Once upon a time, a small church in rural Pennsylvania got a new pastor, and everybody was excited. The nice-looking young man brought smiles to the faces of the blue-haired ladies, and his first sermon was on love. “Wonderful,” the congregation agreed as they exited the church afterwards. “Thank you so much. Pastor.”

The next week, everybody was a little surprised when the new pastor spoke again about love. Week after week, the sermons began to all sound the same, and one woman couldn’t contain herself as she took the pastor’s hand after the service. “Pastor,” she said, “why do you keep preaching about love? What about sin? What about right living?”

The pastor answered with a smile, “When I believe the congregation fully understands this topic, I’ll move on to something else.”

I feel that way sometimes, as new versions of old themes keep popping up across the media landscape.

Umair Haque, the brilliant London Business School economist that I’ve written about so many times, writes today of new investment in Twitter, the cool text-messaging application without a business model. Why would anybody sink real dollars in a business that has no business?

This is where the old theme comes in. I’ll state it, and let Umair expand. The disruption of Media 2.0 is, at core, a disruption of mass marketing. Hence, “new media” applications built on a mass marketing foundation are not part of the disruption.

This approach - an almost disturbing lack of interest in the business plan/model/etc - is something all of today’s great media investors have.

…When an industry requires total economic reinvention - new assets, capabilities, revenue streams, market space, the whole nine yards - it’s futile to stick to the sterile nostrums of a printed “business plan”.

This should be intuitive. Total economic reinvention implies almost perfect uncertainty. Under conditions of perfect uncertainty, it’s a suckers bet to put faith in rigid plans.

Now, this isn’t to say that you should descend into irrational exuberance, and forget about value creation and value capture altogether.

Rather, what counts is the ability to tap (better yet, create) many different kinds of revenue streams, offsetting the systematic risk of investing in the space in the first place.

…There’s little strategic point in focusing no how, for example, to grow a next-gen media business to $50m in revenues or how much $$$ ad nets make if it’s the larger economics of the industry which are in an almost total state of flux, because the new value chain hasn’t yet emerged.

Put another way, too often, these kinds of elaborate analyses built on fixed assumption have a very steep opportunity cost in industries where resources, competencies, revenues streams, business models, etc are exactly what are undergoing seismic shifts - they blind us with illusions that fixed cells in spreadsheets are strategy.

Spreadsheets aren’t strategy.

Rather, next-gen investors are better off understanding why and how value creation and value capture will shift over the next 2-5 years - and then invest in plays which can dominate those shifts.

Numbers are important - sure. But it’s understanding the deeper economic logic which really counts.

“Spreadsheets aren’t strategy.” Brilliant!

This is precisely why I tell people that you can’t left-brain your way into right-brain thinking and why I have so little faith in the conclusions of the NewspaperNext project. “Innovative” solutions, it concludes, begin with the spreadsheet about which Umair speaks, and that’s as problematic for media companies trying to reinvent themselves as it is for investors.

This is why Simulpath™ is so crucial to understand and why we must throw off the burden of tying everything we do today to a revenue stream. It’s not blind faith; it’s a deep understanding that the revenue runway for a lot of this has to be a long one, which is why Media 2.0 is best viewed as an investment.

And for me, this is a vital aspect of my work, because my passion lies with positioning local media companies for tomorrow. If we can bring ourselves to get in sync with the disruption, we’ll be far ahead of our local competitors, but that means thinking like motivated and informed new media investors.

This entry was posted on Friday, July 27th, 2007 at 10:23 am and is filed under Media 2.0, Disruptions, Technology. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.