Two examples to discuss
Media Giant and Big Pharma
Out of the gate the NYTimes.com team made almost all newspaper content online free. They basically repurposed the newspaper content in order to make it web-friendly. In addition, they innovated with different way to leverage the power of the internet and include features that could not be delivered within the newspaper version of the times. For example, they included discussion areas, tax-cut calculators and other interactive content.
nytimes.com scope narrows
“We’ve cleanly split the functions. Any journalism is done by the newspaper because they have the infrastructure and editing capabilities. What we create here is value added. In addition to providing news updates throughout the day, we create features and functions that enhance the news report. We also add other databases that we import from other sources. In a sense, we [NYTimes.com] are a software operation, and they [the newspaper] are a news operation.”
New Co. Business model experimentation
The NYTimes.com team perpetually considered and reconsidered their business model throughout the formative period. The content remained free (vs Wall Street Journal) and they eventually added a registration requirement (versus other ROS news agencies) to view the content.
Mr. Nisenholtz reported to both the general manager and the editor of the newspaper. This was an unusual move, since The New York Times, like most news organizations, maintained a “Chinese Wall” between the editorial and business sides of the organization to ensure editorial independence. Superstar editor and diplomatic correspondent Bernie Gwertzman was assigned to direct editorial operations for NYTimes.com, which gave the organization instance credibility within the newspaper organization.
Over time the NYTimes.com organization grew to a dozen people, mainly from the newspaper organization. There was an unintended consequence of this staffing plan. NYTimes.com began to inherit a perception of a being a credible part of the business and adopted the values of the newspaper organization. In fact, since it was not an independently run organization, Senior Executives did not worry about tarnishing the priceless New York Times brand.
Initial Profitability Goals
The Company established an informal goal that online operations were to be profitable within five to six years.
“We weren’t where we needed to be. We didn’t have the resources we needed to create the necessary infrastructure to get there. But when one works for a big company, you recognize the art of the possible. Given that it was going to cost a lot of money to do what needed to be done, I just didn’t think that it was possible.”
Transition to a separate business unit
What does this mean?
- Revenue Accountability: All internet properties were organized under one P&L
- Reporting Structure: Martin Nisenholtz now reported directly to then-CEO Russ Lewis
- Organizational Culture: Established a functional management team (i.e., CFO, VP HR, Chief Council, VP Business Development)
“We wanted to really get across a strong message that we were a different business, a different company, and a different culture. We wanted to hire a workforce that valued different things than the workforce of The Times. So we made a lot of changes. We formed a culture committee, which was largely to figure out who we were or who we wanted to be and then what we needed to put in place to get there.”
Divergent operational models
Did not adopt legacy processes, systems and BUREAUCRACY
- Location: Manhattan, 10 blocks from the New York Times.
- Space: More collaborative with open spaces, teaming areas, and a central cafe.
- Stock options: Critical to attract and retain key talent in corporate start-ups.
- Staffing Model: Invested in building a world-class product and engineering staff. Hired heavily from the outside.
- Hiring Policies: Customized to create a distinct culture.
- Charge Back: Based on revenue, there existed a $5MM fee for NYT content.
“NYTimes.com runs on an IT infrastructure that is very different from the newspaper’s. Building it required developing new expertise. Because our projects are much smaller in terms of capital required than newspaper projects, it would have been difficult to get them prioritized if we were part of the newspaper. Being separate allowed us to move faster. At the same time, being part of The New York Times Company allowed us to take advantage of the better pricing that the corporation is able to get from vendors.”
Measuring the business
THe bottom line is...Break Even Point took over 6 years
“Financial performance was not the only measure. We always measured audience reach, traffic, and various measures of consumer satisfaction as well. Still, even though we had been in a loss position, hitting bottom-line targets was important.”
- Ellen Taus, CFO
EARLY ASPIRATIONS FOR digital health
Explore new methods of developing direct relationships through the application of technology with patients, caregivers, physicians and other healthcare professionals. Discover what needs exist and prototype solutions to bring forward for consideration to our brand and clinical research organizations.
CIO - Life sciences company
Partnered with the diabetes franchise
raised $1.5M from the EVP of commercial operations to research, develop and launch the first iphone apps for type 2 diabetes
Working with the SVP of the Diabetes and Obesity Franchise, and a full-time staff of one, we created a non-branded smartphone app that was designed to walk the Type II Diabetes patient through initial treatment with an emphasis on behavioral change. We repurposed content from a well-known clinical reference manual as well as the diabetes franchise's web assets.
Operationalizing the product
There were no organizational processes and controls in place for mobile applications or patient-facing services within the company, so we set forth in establishing company guidelines:
- Promotional guidelines (i.e., no pharma rep detailing)
- Establishing the brand
- Creating a customer support process
- Information security reviews
- Privacy / HIPAA reviews
- Medical device evaluation
- Commercial / anti-kickback guidelines
Led to a flood of mobile application demand by RX & OTC brands
Mobile apps were launched for: Chemotherapy, Dosage calculators, Sun tan lotion, Allergy / Asthma, Custom-fit orthotics, and medical reference manuals.
Following the deluge of brand-specific mobile demand, this Pharma company recognized in 2010 as the 4th most innovative company in business technology, up from 94th the previous year. And the diabetes app team was in the process of conducting an outcomes research trial with BCBS Horizon using our technology and BCBS case managers in their employer population.
Digital Health Expands it's scope
The two co-founders of the digital health organization were invited monthly to meet with a steering committee comprised of the: SVP of Diabetes & Obesity, CIO, CSO, CFO, Chief Council, VP of Commercial IT, and VP of Consumer Care.
Following 6 months of watching the immature business evolve, the CSO, citing our mobile app in digital health, presented a business case to the board of directors to establish: (1) $100M evergreen Health Information Technology investment fund and (2) $100M for the establishment of a new division called the Innovative Venture Units (IVUs).
The initial operating model
- The Corporate Venture Fund was established as a wholly owned subsidiary focused on digital health investment opportunities. Team members were initially parent company employees; a president and 4 managing directors that reported into the CSO.
- The Innovative Venture Units (IVUs) were established as a new division within Sales & Marketing and also focused on digital health solutions. The approach whether to directly, indirectly or not support company brands was not determined. Team member were initially parent company employees; a general manager with a product, marketing, operations and sales leaders that reporting into the SVP of Business Development and Strategy.
Year 1: validating business models
Initially we partnered with IBM's consulting group to evaluate various business models. We used IBM for two reasons: (1) "no one every got fired by hiring IBM", (2) we had entirely too much money, $23M in year one.
In order to continue funding within a fortune 50 Life Sciences company, upper management expected a at least a $100M revenue return within 5 years. So, quarterly revenue forecasting required a bit of gamesmanship. Forecasts needed to be enough to be valuable future business, but not so much as to be included in the top-level company forecast.
"Fierce Focus" Required
Under the leadership of a the veteran general manager, the business scope began to expand in an effort to maximize future revenue potential. This led to a lack of focus, where up to 9 product lines were proposed to launch in the first 2-3 years. Other contributing factors that lead to the scope creep were: IBM's "land and expand" sales model and lobbying at executive management levels contributed to this expansion.
A difficult request of a start-up
one condition of the investment was that we were to run an outcomes research study with UNC to measure the effectiveness of our readmission solution.
Year 2: product Pivots
The year started as a continuation of the previous, the massive budget request of $72M lead to an executive decision by the CSO and head of the venture fund to focus on three business units: hospital readmissions (US), weight management (US) and remote monitoring (Italy). We parted ways with IBM as part of the budget reduction to $28M for all three businesses and instead began a transition to using three venture funded vendors as a way to support the overall ecosystem and ensure a longer runway.
Year 3: accountability catches up
IVU reporting structure changed from the SVP of BD to one of his direct reports, which then lead to the splitting of venture units to three different presidents, which lead to very divergent paths.
- Weight management: under the previous GM, he acquired a pre-existing US company in an effort to scale and globalize the business. Maintained direct ties to the parent company as a subsidiary.
- Hospital readmissions: under a new company veteran with no commercial experience, she continued the path of formal separation from the pharma company. EXTERNAL HIRE
- Remote Monitoring - Italy: continued to work directly with the parent company and support the business in Europe.
1st half of Year 4
Found it difficult being agile and meeting revenue target within the big company
- Subsidiary in name only: Employees still parent company employees
- Policies: Spearheaded the creation of operating policies
- Shared Services: Leveraged parent company HR, finance, procurement, etc.
- Equity: Shadow equity talked about
- Location: Housed within corporate headquarters.
- OIG Opinion: Legal held our actions to the opinion letter as boundaries to our conduct.
- Med/Legal: Medical and legal behaved as conservative as if we were part of the company.
- Engineering: Majority outsource to our vendors.
2nd HALF OF YEAR 4
A enabling organizational structure finally caught upTo the businesses
- Holding Company: IVUs were transferred until the holding company. It governed the businesses through legal & policies as well as held them accountable to revenue projections.
- Reporting Structure: Holding company was places under the CFO.
- Location: Moved to a separate office space a few miles away from corporate headquarters.
- No Shared Services: Completely separated all services to in-house resources.
- Engineering: Rebuilt the product and removed initial vendors to bring engineering in-house.