Leno, NBC, and Innovation — One of these is not like the others!

NBC Universal reportedly will announce Jay Leno Show, hailed in September as the future of network television, will be moving to 11:30 pm; thereby, pushing the Tonight Show back to Midnight.  This experiment in pop culture lends itself to a great business lesson.

Some would say the lesson learned is not to tamper with a good thing.  For fifteen years, Leno rode the winning position in late night races.  Five years ago network bigwigs were afraid Conan O’Brien would leave the Network versus swimming in late, late night waters.  Their response was signing O’Brien to a contract promising his move to the Tonight Show helm, thereby adopting a fresh, new, innovative approach.  Its late night business model was a winner.

The decision to create a five night per week was a bold move supposedly responsive to the current situation for the medium and dwindling profit model for prime time programming.  Business model innovation “refers to the creation or reinvention of a business. Though innovation is more often seen in the form of a new product or service offering, a business model innovation results in an entirely different type of company that competes not only on the value proposition of its offerings, but aligns its profit formula, resources, and processes to enhance that value proposition, capture new market segments, and alienate competitors.”[1]   NBC’s public communication in this crises situation is “…while Leno’s average audience of 5.8 million viewers has bet expectations…(the move and five-day a week Leno prime time program) is characterized (as) a bold experiment for recessionary times,…”   So, if it has been a success, why is it not succeeding?

Misstep #1:  Forecasting O’Brien, viewed as a younger, more in-tune with the next generation audience, was anointed heir apparent; Leno representing back in the day.  Five to six years after the forecast was made reality was that Leno was still on top in the ratings and his Tonight Show audience was still profitable performing.  The success of a forecast is fifty/fifty,

Misstep #2:  Listen to the voice of the consumer; the Leno and O’Brien market segments are different.  At best there is minor differentiation between the floods of network late-night viewers.  There is a minor skewing of demographics between Leno and Letterman.  The O’Brien crafted a market segment.  A possible rationale for the product alignment may have been that the Leno, O’Brien, and 10:00 – 11:00 pm products were so unique and differentiated from their competitors that consumers would move with their commodity.  Another explanation could have been thinking outside the box, adopting a Blue Ocean Strategy philosophy, and creating a new, unique product heretofore undelivered, meeting more needs and creating greater value than the current offerings.  (I.e. comedy and variety versus sixty minute drama; younger, in-tune comedy versus back in the day). 

I recognize I am a mere blog author and not a highly paid television programming executive.  The 10:00 Leno felt like the 11:30 Tonight Show Leno and the 11:30 Tonight Show O’Brien felt like an O’Brien sausage – stuffed into a Tonight Show format.  The voice of the customer may have been on mute or translated incorrectly by NBC leadership.

Misstep #3:  Innovation, creative thinking, built the medium – otherwise we would be listening to radio.  Returning to the definition of business model innovation, NBC announced early in the process of reevaluating its original forecasting that the innovative profit formula a five-day a week, prime time Leno created for the company was very positive.  The misstep was that the company has a vertically integrated business system.  In this case, local affiliate news, its 10:00 pm lead-in and its 11:35 follow-up are financially integrated.  Profitable for a recessionary NBC corporate proved not to be for other members of the enterprise. 

Six months after implementation the owners have decided to scrap its project and attempt to shift back to some form of the status quo.  Hindsight is always a gift and typically the bane of change agents.  Acknowledging the need to develop a new business profit model for network television was a major step.  Innovation requires risk taking; NBC attempted this.  In a few years their move may be viewed as before its time or it could become fodder for quiz game trivia.

The answer:  New Coke in the 1980’s, Leno/O’Brien in the late 2000’s.

Answer:  Business profit models that were missteps.