Changing as Fast as the Weather!
The Weather Company has expeditiously transformed from legacy media company to a digital technology powerhouse.
The Weather Channel has been your trusted partner for delivering the weather for decades. When severe weather strikes nearby, Jim Cantore is there on the scene. Need an umbrella for your walk to work? The Weather Channel mobile app (a top 20 mobile property by unique visitors) has your answer in a few swipes.1 Looking for a way to procrastinate from writing your TOM blogpost? Weather.com has enough clickbait to get you through finals.
The Weather Company has made its brand – and a fair amount of money – through a traditional media business model: produce weather content (for both television and digital properties) and monetize it through advertising and distribution fees. The operating model to support this required editorial and production talent to create content and a sophisticated advertising sales team. The model has been quite lucrative and resilient, allowing the company to thrive since its founding in 1980 (by HBS alum Frank Batten) and endure private equity ownership since 2008.2
Therefore, it might come as a surprise that underneath this sleepy legacy media façade, The Weather Company has quickly been transforming into a digital technology powerhouse. The transformation began in earnest when David Kenny (HBS ‘86) took the helm in January 2012. The former chief of Akamai, a cloud services provider, Kenny foresaw a world where weather information and the Internet of Things collided.3 Weather impacts almost everything. The question was whether a traditional media company could build the digital technology muscle required to be the market-leading weather data solution provider.
Kenny started doubling down in his business-to-business segment by acquiring Weather Central in 2012.4 Weather Central predominantly sold weather solutions to media companies, such as products that powered local broadcasters’ forecasts. The Weather Central acquisition bolstered the company’s B2B salesforce and gave it additional expertise in developing and packaging weather solutions for businesses.
Kenny then turned to the other end of the digital technology funnel, data acquisition. The Weather Company acquired Weather Underground, a weather media company that had 100,000 personal weather stations deployed among its consumers.5 While the main synergies of the deal were in the traditional media business, The Weather Company now had access to proprietary weather data through the personal weather stations to go along with several other public and proprietary weather data sets.
Despite a robust portfolio of data sources to work with and a larger B2B sales engine, The Weather Company still needed compelling products to sell to businesses. This required a data engine to digest, interpret, and package all their data into services that would provide actionable insights to business customers. Kenny brought in CTO Bryson Koehler to build out this engine. An operating model once built on editors, producers, and ad sales personnel was now dependent on software engineers and data scientists – 450 of them, and an IT budget that had 60-70% allocated to maintenance shifted to new product and infrastructure development. The result was the SUN (Storage Utility Network) Platform, a data ingestion and synthesis platform that handled seven times the number of daily data requests as Google.6
The Weather Company has leveraged their new business-to-business software-as-a-service operating model to sell compelling products to weather-sensitive industries. A particularly powerful example is aviation, where The Weather Company Total Turbulence solution is used by most major airlines to detect and avoid turbulence.7
Source: http://fortune.com/2015/10/30/ibm-weather-channel-2/
The transition of The Weather Company’s business and operating model from a media company to a digital technology company reached a milestone when IBM announced it would acquire The Weather Company’s Product and Technology assets (including WSI [the B2B business], the mobile application, weather.com, Weather Underground, and related digital assets) in October 2015. John Kelly, senior vice president of IBM’s Solutions Portfolio praised the deal, saying “The Weather Company’s extremely high-volume data platform, coupled with IBM’s global cloud and the advanced cognitive computing capabilities of Watson, will be unsurpassed in the Internet of Things, providing our clients significant competitive advantage as they link their business and sensor data with weather and other pertinent information in real time”.8
IBM and The Weather Company still have much to accomplish. Adoption of weather solutions is non-existent in many industries. There has been much talk about revolutionizing supply chains with weather data, but to-date little has been done. Still, the infrastructure has been laid to ‘map the atmosphere’ and deliver valuable, business-altering weather insights. Maybe The Weather Company can change as fast as the weather!
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1“The 2015 US Mobile App Report.” ComScore. September 22, 2015. http://www.comscore.com, accessed November 15, 2016.
2“Frank Batten Sr. dies at 82; executive who founded Weather Channel,” LA Times, September 11, 2009, http://www.latimes.com/local/obituaries/la-me-frank-batten11-2009sep11-story.html, accessed November 15, 2016.
3Kanter, Rosabeth Moss, and Jonathan Cohen. “Whither the Weather (Company): Forecasting 2016.” Harvard Business School Case 316-143, January 2016. (Revised March 2016.)
4Jason Samenow, Washington Post, August 9, 2012, https://www.washingtonpost.com/blogs/capital-weather-gang/post/weather-channel-domination-member-company-wsi-acquires-weather-central/2012/08/09/8cf00774-e250-11e1-98e7-89d659f9c106_blog.html, accessed November 15, 2016.
5Dr. Jeff Masters, “Wunderground.com sold to The Weather Channel Companies,” Wunderground.com, July 2, 2012, https://www.wunderground.com/blog/JeffMasters/comment.html?entrynum=2143, accessed November 15, 2016.
6Doug Henschen, “The Weather Company: Cloud Journey Requires Cultural Change,” InformationWeek, April 28, 2015, http://www.informationweek.com/strategic-cio/executive-insights-and-innovation/the-weather-company-cloud-journey-requires-cultural-change/d/d-id/1319831, accessed November 15, 2016.
7Scott McCartney, “New Way Airlines Avoid Turbulence,” Wall Street Journal, March 26, 2014, http://www.wsj.com/articles/SB10001424052702304688104579463591411121738, accessed November 15, 2016.
8“IBM Plans to Acquire The Weather Company’s Product and Technology Businesses; Extends Power of Watson to the Internet of Things,” The Weather Company press release. Armonk, NY and Atlanta, GA, October 28, 2015. https://business.weather.com/news/ibm-plans-to-acquire-the-weather-companys-product-and-technology-businesses-extends-power-of-watson-to-the-internet-of-things
This is very interesting. I’d be curious to know what types of companies are already using weather data and to what level of granularity. For example, do food manufacturers use it? It seems like it would be very useful for an ice cream manufacturer to incorporate weather data into their inventory planning system as ice cream sales are likely coorelated to weather. If the data was granular enough, a weather report could atomatically trigger more ice cream to be sent to those stores with a hot and humid upcoming week. Perhaps they could even develop a service that links past weather data to past sales to explore weather’s affect on sales within different industries.
Alex, thanks for the thought-provoking piece. We’ve seen Watson in the context of Jeopardy, an inherently backwards looking application that relies on finding connections between historical data points. Though a more fine-tuned understanding of current and historical weather patterns would certainly be useful, to what extent do you think machine learning will improve the accuracy of our weather forecasting? Also, I wonder if there are diminishing returns to integrating such granular data into a business. The more granular you get, the harder it may be to be flexible and adapt when the data leads you astray.