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HuStream Technologies Interactive Video . -49

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university and college clients were able to provide customized buttons on their schools' websites that students could use to receive a tailored experience; students with a short attention span could receive a broader and shorter experience within 45 seconds. HuStream had developed this metric from its initial customers and knew it was a key success factor.

HuStream was a hub for video production, providing high-quality video production services for clients through an in-house studio equipped with top-performing camera equipment HuStream believed that producing quality video should be inexpensive, which is why it provided cost-effective options for the production of their customers' video content. Using a team of skilled professionals, HuStream produced quality video services at an affordable cost:

We have a proven process to video production that is guaranteed to be smoother and more efficient then you probably think. We begin with Scope and Discovery where we establish needs, goals, timing, at]d budget. Once the plan for the video is laid out, we work with you to ensure the video messaging is aligned with your marketing and goals. When we are all confident that the Pre-Production is tight we let the cameras roll. Regardless of where and how the footage is shot, our Production team is world class and will absolutely ensure that the capture is top shelf. Your project then moves on to Post Production where the footage is edited and visuals and graphics are added. Finally, your video is ready for Launch and we work very closely with you on an effective launch strategy to maximize traffic to your video and make sure it gets seen! 1

HuStream produced a wide variety of video content. Since video conveyed a quick information transfer, the market for interactive video content was potentially vast, which Jed to HuStream offering many different types of video production services to attract a varying customer base, including promotions and advertising, corporate videos, software demonstrations, commercials and YouTube, student recruitment, instructional and training, guided selling with calls to action, self-help and FAQs (frequently asked questions) and customer testimonials. Peter Matejcek believed the current HuStream revenue represented a small portion of the untapped market in interactive content, but that combining HuStream's current skills with new emerging business models would enable HuStream to expand and diversify in any direction identified as profitable.

Due to HuStream's philosophy and commitment to quality, and despite its short time in business, the firm had already worked with some prestigious clients, securing such well-established, global companies as Microsoft and Intel, in addition to many educational institutions in the firm's local region of Kelowna, British Columbia, Canada. Working with companies with the calibre of Microsoft and Intel had given HuStream credibility, enabling the company to expand production more rapidly. In the future, quickly increasing HuStream's production ability and services-based business platform would create a large capital requirement, which would make it difficult to expand quickly and capture market share. The company needed to be able to better manage its ability to secure capital, which HuStream had little experience with. Its business model had thus far been based on customer revenue and required only small investments from the founders.

Within HuStream's services-based model, most processes involved in reaching the final product were performed entirely as a service to the customer, and hence were charged to the customer. This business model provided clients with a guided solution through which both the creation process and the end products were well managed and suited to the customers' willingness to pay. In this way, HuStream provided a product through the use of its SDK (software development kit) platform and services. Since

1 Hustream - Video Production, website landing page, Click on "Video is changing everything· play button, www.hustream.com/, accessed April 10, 2014.

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the co-founders wanted to expand their operations more rapidly, they needed to productize their solution to reach a larger section of the market, which, in tum, would multiply their success exponentially.

To expand and increase revenues, HuStream needed to more effectively manage its operations to serve more clients at one time. Since HuStream was a small company, consisting of seven employees, producing a higher volume of videos would challenge its ability to deliver until it was able to expand. Expansion of a services-based business would require both financial and time commitments. HuStream would need capital investments for personnel in sales, production, customer support, account management, operations, project management and development. There would also be costs related to physical offices and production space. In a market where gaining first-mover advantage was crucial, investing time and money into expansion would hold the business back in terms of its future development. Clients wanted their products developed rapidly; high-calibre clients were unwilling to wait for the construction of a new video production facility, which HuStream might need to build to meet increased demand. 13ut productizing its services-based business model would enable a swift distribution of services over a larger, more diverse range of clientele. How would HuStream balance these forces of building versus executing?

HuStream's overall video output totalled more than 300 videos, which worked out to an average output of 75 videos per year without considering the learning curve faced in the early years, just after the company was founded. Thus, in the future, the average video production would arguably be higher than 75 completed videos per year. Company growth over the past year would be an influencing factor to consider when determining productivity going forward. The overall suggestion was that HuStream should grow steadily.

HuStream's growth in production services, production facilities and highly trained professionals that made the company operate smoothly would increase pressure on maintaining the high quality of account management deliverables. HuStream was committed to delivering exceptional products and services in a timely fashion, which was always a crucial asset to the company; however, in a time crunch, foregoing its commitment to quality would not be an option. HuStream was uncertain whether developing fully productized solutions of products and services as technical advisers urged would replace the need for high-quality account management. The Matejcek's consider account management critical but advisors are offering a different opinion. These two counter-balancing forces need to be considered.

Given HuStream's SDK platform and easy-to-use interface, would the company continue to be able to reach customers who had a less critical need for high-touch account management? Developing this kind of functional interface and platform would take time. HuStream' s management and development team estimated the creation of this leading-edge platform and interface would take three years. The user experience would provide a unique competitive advantage, by enabling clients to feel as if they were having an intimate one-on-one relationship with the website. As Lawrence and her team analyzed the current situation, they looked at HuStream's current business offerings and contemplated the most plausible approaches to manage the shift in business that could bring the company greater financial success.

MANAGEMENT TEAM

HuStream employed seven people in various management roles and responsibilities. Peter and Amy Matejcek had co-founded the business in October 2008, as a producer of content for educational training. They had grown the company to its current state and knew it well. Peter Matejcek held the CEO position

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and was responsible for sales, business development and the office setup. He lead all sales efforts and realized his limited capacity for the multiple roles but he did them better than anyone they had tried in these positions. Amy Matejcek held the COO position and brought her deep skills in content creation, marketing and account management.

HuStream was a lean company with a few key employees, starting with Jon, the developer and tech support; Reid in client services; and the creative team led by Jordy and his sub-team. Marketin~ responsibilities were contracted out to local marketing firms. The company had recently spent $10,000 on a marketing strategy, but it had not successfully convert viewers to new customers.

Their headquarters situated in Kelowna, BC, Canada, held and offices were set up in several Canadian cities to service customers across Canada and the United States. HuStream's video production process streamlined customers' videos and made them flexible to align with their marketing and goals. This process started with ~cope and Discovery, which identified the customer's needs, goals, timing and budget, and progressed to the Shoot and Post Production steps, which ensured top-class editing, visuals and graphics. Finally the process maximized traffic to the video through an effective launch strategy. The founders recognized that they lacked a production team to produce material and content for the videos, although they had good contacts and relationships with people in local markets who produced good- quality content and videos, and who were readily available under contract in the future.

DEVELOPMENT AND NEW ARCHITECTURE

Technology development, conducted by Jon, HuStream's lone developer, was built using an architecture of java, PHP (PHP: Hypertext Preprocessor), HTML (HyperText Markup Language), Windows-based servers and secured with SSL encryption for account and password security. The SDK platform that customers purchased for their own use created a toolkit, which could be resold to give clients the ability to edit their own content and create interactive pages in a secure environment. Although the technical people urged HuStream to build out this capability quickly, the Matejceks were uncertain how their custom-tailored services were consistent with that kind of productized toolkit. The toolkit operated through a web-based browser providing cloud-platform access from anywhere in the world.

In addition to the development platform, Jon, the developer, chose web services as a foundational technology. Web services architecture was a technology that created dynamic systems-based business models around usable and adaptable user experiences. This technology, which provided interoperable digital objects, such as streaming video, had grown and developed over the past few years, and ensured HuStream had a strong foundation for its technology development processes. Recently, experts had promoted the use of standardized back ends and flexible front ends for architectures and business models. 3 The web services architecture described the principles for creating dynamic, loosely coupled systems based on services that could be delivered on multiple platforms.

BUSINESS CRITERIA

The business criteria for HuStream's success included the typical business model metrics of profitability, increasing sales, creating a unique value proposition for customers, reducing the budget and creating

i All currency amounts are shown in Ganadian dollars unless otherwise indicated. 3 Henry Chesbrough, Open Services Innovation: Rethinking Your Business to Grow and Compete in a New Era. Jossey- Bass, A Wiley Imprint San Francisco. 2011. Figure 2.1.

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sound management structure. The Matejcek's had also identified several unique criteria for success based on their experiences with prior customers: lots of video content, a competitive industry, the need to be on the leading edge and the need to interact with people. These critical criteria had led to customers who were ready to pay for interactive content and platform tools.

STRATEGIC BALANCE

HuStream had developed its services-based business model over many years and had recently engaged' technology experts who suggested the company make its business models into more of a products-based model, which might be turned out in mass scale with little customization. The Matejceks considered how "productization" would work and how to balance this new model with their historical competitive advantage, which had been built by creating customized services-based videos. Amy Matejcek hesitated to leave this lucrative customization segment but wanted to balance it with the idea of creating packages of products, solutions and services that could complement HuStream's existing customized products. How would the company's new strategy adjust to reflect this balance among products, solutions and services in the right combination? And what would change in the strategic balance going forward?

INDUSTRIES

In addition to balancing the roadmap of products and services, the HuStream co-founders needed to consider which industries would make a good tit for its offerings and, consequently, how profitable those industries would be.

Interactive content seemed to be the next big development in online video where video "producers can build direct relationships with their customers" (slide 40) 4 bypassing existing channels and creating new markets. In addition, the video game market represents a US$93 billion market in 2013, according to Gartner Research 5 to which HuStream's interactive buttons could offer customized user experiences for messaging to users. Given that Internet users were drawn to interactive features, this influence caught the eye of many big-name companies, such as Microsoft, Intel and Lenovo, along with more than 40 other customers. Using interactive material gave customers a competitive edge that could benefit their products' appeal and propel HuStream's customers' business overall.

Lawrence arrived at the office on Wednesday morning and prepared to meet her team to discuss potential vertical opportunities that HuStream could take advantage of. Given this company's untapped market potential, the team had already decided that HuStream's pressing issue was to develop a sustainable business model to encourage the growth of the company. In anticipation of the meeting, Lawrence had prepared some analyses of industries that HuStream could potentially enter.

Lawrence's team knew numerous potential solutions could lead to HuStream's success; however, Peter Matejcek could focus on only a few potential industries for sales and business development. He was a good salesperson but he could work on these areas for only so many hours in the day, as he also needed to cover all his other many roles and responsibilities. As a result, Lawrence and her team would need to identify the three best industries.

4 Mark Suster, 'Building an /ntemet Based Video Company,· @msuster. upfront resources, September 2013, www.slideshare.net/msuster/on/ine-video-market-sept-2013, accessed April 10, 2014. 5 Gartner, Inc., 'Gartner Says Worldwide Video Game Market to Total $93 Billion in 2013, • press re/ease, October 29, 2013, www.garlner.com/newsroom/id/2614915, accessed March 30, 2014.

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Lawrence met with her team to discuss potential ideas for industries that would give HuStream the greatest ability for increasing revenue generation. Which distribution channel and marketing strategy could best complement these industry choices for the fastest success rate? Which of these industries would respond best to productized or services-based solutions? Lawrence and her team created an extensive list of potential markets to generate increased profits, including entertainment, instructional videos, tourism, sports media, recruiting, education, retail, automobile (either repairs or retail) and many others.

Entertainment

A particular vertical of interest to Lawrence and her consulting team was the entertainment industry. As a result of the North American public's excessive interest in popular culture, an immense untapped market existed for producing eptertainment- and information-based online video content. Media outlets such as CTV (Canadian Television), CBC (Canadian Broadcasting Corporation), Rogers and Global had been providing a constant stream of online content to their viewers long before the larger boom of online Internet content. Through discussions and market research, the consulting team returned to the potential for interactive video in the entertainment industry.

The entertainment industry had undergone many changes since the early 2000s. The team noted that, in terms of-detailed content, users of media sites had high demands, which were increasing quickly. Broadly speaking, the onset of these changes had begun with the DVD industry, which had quickly expanded video content in the entertainment industry by providing people around the world with affordable, digital- quality movies and television shows.6 Experts in the entertainment industry reported that thi~ trend was the beginning of increased expectations around entertainment products and services.

When streaming technology was introduced in 2007, a major pivot occurred in the presentation of entertainment content. "Streaming really exploded around the year 2010," commented Adam Leipzig, a media specialist. "We shifted from a commodity economy of entertainment, where we had to own CDs, DVDs and so on, into a pure experience economy." 7 This shift created a bridge between television and the Internet, providing viewers with an array of online content at their fingertips. The pivot shifted from product-based markets where consumers owned CDs, DVDs and the hardware to play them, to a services- based market where the content and players were embedded in laptops, desktops and mobile devices. Web services architecture was poised to have a profound effect on the entertainment industry and its supporting platforms. W3C, the leading worldwide Internet consortium and founder of the URL (uniform resource locator) addressing system, promoted the ability of these foundational web services capabilities and platforms to give rise to new web-based business models wrapping varying combinations into products and services to satisfy customers' needs. 8

As a result of viewers shifting their consumption patterns, online content exposure powered by web services seemed to be a foundational platform. As the team thought it through, viewers could access an array of constant online content, such as television, movies, sports and news. The way that a business framed its delivery of online content could maintain or gain a competitive edge since customers required a balance of visually pleasing elements and technical functionality. At this time, these digital landscapes held increasingly influential roles in the success of a business. Because of HuStream's ability to create

6 Paul Sai,Wrs, 'How Technology Is Changing the Entertainment Industry, According to Adam Leipzig,· blog post, September 19, 2013, http:llthenextweb.comlinsider/2013/09/19/adam-leipzig/#!y19gz, accessed March 30, 2014. 7 Ibid. 8 W3C, ·web Services Architecture: W3C Working Group Note 11 February 2004, February 11, 2004, http://www.w3.org/TR/ws-archl, accessed March 30, 2014.

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interactive content for an array of business concepts, the consulting team clearly identified that one of the potentially best industries for HuStream would be creating interactive shows and media content.

'Suppose viewers could go to a web-based platform and receive updates directly from their favourite characters or the show of their choice? Lawrence's team considered this possibility, as many people would likely be drawn to such content. Viewers would feel as though they were receiving a first-hand, customized experience with each click, which would reduce the perceived distance between themselves and their favourite celebrities.

As an example, such popular CTV shows as Big Bang Theory and Big Brother Canada could produce video and website clips that used interactive buttons to offer alternative viewing experiences and additional products for sale. "Dim the lights, hook up your player to a 50" TV with surround sound, and you could at least get close to pretending you were enjoying a theatrical experience."9 Imagine that experience with added HuStream interactive content and toolkits through which shows could be perused.

Another program that could benefit from interactive content was Hockey Night in Canada. As Peter Matejcek mused aloud, "I know my boys love hockey and having their favourite player talk directly to them would be a huge selling point for them." Marshal Redrick, a marketing expert on Lawrence's team, expressed interest in hockey and how interactive content directed toward dedicated fans might have a substantial impact on consumers in this area. 10 Hockey Night in Canada, owned by CBC, was the longest running television broadcasting program in Canadian history. Considering the dense market of hockey fans in Canada, which was greater than in any other country in the world, Redrick argued that this avenue might generate major revenue for HuStream.

However, the broadcasting industry could change dramatically over the next few years. In fact, CBC had recently lost its rights to hockey broadcasting in Canada to Rogers TV, a broadcasting giant in its own right, which, for $5.2 billion had landed a 12-year contract for exclusive TV and digital rights to broadcast all Canadian national hockey games, including the national hockey league (N}U,). Avid hockey viewers from across Canada were shocked at the possible loss of the beloved CBC broadcast of Hockey Night in Canada.

Even NHL commissioner Gary Bettman recognized the need for collaboration to deliver content to viewers through varying avenues: "We wanted a relationship where we and our partner would have the flexibility to move among platforms because people, particularly of varying ages, are consuming their entertainment differently than they ever did before and differently by age." 11 As technologies developed, the league "may be looking at things in the course of this deal that don't currently exist," Bettman continued. Viewers, likely paying for the extra privilege, would be able to access specific content on the devices of their choosing.

No one was certain what the media industry would look like within the next few years but these changes in hockey broadcasting resonated well with HuStream's business offerings and suggested that interactive content might be a major influence on broadcasting; however, the Matejceks were not well experienced with gaining access to these types of large broadcast customers.

8 Paul Sawers, "How Technology Is Changing the Entertainment Industry, According to Adam Leipzig,· blog post, September 19, 2013, bttp:/lthenextweb.cornlinsider/'2013/09/19/adam-leipzig/#!y19gz, accessed March 30, 2014. 10 Simon Houp~ "A New Chapter for Iconic Brand Hockey Night in Canada." Globe and Mail, November 26, 2013, www.theglobeandmail.com!news/nationaVa-new-chapter..for-iconic-brand-hockey-night-in-canadalarticle15625191/, accessed March 30, 2014. 11 Ibid.

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Do-It-Yourself (DIV)

As the team explored other options and analyzed global industry trends regarding market share and market size, team member Lily Newman, who had some experience in hotel maintenance, raised the potential use of videos for repair advice. ·

The multibillion-dollar do-it-yourself (DIY) industry had seen steady growth in the past few years. Recession-driven financial caution had given rise to the global DIY culture along with the widespread availability of easy-to-install products that required some assembly. Currently worth US$678 billion, the global DIY industry was expected to continue to grow to be worth US$716.2 billion by 2015. 12 The rapidly increasing number of products and services, including websites, television programs, books and tools focused specifically on optimizing DIY tasks, was on the rise, fuelling the growth of the industry and the potential for development of interactive video content. The DIY industry provided a multitude of existing content, which ~ould reduce the necessary capital investment for HuStream. A significant factor that resonated within the market was the home improvement segment ofDIY.

The home improvement segment alone contributed significantly to the DIY industry overall. With major players in Canada such as RONA, Home Hardware, Canadian Tire and Home Depot, the expansion options into this market were huge. Cost-wary individuals were spending their time and money to improve the value of their home and property to maintain their commercial value. As a result, they were increasing their use of DIY tools and mechanisms, which had led to noticeable growth in the DIY market and could provide a niche for HuStream to satisfy.

Education

The education industry had proved to be HuStream's most responsive and lucrative industry. The company had secured IO universities and colleges as some of their first customers and had continued to generate sales leads every day. In fact, Peter Matejcek had lined up the University of Michigan for a sales call later that day, after a meeting with the consulting teams.

The educational institutions already had video content and often had their own internal television and radio studio production capabilities. As well, these postsecondary schools were communicating with potential students who sought interactive conversations with admissions staff and were eager to have virtual tours. Current and soon to be graduating students also needed to differentiate themselves from other students with experience that would stand out on their resumes, perhaps by using interactive content button which others would not have. The education sector seemed to represent a ripe and rewarding industry for HuStream.

Using HuStream's capabilities, schools' existing video content could be shaped into interactive content, which would create a competitive advantage differentiating these schools from others that provided traditional video and written content. Moving to interactive content could increase traffic to an institution's website, which would in tum increase the positive image of the school and ultimately increase enrollment. Students selected schools based on numerous factors, including the school's distance from home and its scholarships, prestige, image and support network. The support network of a school undoubtedly included the administration and faculty; yet, the school's website was also a secondary

12 Global Industry Analysts, Inc., "Global Market for DIY and Home Improvement to Reach US$716.2 Billion by 2015, According to New Report by Global Industry Analysts, Inc.,· press release, PRWeb Online Visibility from Vocus, January 30, 2012, · www.prweb. comlreleasesldo_it_yourself_DIY/home_improvement_productslprweb9136735.htm, accessed March 30, 2014.

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consideration. The school's website included supporting tools to help students find the infonnation they were searching for, but poorly designed and complex websites could frustrate and discourage new and potential students. Interactive content on a services-based platfonn could increase the conversion from traffic to new customers.

Universities, colleges and other institutions almost always had existing video content, which reduced the capital investment required to produce high-quality content. They would also not require in-house production facilities to be provided by HuStream, as their current content and campus infrastructure could be used to satisfy this need.

Other

Among the many other industries considered by the consulting team were automotive, hospitality and tourism, real estate, advertising, landscaping, athletics and sports, oil and gas, employee training, weddings, computer software, casinos, online dating and other generic marketing and training activities, including vlogging (video blogging) and online tutorials. Driven by factors similar to the DIY segment, the automotive industry generated considerable demands for solutions for both customers and manufacturers. Customers were interested in automotive repair, maintenance and improvement, whereas manufacturers were interested in solutions for automotive advertising, sales, manuals and maintenance. This market would continue to generate demand for solutions because of such supporting factors as increases in the global number of cars on the road, the longer average life of vehicles and the general wear and tear of parts and accessories.

Lawn, garden and landscaping also provided lucrative opportunities for interactive solutions. Homeowners and small business owners were always looking for ways to stretch every dollar, including by reducing their dependence on professional landscaping services.

Hospitality and tourism provided an abundance of avenues. The needs in this segment included features directed toward municipalities and their marketing strategies to promote their cities. This segment could also be directed toward travel agencies, such as Expedia and their online service models. Cruise ship promotion was also considered because a personal virtual tour could be offered through interactive video.

Other generic uses not defined to a specific industry included a wide range of marketing and training activities. Advertising and marketing agencies could also use interactive videos as a tool to help their customers improve their marketing and promotion efforts by providing them with a competitive advantage.

PARTNERS

As Lawrence considered what the Matejceks would do, she realized they needed partners for this business to be successful. But what partners would have the best fit, and at what points would they be integrate into HuStream's business model? The systems thinking community was promoting the use of ecosystems for collaborators, partners, third-party content and other providers necessary for the installation and implementation of technology .13 Balancing the services-based and the product-based company proved a

'-- 13 Henry Chesbrough, Open Services Innovation: Rethinking Your Business to Grow and Compete in a New Era, Jossey- Bass, A Wiley Imprint. San Francisco, 2011, Chapter 2, Figure 2.2 Open Services Value Chain, p. 35.

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difficult task. The problem was there was no predetermined process for creating the balance that HuStream needed.

BUSINESS MODEL

Lawrence began to contemplate how to generate revenue through the entertainment option. Of all the options the team had explored, it had considered only the most potentially lucrative industries. In the entertainment segment, the pricing strategy would be based on a per-episode fee and any additional maintenance fees that may apply.

When considering the DIY segment, the team proposed a per video profit model. As with the entertainment option, the prices at increasing volumes would be negotiated downward. The team considered the various types of DIY videos. Education appeared to be a very lucrative industry, and some schools might be pric'e-insensitive, such that HuStream could consider how to detect price flexibility.

HuStream's customers generally wanted affordable solutions, which required an operational budget that was as tight as possible. With these new industries, the profitability potential would grow, and Lawrence's team needed to propose the business model profitability to the Matejceks. Funding for any major initiatives would also need to be considered. ·

DECISIONS

As Lawrence sat contemplating the recommendations her team would make, she considered which industries were the best options, and how the Matejceks would make money by scaling this business. Lawrence and her team needed to present clear value propositions for both customers and users within these industries, such that the Matejceks could articulate the strength of their tools and services to their potential customers. Lawrence's team would need to identify additional personnel, architecture changes and functionality that they might need and how those costs would impact the budget. The outlook seemed to be a combination of products and services development; just productizing would not likely meet what the Matejceks had in mind, so they needed to carefully consider how much of each type of work they did. Clearly, the user experience in each of these areas would be an important part of that decision.

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difficult task. The problem was there was no predetermined process for creating the balance that HuStream needed.

BUSINESS MODEL

When considering the DIY segment, the team proposed a per video profit model. As with the entertainment option, the prices at increasing volumes would be negotiated downward. The team considered the various types of DIY videos. Education appeared to be a very lucrative industry, and some schools might be price-insensitive, such that HuStream could consider how to detect price flexibility.

DECISIONS