Bloomberg BusinesWeek's Megan Murphy recently interviewed HBO's CEO, Richard Plepler. The discussion offers some terrific insights regarding how an incumbent player can grow and innovate, overcoming concerns about how new opportunities might cannibalize existing products and services. Plepler talks about purusing "multilateral growth" at HBO in an age of cord-cutting customers. First, he explains that HBO made a decision to offer a standalone streaming service (i.e. purchasing HBO without having to buy a cable package) in 2013, when few homes were "broadband-only." Today, nearly 20 million homes are in that category. HBO didn't view cord-cutting as simply a threat though. They framed it as an opportunity. Plepler explains that HBO chose to pursue "multilateral" growth - expanding into the standalone streaming space, while also trying to grow its traditional cable business. To management at HBO, one did not have to come at the expense of the other. Plepler explains:
We are going to grow multilaterally—digitally and among our traditional partners. We looked at the market and realized we were totally underpenetrating both...We knew it wasn’t going to be cannibalistic. There are some people who prefer a traditional bundle—maybe it’s a skinnier bundle and doesn’t have 180 channels in it. But for HBO, skinnier bundles have been a good thing, because if you take the average price of a cable or a satellite or a telco subscription down from $100 to, say, $65 or $70, that means HBO—which has always been a la carte—is a much more digestible purchase. Skinny bundles allowed the cable, satellite, and telcos to package us more effectively.
Opportunistically for us, we’ve been able to parallel-process and to grow digital. One has not been at the expense of the other. As I like to say, nobody is doing us a favor when they sell HBO, whether it’s digitally or whether it’s in the traditional ecosystem. They’re selling HBO because it’s a great product and it helps make their bundles stickier—and because they know their consumers want it.
That quote is packed with some fascinating insights. Perhaps most interestingly, HBO did not buy into the conventional wisdom that skinny bundles would serve as a disruptive threat to its business. Instead, it asked the question: How might we take advantage of this trend to actually grow our business? What they found was that the offering of skinny bundles by cable companies provided more disposable income and purchasing power for the consumer, enabling them to add HBO while staying within their budget.
HBO didn't begin by assuming that these trends regarding cord-cutting and skinny bundles were simply threats. They reframed these issues as opportunities, and asked the "how might we" questions that enabled them to discover new growth opportunities. More companies need to think in terms of "opportunity framing" when their business environment shifts.
What are the benefits of "opportunity framing" in these situations? Research suggests that we can act very rigidly when we frame situations as a threat. We often simply "try harder" - doing more of the same rather than thinking differently. We act much more flexibly and adaptively when framing situations as opportunities. We encourage more experimentation and learning, and we find new ways of working. Clark Gilbert's research suggests that initially viewing a situation as a threat can help an organization to mobilize resources and get management's attention. However, successful adaptation requires reframing the situation as an opportunity, much as HBO has done in this case.