"This is a great company, with a great heritage and a great future"

Three years into its transformation process, Sanoma has reinvented itself as a digitally savvy company. With the organisation’s structure, strategy and culture firmly defined, Sanoma is making confident strides towards organic growth in 2016. CEO Harri-Pekka Kaukonen explains why Sanoma’s credibility was restored in 2014 and why growth and culture will be the core themes of 2015.

A few years ago, Sanoma was in dire straits. The advertising market was hit hard by Europe’s economic woes and the print industry was being pummelled by the rise of digital media. Sanoma, with a portfolio that emphasised print, lacked a decisive response. Growth was negative and people felt frustrated. It was then that Sanoma embarked on an ambitious multi-year transformation programme to radically alter the structure, strategy and culture of the organisation.

A lot happened in 2014. A new structure was implemented, with a large reorganisation at Sanoma Media Netherlands and Sanoma Media Finland, and the formation of Sanoma Digital and a new technology organisation. The EUR 100 million cost-saving programme will be completed ahead of schedule. Most Russian and Eastern European media assets were sold and the Dutch portfolio was radically cut back. It was also decided that Belgium, originally slated for divestment, was to work more closely with the Netherlands. "By achieving almost all of our targets, our credibility has been restored," Kaukonen says.


Pockets of growth

2014 was intense and tough, but Kaukonen is pleased that everybody’s hard work paid off. "We reduced negative revenue growth from -6.6% to -3.7%, and we’re already seeing pockets of growth. Sanoma Learning is a leading player with fantastic opportunities for international expansion. The media business in the Netherlands is doing better. In week 52, we had the largest inflow of new magazine subscriptions in three years. Finland has shown strong developments across all businesses, TV, radio, news and lifestyle."

There were obstacles, too. Print revenues continued to decline. The Finnish advertising market declined for the third year in a row. Digital growth in Finland and Netherlands was unable to fully compensate for the on-going deterioration in print. Dutch TV advertising slumped in the second half of the year after the FIFA World Cup football, and Poland’s learning market was affected when the government decided to pay for educational materials instead of parents, and introduced a cap on the total market.

 And while Sanoma’s overall performance in advertising has been remarkably strong, it has proven hard to find new content and services that consumers are willing to pay for. Kaukonen, says this is why Sanoma took such big steps in 2014 to build its big data capabilities, which will help to tap into the value still hidden in the advertising and consumer markets.

Growth

After several years of major structural and strategic changes, Kaukonen has high hopes that 2015 will not bring any major unforeseen changes. "2015 is about making it happen, about getting traction on all the things we’re doing." Kaukonen is confident that Sanoma can return to organic growth by 2016, which means it needs to take big steps already in 2015. To achieve this, the organisation will focus on two areas: growth and culture.

When it comes to growth, each of the three Strategic Business Units will accelerate their individual growth programmes, for example in order to monetise the explosive growth in mobile traffic and video, continue expanding Learning into the digital realm, and enter new markets. The front office needs to improve, too. "The next level of efficiency will come from managing customers, sales and content. This is where we invest most of our time and people, and where we can differentiate ourselves. Quality must go up and costs must come down."

Sanoma will also solidify its domain strategy in the Netherlands, which monetises cross-media solutions involving brands in the women, automotive, kids and home deco domains. "The success of vtwonen gave us our first breakthrough, but in 2015 we need to show the world that the domain strategy makes sense." Finland will develop a domain strategy in 2015. "Finland is strong in areas like news, entertainment, parenting and living. Given the smaller scale of the Finnish market and a different starting point, the implementation of the domain strategy may look different from the Netherlands."


Culture

In addition to growth, Sanoma will focus on the organisation’s culture in 2015, particularly collaboration. "Collaboration is crucial to achieving our goals. Our branded content, commercial and technology areas have begun to find each other, but we need to simplify decision-making and work on the pain points of our new structure. Some aspects of our culture also prevent us from cooperating more. We get bogged down in internal debates around whose mandate or turf something is. Or simply, we don’t look hard enough to remove unnecessary activities that do not add value for our customers. This is what I call silly stuff and another priority for 2015 is to get rid of it."

"I want less three-year planning and more agile working, more entrepreneurialism. The pace needs to pick up"

To do this, the company’s priorities need to be clarified and bottlenecks need to be removed. "We need to systematically address these issues and make sure that in a year from now we are in a better place." In addition, he says, people need to work in a more customer-oriented way and, quite frankly, move faster. "I want less three-year planning and more agile working, more entrepreneurialism. The pace needs to pick up. In 2015 we will work to give people the capabilities to do that."

Kaukonen is optimistic despite the challenges that remain. Asked how he sees the market developing in 2015, Kaukonen says that Finland is likely to remain tough, the Netherlands is better but still uncertain and Learning has repositioned its portfolio to more areas of intrinsic growth. "Sanoma should not expect any relief from the markets. But you know, we don’t need relief because matters are in our own hands. That is what we gained from 2014. Sanoma today is a great company, with a great heritage and a great future."