Big Data Powerpoint

This case was prepared by Ruth Gilleran, Senior Lecturer, Patricia J. Guinan, Associate Professor, and Salvatore Parise, Associate Professor, of Babson College. It was developed as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. It is not intended to serve as an endorsement, source of primary data or illustration of effective or ineffective management. Copyright © 2015 Babson College and licensed for publication to Harvard Business School Publishing. All rights reserved. No part of this publication can be reproduced, stored or transmitted in any form or by any means without prior written permission of Babson College.

 

BAB168/ NOVEMBER 2015

 

THE WEATHER COMPANY: CREATING CONSUMER APPS THAT LEVERAGE BIG DATA It was a gorgeous day in the fall of 2014 at the Atlanta headquarters of The Weather Company (TWC). In fact, with one glance at the oversized 10 on the OutSider mobile running app his team just released, Chris Huff, VP of Mobile and Consumer App Development, quickly confirmed it was a perfect day for a run. The 10 was the highest score on the soon-to-be- patented Run Weather Index (RWI). Touching the number displayed the six components comprising the RWI algorithm—wind speed, precipitation, temperature, humidity, cloud cover, and air quality. Weather was a key factor for runners, and the inclusion of TWC’s detailed and highly accurate weather forecasts provided the OutSider app with what the team hoped was a clear competitive advantage over myriad other running apps. In building this app, TWC was reacting to the mobile mind shift, particularly among the 15- to 30-year old consumer demographic. Impatient and glued to their smartphones, millennials had very high expectations for immediacy. They wanted to transmit or receive information from anywhere, at anytime. Forrester Research referred to these incidents as “mobile moments,” and searching for weather information was a perfect example. 1 In 2014, the dramatic shift to mobile devices caused The Weather Company, parent company of The Weather Channel, to face the biggest challenge in its 32-year history. Similar to the disruption created by the movement from printed to digital books or DVDs to streaming video, weather consumption was moving quickly from TV to the smartphone. Nielsen reported that the network averaged a five-year low of 211,000 daily viewers in 2013, down from 273,000 in

1 “Forrester Research Publishes New Book: ‘The Mobile Mind Shift’.” Professional Services Close-Up. Business Insights: Essentials, May 19, 2014, http://bi.galegroup.com.ezproxy.babson.edu/essentials/article/GALE%7CA368528939/48707a75e8111e213213ae 2efe6db51b?u=mlin_m_babson, accessed September 2015.

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2012.2 Citing declining ratings and evidence of an increasing number of individuals more frequently using their smartphones to check the weather, DIRECTV blacked out TWC to DIRECTV’s 20 million subscribers, which represented one-fifth of TWC’s total audience.3 In a January 2014 email statement to SNL Kagan Media and Communications, DIRECTV Chief Content Office Dan York said, “Consumers understand there are now a variety of other ways to get weather coverage, free of reality show clutter and that TWC does not have an exclusive on weather coverage – the weather belongs to everyone.”4 A few months later, DIRECTV reinstated TWC because of consumer preferences, but the company clearly needed more innovative approaches to serving up its weather data. The OutSider app, TWC’s first lifestyle- related weather app, helped answer that call. As Huff laced up his running shoes and headed to the elevator, he imagined how he could make the weather data more valuable to TWC’s running customers by delivering information that both interested and benefitted them. According to Huff, “OutSider is much more than an app, it is a way to learn about how the weather affects a person’s body chemistry. Whether one runs four or twenty-four miles, all runners are affected by the weather. People understand it’s not the best time to run when the newscaster is saying it’s 90 and humid, be careful, stay indoors. However, when it’s 82 degrees, with 90% humidity, it can be just as dangerous outside.”5 In addition to the temperature, the sun, and the rain, air quality and pollen levels affected everyone greatly. With the app released, Huff pondered his next move. Should he continue to develop OutSider further and if so, what features should be added to make it a go-to running app? Consumers downloaded several apps, but they used few on a regular basis. Should he target other outdoor enthusiast segments? Or, should he persist down the learning path, studying the run analytics and marketing what Huff calls biometrics insights (see Exhibit 1 for definition) to other organizations? But right now, the RWI of 10 was all he could think about. The Weather Channel slogan, “It’s Amazing Out There,” could not be more apropos. Time for a run.

The Weather Company TWC represented the most well-known name in the weather business. Three divisions comprised the company: TV, digital, which included website and mobile, and professional services which sold data services, software, and hardware to TV stations, retailers, airlines, and energy traders. During his keynote address at the 2014 annual Association of Business Information and Media Companies, The Weather Company COO, Chris Walters, remarked, “digital and specialized business information products, not television, are two of the biggest drivers of growth for The Weather Company, parent of The Weather Channel. Today, b-to-b products represent 10 percent of revenue. In the next three years, that percentage will double,

2 J. J. McCorvey, “A Storm Brews Over Weather,” Fast Company, February 2014, http://www.fastcompany.com/3023354/weather-channel-a-storm-brews-over-weather, accessed July 2014. 3 Rodney Ho, “Big Storm Brewing for Weather TV: Weather Channel Fight with DirectTV just One Challenge. Network Convinced Snow Proves its Worth,” The Atlanta Journal – Constitution, February 02, 2014, http://search.proquest.com.ezproxy.babson.edu/docview/1493337386?accountid=36796, accessed July 2014. 4 Sarah Barry James, “Weather Channel Stuck in Eye of Carriage Fee Storm,” SNL Kagan Media & Communications Report, January 14, 2014, http://www.snl.com/InteractiveX/Article.aspx?cdid=A-26532718- 13608, accessed November 2014. 5 Chris Huff, telephone interview by author Ruth Gilleran, Wellesley, MA, August 21, 2014. Do

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thanks to big data and the ability to integrate into customer workflows.”6 One year earlier in January of 2013, Digital Division President Cameron Clayton stated, “The Weather Co.’s revenue from non-TV sources is now ‘not far away’ from being half of total revenue.” 7 Launched over 30 years ago in 1982 as the first 24-hour network devoted to weather programming, The Weather Channel’s 2013 audience totaled more than 100 million viewers and the network generated $350 million in annual income.8 Its popular weather website, weather.com, boasted 8 million daily visitors and was the go-to website in 2013 for obtaining weather information.9 In fact, the website commanded an impressive 51 percent of the market share, followed by AccuWeather with just 14 percent (see Exhibit 2 for the top weather brands). TWC’s weather data came not only from the National Weather Service, which owned the radar system in the United States, but also from data TWC gathered on its own and from data supplied by 100,000 private individuals with their own weather stations. Aided by sophisticated computer models within TWC’s forecasting engine, over 200 meteorologists analyzed this data and generated highly accurate weather forecasts. The recent growing granularity of data from an increased use of weather sensors allowed for greater accuracy in TWC’s weather forecast. 10 According to the Forecast Advisor website which graded the accuracy of U.S. weather forecasting outlets, in 2013 TWC “blew away its competition” which included the National Weather Service, Accuweather, and Custom Weather.11 TWC was owned by a consortium consisting of NBC Universal and the private equity firms The Blackstone Group and Bain Capital. In 2011, The Weather Channel Companies became The Weather Company, recognizing its diversity of products and services and its broad appeal to consumers and businesses.

TWC Revenue Streams Like most media sites, TWC employed an advertising-based revenue model. Consumer ads were displayed alongside TWC’s weather data, regardless of where the data was served up— on TV, its website, or its mobile app. TWC’s CEO David Kenny was no stranger to advertising. As a former CEO of Digitas, a global marketing and technology firm, he knew better than most how radical the coming changes were. As he explained in a New York Times interview,

6 Matt Kinsman,“ABM Annual Keynote: How The Weather Channel Saves and Makes Money for B-to-B Markets,” May 6, 2014, http://blog.siia.net/index.php/2014/05/abm-annual-keynote-how-the-weather-channel-saves-and- makes-money-for-b-to-b-markets/, accessed June 2015. 7 Todd Spangler, “Nearly Half of Weather Co.’s Revenue Comes From Digital Division,” Multichannel New, January 15, 2013, http://www.multichannel.com/news/mobile/nearly-half-weather-cos-revenue-comes-digital- division/306174, accessed June 2015. 8 J.J. McCorvey. 9 John Swansburg, “It’s Ugly Out there,” New York, Mar 10 2014, http://nymag.com/daily/intelligencer/2014/03/can-the-weather-channel-survive-its-competitiors.html, accessed July 2014. 10 Kim S. Nash, “Big Data from Above. CIO, May 24, 2013, http://www.cio.com/article/2385814/big-data/how-to- profit-from-the-ultimate-big-data-source-the-weather.html?nsdr=true&page=3, accessed July 2014. 11 Rueben Fischer-Baum and Dennis Mersereau, “What Parts of the Country Get the Worst Weather Predictions?” The Vane, May 2, 2014, http://thevane.gawker.com/what-parts-of-the-country-get-the-worst-weather-predict- 1568905474, accessed October 2014. Do

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“platforms like his were working directly with companies to develop advertising campaigns, especially on mobile devices, essentially bypassing ad agencies.”12 A second revenue stream for TWC was the weather data and the expert analysis it marketed to corporate clients. The Professional Services arm of TWC helped its corporate clients profit from its weather forecasts by enabling them to anticipate the impact of weather on their bottom line. Blue chip customers included national retailers, global airliners, automobile manufacturers, emergency services, utilities, insurers, and media giants. Two clients, Home Depot and American Airlines, incorporated weather data into their buying decisions so they could more accurately predict what products or services would be needed when and where.13 Starting with the release of iOS8, Apple incorporated The Weather Channel data, replacing Yahoo Weather. At the 2014 International Consumer Electronics Show, General Motors announced plans to include The Weather Channel app within its OnStar concierge dashboard screen.14 With the current emphasis of mining big data to make more fact-based decisions, as well as the availability of modern tools to process this data, the company was betting its future on the Digital and Professional Services divisions. Both divisions were headed up by Cameron Clayton, President of Product and Technology.

Consumer Apps Ideation Process To address the dramatic shift to mobile, The Weather Company’s Digital Division was tasked with leveraging the company’s big data to obtain new customers, establish more binding relationships with existing ones, and increase advertising revenue. For a 30-year-old company with 1,300 employees, this new products group resembled a start-up. In the summer of 2012, Huff invited all company employees to a hackathon, a marathon session where software designers and programmers developed an application prototype in a condensed period of time. As Huff explained, “between the over 200 meteorologists, weather scientists, and technologists, there are a lot of engineering-minded folks walking the halls.” When the group gathered on day one, they were given deliberately broad instructions, “build some weather-related working software that our customers will love.”15 Specifically, Huff was targeting one super-user group—the outdoor enthusiasts. Some employees came with ideas they were hoping to implement, while others, for example programmers, were eager to construct a prototype. After forming teams and brainstorming, they spent the next day and a half developing the idea and building out the software. On day three, the teams were given three minutes to present their concept to a panel of judges consisting of the VP of Engineering, the VP of Product, the President of the Digital Products group, and an on-camera meteorologist. The judging criteria included whether the prototype solved a problem the company wanted to help solve, whether it was innovative, and whether it functioned. Several ideas emerged from the hackathon, but the one that garnered the most

12 Tanzina Vega, “Advertising mega merger driven by the rise of Big Data,” The Global Edition of the New York Times, July 30, 2013, p. 15. 13 Kim S. Nash. 14 Jeff Bennett, “Car Makers at Consumer Electronics show Tout Ways to Plug Autos into the Web; Moves Raise Worries among Highway Safety Regulators,” Wall Street Journal (Online) January 5, 2014, http://www.wsj.com/articles/SB10001424052702304887104579302880279339184, accessed July 2014. 15 Chris Huff, telephone interview by author Ruth Gilleran, Wellesley, MA, August 21, 2014. Do

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