Be Really Glad Bezos Bought The Washington Post

by | Aug 6, 2013 | Current Affairs, Defend & Extend, In the Swamp, Innovation, Leadership

Jeff Bezos, founder of Amazon worth $25.2B just paid $250 million to become sole owner of The Washington Post. 

Some think the recent rash of of billionaires buying newspapers is simply rich folks buying themselves trophies.  Probably true in some instances – and that benefits no one.  Just look at how Sam Zell ruined The Chicago Tribune and Los Angeles Times.  Or Rupert Murdoch's less than stellar performance owning The Wall Street Journal.  It's hard to be excited about a financially astute commodities manager, like John Henry, buying The Boston Globe – as it has all the earmarks of someone simply jumping in where angels fear to tread.

These companies lost their way long ago.  For decades they defined themselves as newspaper companies.  They linked everything about what they did to printing a daily paper.  The service they provided, which was a mix of hard news and entertainment reporting, was lost in the productization of that service into a print deliverable. 

So when people started to look for news and entertainment on-line, these companies chose to ignore the trend.  They continued to believe that readers would always want the product – the paper – rather than the service. And they allowed themselves to remain fixated on old processes and outdated business models long after the market shifted.

The leaders ignored the fact that advertisers could obtain much more directed placement at targets, at far lower cost, on-line than through the broad-based, general ads placed in newspapers.  And that consumers could get a much faster, and cheaper, sale via eBay, CraigsList or Vehix.com than via overpriced classified ads. 

Newspaper leadership kept trying to defend their "core" business of collecting news for daily publication in a paper format.  They kept trying to defend their local advertising base.  Even though every month more people abandoned them for an on-line format.  Not one major newspaper headmast made a strong commitment to go on-line.  None tried to be #1 in news dissemination via the web, or take a leadership role in associating ad placement with news and entertainment. 

They could have addressed the market shift, and changed their approach and delivery.  But they did not.

Money manager Mr. Henry has done a good job of turning the Boston Red Sox into a profitable institution.  But there is nothing in common between the Red Sox, for which you can grow the fan base, bring people to the ballpark and sell viewing rights, and The Boston Globe.  The former is unique.  The latter is obsolete.  Yes, the New York Times company paid $1.1B for the Globe in 1993, but that doesn't mean it's worth $70M today.  Given its revenue and cost structure, as a newspaper it is probably worth nothing.

But, we all still want news.  Nobody wants the information infrastructure collecting what we need to know to crumble.  Nobody wants journalism to die.  But it is unreasonable to expect business people to keep investing in newspapers just to fulfill a public good.  Even Mr. Zell abandoned that idea. 

Thus, we need the news, as a service, to be transformed into a new, profitable enterprise.  Somehow these organizations have to abandon the old ways of doing things, including print and paper distribution, and transform to meet modern needs.  The 6 year revenue slide at Washington Post has to stop, and instead of thinking about survival company leadership needs to focus on how to thrive with a new, profitable business model.

And that's why we all should be glad Jeff Bezos bought The Washington Post.  As head of Amazon.com  The Harvard Business Review ranked him the second best performing CEO of the last decade.  CNNMoney.com named him Business Person of the Year 2012, and called him "the ultimate disruptor."

By not doing what everyone else did, breaking all the rules of traditional retail, Mr. Bezos built Amazon.com into a $61B general merchandise retailer in 20 years.  When publishers refused to create electronic books he led Amazon into competing with its suppliers by becoming a publisher.  When Microsoft wouldn't produce an e-reader, retailer and publisher Amazon.com jumped into the intensely competitive world of personal electroncs creating and launching Kindle.  And then upped the stakes against competitors by enhancing that into Kindle Fire.  And when traditional IT suppliers like HP and Dell were slow to help small (or any) business move toward cloud computing Amazon launched its own network services to help the market shift.

Mr. Bezos' language regarding his intentions post acquisition are quite telling, "change… is essential… with or without new ownership….need to invent…need to experiment." 

And that is exactly what the news industry needs today.  Today's leaders are HuffingtonPost.com, Marketwatch.com and other web sites with wildly different business models than traditional paper media.  WaPo success will require transforming a dying company, tied to an old success formula, into a trend-aligned organization that give people what they want, when they want it, at a profit.

And it's hard to think of someone better experienced, or skilled, than Jeff Bezos to provide that kind of leadership.  With just a little imagination we can imagine some rapid moves:

  • distribution of all content via Kindle style eReaders, rather than print.  Along with dramatically increasing the cost of paper subscriptions and daily paper delivery
  • Instead of a "one size fits all" general purpose daily paper, packaging news into more fitting targeted products.  Sports stories on sports sites.  Business stories on business sites.  Deeper, longer stories into ebooks available for $.99 purchase.  And repackaging of stories that cover longer time spans into electronic short-books for purchase.
  • Packaging content into Facebook locations for targeted readers.  Tying ads into these social media sites, and promoting ad sales for small, local businesses to the Facebook sites.
  • Or creating an ala carte approach to buying various news and entertainment in an iTunes or Netflix style environment (or on those sites)
  • Robustly attracting readers via connecting content with social media, including Twitter, to meet modern needs for immediacy, headline knowledge and links to deeper stories — with sales of ads onto social media
  • Tying electronic coupons, and buy-it-now capabilities to ads linked to appropriate content
  • Retargeting advertising sales from general purpose to targeted delivery at specific readers, with robust packages of on-line coupons, links to specials and fast, impulse purchase capability
  • Increased use of bloggers and ad hoc writers to supplement staff in order to offer opinions and insights quickly, but at lower cost.
  • Changes in compensation linked to page views and readership, just as revenue is linked to same.

We've watched a raft of newspapers and magazines disappear. This has not been a failure of journalism, but rather a failure of business leaders to address shifting markets and transform old organizations to meet modern needs.  It's not a quality problem, but rather a failure of strategy to adapt to shifting markets.  And that's a lesson every business leaders needs to note, because today, as I wrote in April, 2012, every company has to behave like a tech company!

Doing more of the same, cutting costs and rich egos won't fix a newspaper.  Only the willingness to experiment and find new solutions which transform these organizations into something very different, well beyond print, will work.  Let's hope Mr. Bezos brings the same zest for addressing these challenges and aligning with market needs he brought to Amazon.  To a large extent, the future of news and "freedom of the press" may well depend upon it.

 

Why Jeff Bezos is our greatest living CEO

by | Jan 8, 2013 | Defend & Extend, In the Rapids, Innovation, Leadership, Web/Tech

The Harvard Business Review recently published its list of the 100 Best Performing CEOs.  This list is better than most because it looks at long-term performance of the CEO during his or her time in the job – with many on the list in service more than a decade.

#1 was Steve Jobs.  #2 is Jeff Bezos – making him the greatest living CEO.  It is startling just how well these two CEOs performed.  During Jobs' tenure Apple investors achieved a return of 66.8 times their money.  During Mr. Bezos' tenure shareholders achieved a remarkable 124.3 times return on their money.  In an era when most of us are happy to earn 5-10%/year – which equates to doubling your money about once a decade – these CEOs exceeded expectations 30-60 fold!

Both of these CEOs achieved greatness by transforming an industry.  We all know the Apple story.  From near bankruptcy as the Mac company Mr. Jobs led Apple into the mobile devices business, and created a transformation from Walkmen, Razrs and PCs to iPods, iPhones and iPads – to the detriment of Sony, Motorola, Nokia, Microsoft, HP and Dell. 

The Amazon story is all the more remarkable because it has been written in the far more mundane world of retail – not known for being nearly as fast-changing at tech.

Lest we forget, Amazon started as an on-line seller of books frequently unavailable at your local bookstore.  "What's a local bookstore?" you may now ask, because through continuous upgrading of its capability to build on the advances in internet usage – across machines, browsers, wi-fi and mobile – Amazon drove into bankruptcy such large booksellers as B.Dalton and Borders – leaving Barnes & Noble a mere shell of its former self and on tenous footing.  And the number of small bookshops has dropped dramatically.

But Amazon's industry transformation has gone far beyond bookselling.  Amazon was one of the first, and by most users considered the best, at offering a complete on-line storefront for any retailer who wants to sell goods through Amazon's site.  You can set up your inventory, display products, provide user information, manage a shopping cart and handle check out all through Amazon – with minimal technical skill.  This allowed Amazon to bring vastly more products to customers; and without adding all the inventory or warehousing cost.

As digital uses grew, Amazon moved beyond the slow-paced publishers to launch the Kindle and give us eReaders displacing paper books and periodicals.  But this was just the first salvo in the effort to promote additional on-line buying, as Amazon next launched Kindle Fire which at remarkably low cost gave people a tablet already set up for doing retail shopping at Amazon.

As Amazon launched its book downloads and on-line services, it built its own cloud services business to aid businesses and people in using tablets, and doing more things on-line; which further reinforced the digital retail world in which Amazon dominates.

And make no doubt about it, Kindle Fire – and the use of all other tablets – is the WalMart and other traditional brick-and-mortar retail killer.  Amazon is now a player in all pieces of the transition which is happening in retail, from traditional shopping to on-line. 

Demand for retail space in the USA began declining in 2009 and has not stopped.  Most analysts blamed it on the great recession.  But in retrospect we can now see it was the watershed year for customers to begin looking more, and buying more, on-line.  Now each year growth in on-line retail continues, while demand at traditional stores wanes.

Just look at this last holiday season.  To (hopefully) drive revenue stores were opening on Thanksgiving, and doing 24 and 48 hours of non-stop staffing and promotions to drive sales.  But it was mostly in vain, as traditional retail saw almost no gains.  Despite doing more and more of what they've always done – trying to be better, faster and cheaper – they simply could not change the trend away from shopping on-line and back into the stores.

For the last year the #1 trend in retailing has been "showrooming" where customers stand in a store with a smartphone comparison pricing on-line (most frequently Amazon) to the product on the shelf.  Retailers were forced to match on-line prices, despite their higher overhead, or lose the business.  And now Target has implemented a policy of price-matching Amazon for all of 2013 in hopes of slowing the trend to on-line purchasing.

Circuit City went bankrupt, which saved Best Buy as it picked up their lost business.  But now Best Buy is close to failure.  Same store sales at WalMart have been flat.  JCPenney recruited Apple's retail store wizard as CEO – but he's learned when you have to compete with Amazon life simply sucks.  Nobody in traditional retail has found a way to reverse the on-line shopping trend, which is still dominated by Amazon.

We all can learn from these two CEOs and the companies they built.  First, and foremost, is understand trends and align with them.  If you help people move in the direction they want to go life is easy, and growth can be phenomenal.  Trying to slow, stop or reverse a trend doesn't work, and is expensive. 

Second, don't ask customers what they want, instead give them what they need.  Customers may be on a trend, but they will frame their requests in the old paradigm.  By creating new trend-promoting products and solutions you can capture the customer and avoid head-to-head competition with the "old guard" titans selling the increasingly outdated solutions.  Don't build better brick-and-mortar, make brick-and-mortar obsolete.

So, what's stopping you from growing your business like Apple or Amazon?  What keeps you from being the next Steve Jobs, or Jeff Bezos?  Can you spot trends and provide trend-supporting solutions for customers?  Or are you stymied because you're spending too much time trying to defend and extend your old business in the face of game changing trends.