Andrea (2015). “What is a business model?” Harvard Business Review, January.

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Digital Transformation at La Presse (Teaching notes)

Agile software development

Do

No

tC

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Abrahamsson, Pekka, Outi Salo, Jussi Ronkainen, and Juhani Warsta (2002). Agile Software Development Methods: Review and Analysis, VTT publication 478, Espoo, Finland, Copyright holder’s version can be downloaded from http://www.vtt.fi/inf/pdf/publications/2002/P478.pdf. Cockburn, Alistair and Jim Highsmith (2001). “Agile software development: The people factor”, Computer, Vol. 34, No. 11, 131–133. Highsmith, Jim and Alistair Cockburn (2001). “Agile software development: The business of innovation”, Computer, Vol. 34, No. 9, 120–127. Palmquist, Steven, Mary Ann Lapham, Suzanne Miller, Timothy Chick, and Ipek Ozkaya (2013). Parallel Worlds: Agile and Waterfall Differences and Similarities, Technical Note, Software Engineering Institute, October.

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