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Featured on CIO.com | By Howard Tiersky

The New York Times is Winning at Digital

The NYT just released a blockbuster earnings report attributable heavily to their digital transformation. Insiders share the five key secrets to their surprising success.

Most of today's media "success stories" are about digitally "native" companies like Google and Facebook. Meanwhile, many of the great brands of the pre-digital era seem to be struggling for mere survival in the face of digital disruption. And it's hard to think of a media segment more threatened by digital than newspapers.  As advertisers have shifted more of their budget to web and mobile,  almost 70% of all newspaper advertising dollars have evaporated over the last 15 years.

Yet something astonishing is happening at the company that President Trump regularly demeans as "the failing New York Times." NYT stock is up nearly 60% in the last six months to a nine-year high, and in May, the company issued its quarterly earnings report which reflected the profound impact of their efforts at digital transformation. 

According to the report, digital subscription revenue increased 40% year-over-year.  Furthermore, among The Times' three million subscribers — a threshold it crossed earlier this year — 2.2 million are paying digital subscribers, representing almost 70% of their total subscriber base.  Although print advertising in The Times declined around 18% year-over-year, those losses were more than offset by increases in digital subscriptions and digital advertising, resulting in year-over-year increases in both revenue and profitability.  As CEO Mark Thompson said in the Q1 2017 earnings report, "These results show the current strength and future potential of our digital strategy to deliver substantial revenue."

So how did they do it in an era where so many great pre-digital brands, both media and otherwise, are failing to compete effectively with digital disruptors?  I sat down with two senior executives who are helping lead The Times' digital transformation. In order to understand the key principles behind their recent digital turnaround, I met with Kinsey Wilson, EVP, Product and Technology, and Editor for Innovation & Strategy; and with Tristan Boutros, SVP & COO for Digital Product, Strategy, and Design.  In our far-ranging discussion, five key themes emerged that form the basis of the approach The Times has pursued, and which, has thus far, exceeded their forecasts and expectations.

These five themes are not unique to newspaper or media companies but can be applied to most, if not all, companies looking for the path to successful digital transformation.

1. Leveraging Customer Data to Increase Subscriptions

While many newspapers have declining print subscriptions and are challenged to get customers to pay for digital content. Boutros and Wilson attribute the recent boom in subscriptions to efforts to better leverage customer data across marketing. Wilson explained, "They've…professionalized the way in which they manage the funnel, essentially how we get people to the point where they subscribe. [As a result], year-over-year, we doubled the number of quarterly net new [subscriptions]."

According to Wilson, "It's been a combination of two things. It's been really modernizing our data environment, and just our sophistication around analytics, and understanding how the audience arrives at a point where it's willing to subscribe."  He added, "Where we were a year ago was essentially a fairly crude mechanical mechanism where you see ten pages; you hit the wall; you subscribe, or you don't. It was fairly binary. Now, we understand, depending on how often you come, how engaged you are with The Times, what your particular profile is, what's the next action we can take to make it a more meaningful experience to get you back more often, to drive you closer to subscribing."

"We have become a very data-driven company," Boutros described. "We've built what I think is a very productive partnership between data, technology and our partners in consumer revenue to actually put more control in their hands as well. We're trying to integrate tools, so at various points in the customer journey [marketing] can feed the messaging required to engage customers in a way that resonates, and so it actually gives a lot more autonomy and control to our marketing partners."

This type of personalized data-driven sales funnel is par for the course for digital leaders such as Google and Amazon but is typically far less sophisticated at pre-digital media companies. The benefits The Times have delivered via this approach are instructive to those hesitating to make the investment to become world class in this area.

2. A New Mindset of Agile Product Experimentation

But more effective marketing processes is only part of the formula. Wilson and Boutros described the mindset shift that has led to far more experimentation around product development, including their new Cooking and Crossword apps that have significantly contributed to new subscriptions. These fresh products emerged from an internal incubator group, named Beta, which has been charged with bringing to market a variety of new products.

Wilson explained, "Beta in many ways was the example of how we wanted the rest of the organization to work…where product, design, process, technology, and data came together, in Silicon Valley style. Two-week sprints starting with discovery. Trying to understand the market opportunity, what particular competitive advantage we possess, and once you've defined a series of hypotheses, then beginning to test them quickly with MVP releases."

Wilson described how that cultural shift was aided by the leadership of Dean Baquet, Pulitzer Prize-winning journalist and executive editor of The Times since 2014. "Dean has been quite clear in saying we need to understand how to take prudent risks. He approved an arrangement with Facebook to do Facebook Live in a matter of weeks, and clearly, we were ramping up as we were doing it, finding our way. We can look at what was produced and find tremendous bright spots, and other places where we stumbled a bit."

Wilson described the new willingness at The Times to experiment with different formats, "You can be seen as experimenting with the medium, and finding your voice, and finding new forms of expression without perfecting right out of the gate.  We've done that with 360 video. We've done that with VR. We just launched on SnapChat Discover. We launched an audio product called The Daily, a news podcast, a brand new format for The Times [that's] been enormously successful--more than 40 million downloads and streams in its first three months, which is just off the charts in podcasting terms. It has received both in the audience that is listening to it as well as from professionals from across the industry, all kinds of accolades."

However, some experiments have failed, which Wilson readily acknowledged is part of a healthy process: "I don't think we've killed quite as many things as we've built, but [for example] we launched an opinion app as a standalone app that simply just failed to get audience revenue, and I think what that illustrated to us is our power in the market is really in the bundle, not necessarily in carving off distinct elements of our report and selling them at a lower price point as a standalone."

One of The Times' bigger new product launches has been their standalone subscription-based Cooking app, which gives access to decades of recipes from their database. Wilson clarified the distinction:  "Cooking is different. Cooking addresses a different kind of use case and has the potential to attract a much wider audience, a portion of which may never have any interest in The Times' entire report, but Opinion was so tightly coupled with our core news identity that we discovered that it really didn't work as a standalone."

Another product that did not achieve its original goals was an app called NYT Now, which provided a subset of NYT stories for a reduced price. Wilson said, "Essentially of the 200 plus stories a day that we publish, we would publish about 30 in NYT Now. There was no desktop version of it. It was intended to be purely a mobile application and was designed to appeal to an audience who was willing to sign on at a lower price point than the $15 a month standard subscription. It was absolutely a knockout editorial success, and a complete failure from a business standpoint."

But such business failures can lead to innovations that have applications elsewhere. Although no longer available, NYT Now "pioneered a form of mobile presentation that was probably industry-leading," according to Wilson, and the successful aspects of how it presented news articles have now been folded into the main New York Times app. Wilson highlighted that this is another way to extract value from experimental products even if they don't become revenue-generators in their own right.

The Times is somewhat cautious about making changes to the user interface or editorial presentation of their main app. As he explained, "the core app itself, in a way, had become a legacy product that had a very substantial paying audience that was wedded to the way it was, and so to experiment quickly with changing the layout, changing the format, changing the composition of that felt risky, and so it was easier to create something off to the side as a standalone.

"As it turned out, in retrospect, we look at it, and recognize that the business modeling that went into [NYT Now] was relatively unsophisticated. The product development effort that went into it was actually quite sophisticated, and I think there's broad consensus that it was one of the best things we built. We ultimately said, ‘Okay. It didn't succeed in business terms. We don't need two apps out there creating market confusion, so we'll take the very best things that we learned from it, and pull it back into the core.'"

One of the challenges of any transformation is engrained thinking. Wilson believes one of the challenges in pushing forward into new terrain is being ready to see what aspects of past behavior can be abandoned because technology has moved on.  Wilson theorizes that "human beings don't easily recognize the impact that a particular technology has had on the way we work and the way we think. Newspaper stories, the traditional newspaper story has the shape and form that it does in part because at one point in time, the composing room needed to be able to take a razor blade to the bottom of the story, and sort of paste it up in the right column, and it would fit, and these are habits that become ingrained.

"So we're all conditioned in one way or another by the technology that has defined the profession we're in, and as it begins to change as rapidly as it's changing, it's difficult to separate pure technological change from the habits, and habits of mind that we've formed around that, and so I think that's part of the reason the cultural change is so difficult."

3. Intense Leadership Focus on Digital

Today, many companies find themselves in a situation similar to The Times in that, while digital appears to be the future, the vast majority of revenue is still coming from legacy products and distribution channels.  This leads to the question of how much focus an organization should put on the declining but still sizable legacy business and how much focus to put on digital businesses which, while future-oriented, might not yet be near the scale of the traditional business. Further complicating the decision is the fact that new digital channels might deliver less revenue per transaction, as Jeff Zucker, head of NBC Universal, bemoaned almost a decade ago when he feared NBC was trading "analog dollars for digital pennies." In fact, this is clearly playing out at The Times where although almost 70% of their subscribers are digital, almost 70% of their revenue comes from print.

The New York Times has taken a bold and future-oriented approach to this conundrum, which seems to be paying off. Despite the fact that around two-thirds of their total revenue still comes from print, Wilson credits NYT CEO Thompson with, "having put together an executive committee that spends the vast preponderance of its time discussing where the company is going from a digital perspective."  The Times executive committee has 14 members and, "has assigned to an extremely skilled operator, Roland Caputo, the responsibility for making sure that print stays on track." The other 13 members of the executive team (including Wilson), "are thinking first and foremost about digital."

The New York Times has taken a bold and future-oriented approach to this conundrum, which seems to be paying off. Despite the fact that around two-thirds of their total revenue still comes from print, Wilson credits NYT CEO Thompson with, "having put together an executive committee that spends the vast preponderance of its time discussing where the company is going from a digital perspective."  The Times executive committee has 14 members and, "has assigned to an extremely skilled operator, Roland Caputo, the responsibility for making sure that print stays on track." The other 13 members of the executive team (including Wilson), "are thinking first and foremost about digital."

4. Cross-Silo Collaboration Built on Trust

While The Times level of leadership focus on digital is impressive, the digital aspiration of many companies is foiled despite leadership's desires.  This is due to the failure of different teams, departments or other silos to effectively work together to create effective digital businesses.  Boutros and Wilson credit a big part of The Times' success over the last two years to the effectiveness of collaboration across units within the organization.  Wilson explains, "There's virtually nothing that you can build, or touch, or launch that doesn't require involvement from the editorial side of the house -- a combination of technologists, and designers, and revenue folks, and in our case because it's a subscription business, both consumer revenue and advertising revenue, as well as brand marketing folks. I mean, virtually everybody gets involved."

This need for cross-organization collaboration was quite a sizable cultural shift. As Wilson described, "the newsroom has historically operated with an extraordinary degree of independence and had very, very little if any, contact with the business side, and by ‘business side,' I don't just mean a firewall between advertising and editorial, but really all of the business functions. For all intents and purposes, it ran its own tech support and HR functions.

"Dean [Baquet], as executive editor, has brought an enormous cultural change in that regard, and just opened up the newsroom to the business side, and allowed easy conversation between the two, and he has sort of uniquely, I think, reassured the organization that he attaches the utmost importance to the values and the editorial quality that has always been foremost at The Times, but at the same time, has said that people have got to figure out a way to work together. ‘This is a new era. Don't be afraid to engage', he says, and that's been an enormous cultural shift."

Boutros expanded on that, saying  "and we've had that across the board, not just with the newsroom and the business side, but different departments within each area. We now have teams actually sitting together, cross-functionally, making sure that our designers are on the team with the engineers, with the scrum masters, and constantly pushing to break down silos across different teams and business units. We've put a lot of emphasis on those behaviors and practices over the last twelve months. And I think it's paid big dividends."

This type of Kumbaya moment may sound like a fairy tale to many enterprise digital executives who may also create cross-divisional working groups and yet who still spend so much of their time in turf wars and budget battles with their colleagues. What more did The Times need to do to achieve true cross-organizational cooperation?

Wilson explained, "I think it's a combination of things. I think it's being able to articulate a clear strategy and direction of travel to give people confidence that you're bringing real experience to difficult problems, and giving them visibility into how the work is being done, and what the rationale is for various things that you're advocating. I think it's demonstrating, and this is crucial - particularly for people who are new to an organization that has historically been a destination, a career destination for folks -  that you understand profoundly the mission of the organization, and are prepared to take the time to get to know it properly, and to understand fully how it operates, and what its values are, and what it holds dear, and that's just a certain amount of empathy and humility about how you go about the task, and that takes time."

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Boutros described enthusiastically, "We have a corporate vision in ‘Our Path Forward, ' and we have a clear set of enterprise priorities. Teams are now becoming more and more cross-functional, so I think that alignment to a common vision has been a big win. We've doubled down on our agile stance, so we're ramping up now for a big, agile training push, and we really strive to gather feedback from the teams themselves to improve our processes and tools. We've started to treat our product development lifecycle as a product itself, continually tweaking and improving it."

Each team now has goals, which align with the vision and strategy of the company. "[All the teams] have roadmaps, not in different varying formats, or on different planning intervals, but all on the same rolling three to six-month release horizon, using a quarterly social cross-portfolio planning cycle. All roadmaps are transparent and public to everybody within the company. That was a big push we just concluded in the last month or so to make sure that everything our digital organization was developing was public-facing for everybody internally to see. We also just launched our first roadmap show-and-tell where teams presented their roadmaps to anyone in the company who wanted to learn more about the work our teams were taking on and the future of our products. In essence, the tactics and collaboration have evolved tremendously, and I think culturally, having everyone more involved in the process has really helped to build trust."

5. A Complete Rebuild of the Technical Stack

But even with great process and leadership, rapidly building and testing a stream of digital products requires a modern technical stack.  Boutros described the difficulties, "Our technology landscape is quite vast, and so our CTO, Nick Rockwell has had a big challenge in that regard. Hundreds of systems, from multiple different advertising pipeline tools to several different marketing vehicles and systems, to different billing systems." 

Over the past two years, The Times has been undergoing a major rebuild of many of its core tools and systems. Explained Boutros, "We've had to undertake a big systems transformation in order to truly drive a cross-platform experience for our customers that delights. That's something we're in the midst of completing now and are very close to not having so many disparate technologies."

Wilson added, "Today, we are right in the midst of transforming this, but we're running the core website on six different platforms and six different code stacks. So two desktop, one tablet, one iOS mobile, one Android, one mobile web, and so it doesn't take much to imagine how hard it is to manage future development across those stacks if that's what the state of play is. So it actually wasn't very hard to diagnose the issue. Re-platforming and re-architecture work have been underway for about a year, following the hiring of Nick Rockwell, whom both Wilson and Boutros praise.  We were able to do it largely because we got about a third of our …[budget] reserved for that underlying architecture which almost by definition contributed very little in the near term to either design features or new improvements and so forth. We also completely re-architected our data environment and moved to Google BigQuery."

Getting buy-in for sizable technology architecture projects that don't in-and-of-themselves drive new revenue can be challenging.  The team's approach on selling it to the organization was predicated on  "having a clear view at the top of the organization of what our objectives were, being aligned around strategy, and defining it clearly so that the entire organization could understand what the deficit was that we were operating with, and getting buy-in on the time and resources that it would take to remediate that."

Boutros added that once the strategy was articulated to the executive team, "everyone understood that there was a certain amount of technical debt and that we needed to re-platform. Re-architecting didn't have a lot of resistance, although we have had to remind certain stakeholders just what sort of effort that requires along the way", he joked. "There were points of fatigue throughout, that is natural with such a massive undertaking, but that's where Our Path Forward and product vision, along with clearly defined benefits and goals, and constantly reiterating them, has really been critical. We do this in every quarterly business review that we have; we do it in every roadmap review and in our annual corporate planning cycle. We make sure that the roadmaps are thorough, transparent, and that people really understand what our teams are working on, what percentage of time or investment is going into our products, and how that conflicts or doesn't conflict with any other initiatives that we may want to undertake."

Wilson added, "The hardest part is the waiting for the core work to be done so that the increased velocity, the ability to work much more incrementally, to be able to address short-term needs as well as long-term needs. To be able to respond quickly to external technology changes. Those are all the benefits that you'll get out of this, and we've got to demonstrate now that that, in fact, is what can be delivered by all this work and time that's invested."

What's Next?

So what's next for The Times?  They are on the verge of launching their next wave of new technology platforms which they predict will further turbo-charge the digital success they've been able to create even while waiting for those new platforms to be ready.

"I would say we're probably halfway to where we really want to be," described Boutros, "We are focusing tremendously on the user experience piece of it right now. Really making sure that the site and the products that we offer are world-class from a design and product perspective, but also that the marketing aspect of it really takes that next leap." Boutros added that personalization is a big priority right now, "making sure that those experiences really resonate with the customers."

The Times seems to have identified a set of effective key principles of leadership focus, cross-organizational trust, product experimentation, data-driven marketing and modern technology architecture. But perhaps more important, The New York Times has figured out how to make these things a practical working reality within their specific culture, organization, and business model.  Their recent earnings report shows clearly that their strategy is working so far. Hopefully, the details of their path to success can serve as a recipe that might apply to a wide range of other organizations.

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