Building the Foundations for a Successful Cost Optimization Program in Media & Entertainment

Cost optimization. While it’s certainly not a new topic for the seasoned executive, it is an increasingly important one in the current market – and it’s also one that many executives struggle to implement in a way that realizes its often lofty goals.

Executives are held back by many challenges including:

• Systems created in siloed business areas, leading to duplication of processes and tools
• A reliance on obsolete technology, resulting in security risks and even employee churn
• A lack of system integration and automation, creating more manual business operations and workflows
• Previous ad-hoc, reactionary cost reduction efforts, causing businesses to miss out on long-term sustainable cost optimization opportunities
• Lack of a unified approach and alignment across the business, finance and IT departments

As 2024 continues to usher in more layoffs and recession challenges, it’s more important than ever for M&E companies to proactively focus on optimizing their costs. But how can you start implementing cost optimization at scale in a way that avoids these challenges?

With all the recent improvements around AI and ML technologies, it’s easy to think they’re the silver bullet. In the first of this two-part blog series, we will look at the foundational elements necessary to running a successful CostOps program from an organizational, process and tooling perspective.

Establishing CostOps Governance

It all starts with instilling a digital factory mindset and culture. The business needs an operating model that unifies digital service delivery to increase scalability and operational efficiency, drive innovation and accelerate organizations' digital maturity to move from traditional to connected digital business.

To optimize your business’s costs, you need to know where you’re starting. Begin by conducting an organizational assessment to better understand your strengths and weaknesses. Then, build a plan that addresses them. By getting a complete picture of your organization’s current state, you can glean key insights into your business’s expenses, revenue and opportunities for innovation.

Earlier, we described siloes as a key challenge – which is why it’s so important to break them down to effectively address costs. To combat this, build a unified governance approach with a business, finance and IT partnership model to drive transparency, consistency and efficiency across teams (i.e., marketing, advertising, sales, production, distribution, sponsorship and venues). It must be holistic and consider all aspects of the organization to discover and remediate overlap and inefficiencies where they lay. Identify manual processes and automate wherever possible.

By creating a cross-functional team focused on these efforts, you’ll be able to instill that digital factory mindset and culture within your organization. Your team will have the freedom to rapidly experiment agilely and bring innovations back to the larger organization for adoption. It’s a great way to innovate and drive transformation as a startup would within the structure of a larger organization to stay competitive.

This will help you develop a forecast model to help meet current and future demand and resource needs using a demand-based capacity management system. It uses your data — both current and historical – and reasonable assumptions to determine future capacity needs.

Leveraging Data to Build Operational Intelligence

Once you’ve established governance for your cost ops program and gained a thorough understanding of where you are and where you’d like to go, it’s time to optimize your processes.

Specifically, executives should focus on optimizing process that allow them to extract more data so they can, in turn, make data-based decisions. Those processes should be:

• Business monitoring: By proactively monitoring transactions, businesses can identify failures, anomalies or inefficiencies to stay ahead of their impact with data-driven decision analytics. For example, this could predict and help organizations better understand the impact of major artists and special events on live entertainment ticketing for events like Black Friday, the Super Bowl or a major musician’s tour like Taylor Swift.
• Total cost of ownership (TCO) optimization: Use past performance indicators with non-machine learning (ML) and ML-enabled analytics to determine when a particular resource is going to reach its capacity or is underutilized. For example, businesses can use enhanced pay-per-view autoscaling prediction to optimize allocated infrastructure and support team size.
• Anomaly detection: Focus on data points with unusual behavior to gain knowledge of the interrelationships between related factors. For example, you can use this to detect and predict system bottlenecks and adjust resources accordingly.
• Trend prediction: Capture deteriorating long-term behavior that’s not obviously visible when analyzing short samples of data by using techniques such as univariate or multivariate time series machine learning models.
• Incident prediction: By putting in place a process for intelligent alerting before a predicted incident, you can receive automated recommendations for corrective actions to help you allocate your spending more appropriately.
• Unknown errors classifications: Use AI/ML analytics and natural language processing (NLP) to detect and classify unexpected and unknown errors in your systems to speed up their resolution.

Rationalize the Technology Landscape

To enable those processes, you need the right tools in place. That’s why it’s critical to conduct an application rationalization effort to assess your technology landscape, identify areas of overlap as well as pain points, and develop an enterprise tech architecture and roadmap for what you can consolidate or replace. For instance, you can maintain a reusable library of process and engineering standards and assets that can lead to faster onboarding and simplified support.

Ensuring you have the necessary tools in place – and no more and no less – is crucial to enabling your organizational and process-related cost optimizations measures.

In order to realize the full benefits of a cost ops program, media and entertainment businesses to set up the essential organization, processes and tools necessary to driving those results. In our next blog, we’ll talk about the large-scale and innovative improvements your team can make thanks to having a strong jumping off point.