The Sonic Foundry

Creating Psychological Safety and Normalizing a Culture of Innovation

Problem

With over 30 years of experience serving the higher education vertical, SoFo has enjoyed predictable contracts with strong cash flows.

However, the shift to virtual instruction made urgent the need to redefine higher education to control the “new normal” conversation.

Solution

The Berkeley Innovation Group helped SoFo transition from a video solutions provider to an integrated education platform allowing students to customize their learning journey.

Beyond the business model transformation, the team redefined their internal culture to embrace and foster a culture of innovation to stay on the cutting edge.

The Challenge

Sonic Foundry’s (OTC: SoFo) core product is Mediasite, an on-premise media solution that provides video content capture, maintenance, and storage. Mediasite is primarily used by large organizations in higher education, healthcare, and event management.

Given the long-term sales cycles of higher education and its bias towards maintaining legacy products with trusted vendors, SoFo has historically enjoyed strong cash flows. However, the expense associated with delivering one-on-one account management and customized technical support relationships quickly offset revenues, meaning the company hadn’t been profitable in years.

In parallel, startups such as Zoom have shifted the value proposition from the high-end, customized, on-prem video solutions that SoFo was known for to low-cost, scalable, cloud-based solutions that favor user-friendly software over cumbersome hardware.

When the pandemic rapidly prioritized digitization across all industries, SoFo’s customers’ saw their traditionally predictable tuition-based revenue streams disrupted. All expenses were brought under the microscope and forced to justify their benefit to remote students. How would a high-cost, on-premises solution fair in a moment of uncertainty and a shift to cloud-based solutions?

Recognizing the need to capitalize on this once-in-a-generation transition, SoFo needed to make a step change in their business model -- not to simply make incremental improvements or mimic the disruptors, but unveil bold new ideas that would create new lines of revenue within three years.

The Process

While it’s easy for a CEO to say he or she wants bold new ideas. The challenge for a management team embedded in the day-to-day operations of a company is to step back and gain the necessary perspective. To help with this process, Sonic Foundry engaged the Berkeley Innovation Group (BIG), a leading innovation consulting firm founded by UC Berkeley professors.

Before BIG could make any recommendations, it needed to learn about Sonic Foundry’s current innovation efforts and capabilities. To that end, BIG conducted an Innovation Capabilities Analysis, which examines the client’s culture and processes towards innovation over time.

Given SoFo’s current state, the results were not surprising; while the company had high aspirations, it was, like many companies, overwhelmed by the day-to-day operations of running a business. While struggling to turn a profit, the company’s leadership had been put on the defensive trying to retain existing clients, rather than taking a longer-term offensive view of how to expand its offerings and win entirely new business.

After understanding and analyzing SoFo’s history and comfort level with innovation, BIG embarked upon leading SoFo through a 12-week Design Thinking cycle, including discovery, insight formation, idea generation, and prototyping.

In the discovery process, BIG quickly uncovered internal processes in service to industry orthodoxies that kept the status quo entrenched and prevented innovation. For example, in higher education, a teacher lecturing in a classroom is the medium of knowledge exchange, which supports an on-prem video capture solution. However, remote instruction flipped this paradigm and new thinking was required. Why didn’t SoFo immediately respond?

As BIG delved into the Insight phase of the work, the issue wasn’t a lack of “good ideas.” Rather, the company culture lacked the psychological safety that allowed inspiring ideas to be heard, nurtured, and supported from those at all levels of the organization. Namely, the employees who directly interacted with the customers were empowered to make incremental changes to the offering, which only increased MediaSite’s complexity. BIG’s work uncovered that the true Insights either not communicated or acted upon to drive meaningful business model innovation.

The Impact

This realization allowed BIG and SoFo to actively solicit the organization’s employees for new ideas, which paved the way for SoFo to enter new markets with new products for a rapidly evolving post-pandemic world.

• The first idea was to expand existing offerings into new markets. Whereas current education customers were primarily located in North America and Europe, existing relationships offered new opportunities to institutes of higher education in Latin America and Africa.
  
  
• Next, as students return to in-person instruction with the experience of 18 months of remote instruction, SoFo is developing AI solutions to edit and enhance recorded videos of live lectures for asynchronous consumption.
  
  
• Finally, emerging technologies with a 3-year time horizon were explored that redefine both recorded and live lecture experiences as well as the underlying business model of higher education.

With three distinct initiatives in development, each with a defined timeline, the engagement could certainly be considered a win; however, the true success can be found in the lasting change of a public company’s mindset, process, and culture that will empower its people to carry on this work on their own for years to come.