The clear Sky strategy


Jeremy Darroch will soon mark his 13th year as CEO of Sky. With 32,000 employees and 24 million customers across seven European countries, Sky is a leading player in media content and distribution. Darroch has an atypical background for the head of a large global media company. Raised in a small town in the northeast of England, he attended the University of Hull, and spent 12 years at Procter & Gamble before moving to electronics retailer Dixons as a finance executive. He joined Sky as chief financial officer in 2004, and was named CEO in December 2007. Sky, founded in 1989, was the U.K.’s first satellite TV service. It grew into a media powerhouse, largely on the back of its channels dedicated to news and sports — especially English Premier League soccer. Darroch spearheaded the company’s investments in adjacent business lines such as broadband and over-the-top (OTT) subscription service Now TV, pushed the company into European markets (acquiring Sky Italia and Sky Deutschland in 2014), and invested in prestige original productions such as Chernobyl, the Emmy Award–winning series jointly produced with HBO. In October 2018, when Comcast completed its US$39 billion acquisition of Sky, it sealed one of the largest and most consequential media deals in history. In a virtual interview with strategy+business contributing editor David Lancefield and editor-in-chief Daniel Gross, Darroch discussed his approach to strategy, the importance of culture, and why he doesn’t go out much.

S+B: You have talked about a mind-set of continual reinvention at Sky. How do you go about creating it? How do you sustain it over time?

DARROCH:
It starts from having a strategic mind-set about how you think about the business. You have a core assumption that your markets, customers, and the environment are not going to stay the same. When you start with that mind-set, you begin to ask: How do we need to change to stay relevant and continue to grow in the future environment that we see?

The demand for renewal then cascades all the way down. But you can’t be overly prescriptive. Much of my job is not to tell my colleagues how to renew, but to encourage them to continually do it. That means making sure every time I’m in a business meeting or review, it’s one of the core things I talk about. From there, you start to legitimize this idea of constant reinvention.

The other way to do it is through the brand. The basic idea of Sky is to “believe in better.” The essence of this is change and improvement, with an optimism attached to it. If we believe that we can get better, we will get better.

S+B: Pay-TV for years was a fantastic business to be in, with growing revenue streams from both subscribers and advertising. But in the last few years, with the rise of streaming and cord cutting, this disruptive industry is being disrupted. How do you approach this challenge?

DARROCH:
It depends where you choose to begin. You could start with technology or content, but do you actually start with consumers?

If our north star is our customers and consumers, let’s understand what their usage and habit patterns are today, and how they’re changing. Because that will give us the best picture of where they’re likely to go in the future. It won’t be perfect, but it will open doorways that get us thinking more about where the business needs to go over time. If you can step into those changes, you optimize your chances of controlling them.

When I joined Sky in 2004, around 93 percent of our customers took what we would call “the big bundle,” where essentially, you had everything that Sky offered. We could see, even back then, that this trend wasn’t likely to hold. So, as early as 2005, we started to break down our packages and give customers more options as to how they could rightsize themselves and get what they wanted for what they could afford. When you play that out over 10 or 15 years — the business we have today has a very different makeup and strategy in terms of what it does and how it sells.

By going on this long journey, you can best influence that change and optimize it over time. Sometimes businesses can resist change too much and when they actually find that they need to change, it’s almost too late. When you do change, you’re going to get things wrong. The idea that you can somehow pivot and become excellent in something new, having been excellent in something old, is quite hard to pull off. But if you think of it as a journey and an evolution of the business, it is easier.

Our first OTT service, Sky Player, was launched in 2006. At the time, we didn’t think it was going to be a huge, immediate success. But we knew if we stepped into it, we would learn. It’s why I often talk about long-term shifting plates. What are the big shifting plates that we think are important, that are going to be important to customers, that are important to the industry?

S+B: Many media companies have a CEO and one or two people around them with a vision, but there’s a gap in translating that vision to the rest of the organization. How do you actually go about making sure the vision is consistent and embedded across your executive team and throughout the organization?

DARROCH:
You need to do two things. You need to have your eyes to the horizon and your feet on the floor. At all times. And it’s quite a discipline to do that. You see a lot of people who are consumed about managing the now, and then if you look at the last few months, there’s not been a lot of forward thinking. Then you also see other people who, perhaps the longer they are in their roles, spend more and more time thinking about the future horizon. That’s all very alluring and appealing, but they disconnect with the immediacy of what’s important today. You must try to think of both of those things and also encourage everybody else to think of their own role in that way. So, if you’re in broadcast technology today and you’re running that function or department, how do you get your colleagues to look at the future broadcast technologies and at the same time equip people to shoot with their iPhones and get the news out quickly? What you end up with is this networked brain. Everybody in Sky should be thinking about where the company should go, but also “How do I personally make sure I’m doing what is needed?”

S+B: Sky as an organization is clearly ambitious, very capable, and high performing over the long term. So how do you nurture this networked brain? How do you make sure people are managing their energy, making wise decisions without tipping over into burnout?

DARROCH:
When you are a CEO, you own the emotional health, robustness, and resilience of the organization, as well as the business performance. Our organization is a slice of life, and you see the best of times and the worst of times. In my tenure, we tragically lost a colleague from Sky News when Mick Deane was shot while covering the Rabaa massacre. We have to support our people to get through terrible situations like that. Culture and style are both very important. Style is defined by the top. If you behave a certain way, then it’s not surprising to find that others will tend to mimic that.

One of the benefits of the open environments we’ve invested in is a healthy, transparent workplace. We were early in investing in mental health and resilience. I’m always somewhat skeptical when I hear about businesses treating mental health efforts as a discrete program. I think it’s a way of life. Somebody said to me many years ago that when we talk about work–life balance, we have to think about it as a verb, not a noun. It’s balancing and not balance.

I think we got a lot of that from our insights in sports, and particularly from Team Sky, our cycling team.

S+B: Team Sky was a cycling juggernaut that had the best assemblage of talent; made huge advances in health, nutrition, and technology; and won the Tour de France four straight years, and six out of seven. How did that partnership come together? And what precisely did you learn from it?

DARROCH:
Back in 2007, with the London Olympics coming up, I was thinking about how we could contribute more broadly to a sport. We’re associated with a lot of big sports, and I had this idea of working much more closely with smaller sports, particularly at the grassroots level. I was also intrigued by what a business could learn from an elite sport. Relative to business, sports are often quite pure environments with very singular goals. Whereas if you’re running a very big organization, you’re pulling all the levers, but you’re not quite sure what’s connected to what lever. And it’s a little bit harder to just translate all specific actions to results.

I talked to a lot of people, and they all told me to meet a guy named Dave Brailsford because they thought we had a lot in common. And in the first meeting, Dave talked about the idea of marginal gains [small improvements that lead to significant success]. There was an immediate meeting of minds. It led us to working with British Cycling ahead of the Beijing Olympics, and then from that, Dave said, “We can create a team that can go on to win the Tour de France.”

The purpose of the team was never just winning bike races — it was about grassroots participation. Over 10 years, we inspired nearly 2 million people to cycle regularly. We learned an enormous amount. Clearly, funding is important. But it’s only part of the mix, and that alone won’t guarantee success. Team Sky benefited from the branding, communications, and infrastructure that we were able to put in around the team. It was an incredible journey. They have continued in their new form [sponsored by chemical company Ineos].

S+B: In your first annual report as CEO, you said that a successful and sustainable business is a responsible business. Sky was the first media company in Europe to launch a net zero carbon emissions campaign. Why?

DARROCH:
All businesses are collectives, in which everybody can feel part of the mission and have a stake in the journey. But as a CEO, you’ve got a unique opportunity to define what the business stands for. I was very taken by this idea of creating a good business, one that could see beyond the narrowness of its own financial performance. Every business takes from the environment. We get access to resources, roads, infrastructure, and education. So it’s only right that we have a mind-set that we give back, we replenish as well as consume. And we use our voice to try to make a difference.

That view was very much shared by my senior colleagues. We got into it and took a small step, and I found two things. First, the broader environmental community responded really positively to that, and second, people in Sky responded positively. Back in 2006, we were the first media business to become carbon neutral. And since then, our Rainforest Rescue campaign has saved a billion trees in the Amazon, we launched the hugely successful Sky Ocean Rescue campaign against single-use plastics, and, earlier this year, we set our ambition to be net zero carbon by 2030. Comcast [Sky’s parent company] has a wonderful program called Comcast Cares, which is one of the biggest corporate volunteering programs in the world. We’ve now created Sky Cares because we plan to really step up our volunteering in local communities.

S+B: Streaming has become as powerful a force in entertainment and media as the steam engine was for transportation in the late 19th century. How do you talk about streaming in terms of strategy? Is it a technology or consumer habit?

DARROCH:
First, you have to separate technology and how we distribute what we do from the actual product that we sell. When Sky was launched, we had analog TV, which was replaced by digital multichannel TV, which in turn was replaced by high-definition TV. Atop that came the concept of on-demand content, initially served through hard disks in boxes, then through server farms that we owned, and then eventually through the cloud-based virtual servers we have today. And then, there was a transition from a pure broadcast platform to a hybrid platform where we combine satellite and the broadband return pathway. Today, you can get Sky purely over a streamed platform. So we’re on a journey through time, rather than moving toward a destination.

Second, when you have a customer focus, streaming becomes irrefutable because you can see the trends. Streaming today is as much about how people choose to lead their lives as it is about technology platforms and infrastructure. Both of those things are important.

The reality is today, fewer of our customers than ever before consume their content purely through satellite. But 15 years from now, people will still be consuming content by satellite. It will just be a smaller number. I think leaders can race too quickly into some of these changes because they haven’t been thoughtful enough about the right pace of change.

We don’t spend too much time being overly precise on predicting specific outcomes. We want to understand the trends, take a wide view to make sure that we can see them in the broadest context, and then figure out how to step into them. And that becomes liberating, because the question is not, do we change? It’s how, at what rate, and where?

S+B: In some ways you’ll be cannibalizing yourself as an organization. And that can be challenging because you have shareholders to please. How do you manage that tension?

DARROCH:
Our role is to build this business for the medium and longer term and create the greatest sustainable value that we can create over that period. At Sky, we reject excessive short-termism. When we invest, we invest all the returns. We understand, appreciate, and are equally committed not just to the investment, but to the returns phase that flows off the back of it.

You have to think about strategy at a capability level, a human capital level, and ask: “How do we get the right set of skills into the organization?” We’re seeking people who share our same values. That’s probably the only single thing that we’re quite strict about. When you put that together, then you’ve got the ingredients that allow you to do both of those things.

At a personal level, you have to recognize that with some of your new technologies, your own personal batting average just goes down. You have to be willing to fail a lot over time. And that’s not always comfortable, but that’s part of the job.

S+B: On the content side, you’ve made some bold moves and successful moves in Sky Studios. How do you see the role of short-form, high-quality content?

DARROCH:
We have a pretty simple mantra, which is that we want to have something for every household in the market in which we compete and for every person in the household. When I first joined Sky, I realized that we offered a lot for myself and my son, but maybe there was a little bit less for my wife and my daughters. That led me to the decision to build a much broader entertainment portfolio and then to invest in our own content with Sky Studios. It was one of the harder decisions to land on in the business. But once we did it, it turned out to be transformative.

There’s always a lot of people telling you that that particular idea is not a very good one. And you just have to follow your instinct and make it happen.”

Short-form content and its consumption are just going to grow. Whether you’re 20 or 50, you recognize that attention spans are going down a bit. But monetizing in that space is not going to be easy. There’s a lot of short-form content available. Is it going to be a big thing or an addendum to another thing? Maybe we can distribute it over a digital platform, but more and more of it is now flowing into our main in-home TV platforms as well. One of the great things about Sky Studios in particular is that it just gives us a much greater capability to harness our talent and to be able to create more of that type of content.

For many years, we’ve done a set of half-hour Christmas Comedy Shorts on Sky Arts. They’re little stories, quirky stories often, where we work with fantastic on-screen talent and writers. We give them a vehicle to publish their story, and it’s been tremendously successful every year.

S+B: You said that deciding to move into content was one of the harder decisions to land on in the business. What was so particularly hard about it?

DARROCH:
It was more of a pivot from where we had traditionally been. At the time, we thought we would continue to work with people around the world to acquire content. In the short term, you can convince yourself that the easy, most efficient, lowest-risk approach is to work with the Universals, Disneys, Warners of this world. And why would Sky think that it should compete in that area? However, I felt that short-term thinking was too limiting in terms of our ambition and could see this real desire for locally originated content. And the free-to-air broadcasters were going to become ever more general, to secure advertising dollars or the license fee. We needed to combine working at scale with the best people…with our consumer insight and mind-set, to create distinctive, highly differentiated, very high quality paid TV content and paid-for content that could complement what we did elsewhere.

It was always going to be a journey. I knew we were going to have to [stay] the course. There are always a lot of people telling you that that particular idea is not a very good one. And you just have to follow your instinct and make it happen. Fortunately for us, it worked — Sky is part of the team that created Chernobyl, which became such a huge success. Those are the great days.

S+B: Sky and other large media companies have a mix of global and national features. How much further do you think Sky intends to go in terms of its global ambition?

DARROCH:
We have all the attributes and assets that we need. Being part of the broader Comcast organization has been fantastic. We’re already distributing our content more broadly, and our original productions are being sold in many markets. We can see that it is resonating and working. You can take a service like Sky News and look at its global reach. We recently completed a documentary on what has happened in Lombardy called Coronavirus: Into the Red Zone. It is a fantastic piece of reporting that is being distributed very broadly. We’ve got all the basic ingredients and capabilities now. The question then becomes, where, at what pace, how do we do this? I’m very hopeful that in the next few years, you’ll see Sky’s reach get ever broader.

S+B: This is an industry that has often grown by transformative acquisitions, including the acquisition of Sky by Comcast. What is the next phase of deals? Is it investing in startups that are doing different things in technology and production?

DARROCH:
Putting Sky together with Comcast and NBCUniversal has given us a very broad landscape and a significant financial and human resource capability. To me, it doesn’t feel like there’s any one thing that the business has to do so it can find the right opportunities. As you’d expect, I see us continuing to work across the spectrum, whether it’s upstream in terms of working with NBCUniversal in terms of content creation, attracting the right talent, and giving those people a much bigger landscape that they can work with. We’ve got 55 million of the world’s richest consumers in five of the seven top markets in the world. We have a very attractive base of loyal customers who like our products and brands, and typically want to take more from us. And we’re simultaneously working with our colleagues at Comcast’s cable and consumer product platforms so that we can roll out more consistently, faster, and at greater scale.

We are almost a year and a half into the new organization. Our focus initially was to embed Sky into Comcast well and secure the synergies between the companies. And we’ve done that. Now I think the business is really thinking forward. The immediate curveball that’s been thrown at all of us is the events of the moment [the COVID-19 pandemic]. But if you look further afield, I think the opportunity for us to be one of the winners in this broader space over the long term is there for the taking.

S+B: Who, or what, has shaped you the most as a CEO?

DARROCH:
The person who had the greatest influence on my life — and even though he has passed away, he still does — is my father. I grew up in a fantastic community, and had a great family and great parents. But my old man in particular had a big influence on me. His mantra all through whatever I did was just “Respect your opponent. Respect yourself. Do your best.”

All of us have a mixture of things we do well and things we don’t do so well. If you can focus on identifying what people do really well, you get rich learning. I’m a little bit of a magpie like that. I try to learn and pick from people I come across. My first boss, Glen Wilson at P&G, had an enormous effect on me, as did John Clare and Stanley Kalms at Dixons. And at Sky, Rupert Murdoch, James Murdoch, and Lord Rothschild. I’ve been lucky to work with some incredibly talented people, and I’ve tried to take a little bit from each of them and then mold it into me so that I can get better.

S+B: How else do you learn, especially when you have incredible demands on your time professionally and personally?

DARROCH:
I think I’m lucky because I was never the smartest, most talented person. Consequently, I’ve always had to have this idea of self-improvement. I’m constantly trying to get better at everything I do. I’m naturally inquisitive, I’m curious about things, and I’ll take time [to learn]. What I’m not good at is back-to-back meetings every day. That doesn’t work for me. So I carve up time in my schedule for people to come by, to poke around a bit, because I love rubbing minds with people. You can learn a lot just by walking around. And if I’m on the road, I’ll often take a day to look around a city I’ve not been to.

You have to be very careful, particularly in a place like London. It’s such a dominant city in the U.K. You can get sucked into the London chatter that just bounces around. So I don’t go out a lot. I want to come home and spend time with my family and my friends. If you get sucked into a wholly work-based life, the danger is that you miss a slightly wider perspective on what’s really important.

S+B: Are there any particular concepts or practices you are fascinated by and indeed playing with?

DARROCH:
A couple at the moment. I think we will see new capitalist models emerge now, and we should all be thinking about the question: What is the definition of a large-scale, modern organization for the future? Also, renewal takes you constantly into new things, but how do you also shed weight as an organization? If you talk to Team Sky, they would spend as much time talking about how they could shed weight, because in cycling, losing just a little bit of weight can have a big effect. I often think effective businesses are defined as much by what they shed and don’t do as by what they do. I’ve been thinking about it in a positive way, encouraging people to give stuff up and focus on what matters, because that’s what makes the business go faster.

Author Profiles:

  • David Lancefield is a strategist and coach who has advised more than 35 CEOs, led 15 digital transformations, and was a senior partner with Strategy&, PwC’s strategy consulting business. He is a contributing editor of strategy+business.
  • Daniel Gross is editor-in-chief of strategy+business.



Source link