by Adam Hartung | Feb 1, 2011 | Current Affairs, In the Rapids, Innovation, Leadership, Television, Web/Tech
Summary:
- There is dramatic change in the television/media industry
- NBC Universal/Comcast is changing ownership, and leaders
- The company’s future success will have more to do with which battles the new President invests in than the history, or style of the past and future company President’s
- Trying to “fix” the old business will waste resources and harm future prospects
- Success will require developing a management approach that gives permission and resources to find a path to the future – a future that will be nothing like the past
NBC Universal is changing owners, from General Electric to Comcast. The former NBC President, Jeff Zucker, is being replaced by Steve Burke. Stylistically, it’s hard to imagine two fellas less alike. Mr. Burke, portraited in the New York Times “A Little Less Drama at NBC,” is a mild-mannered, quiet, self-effacing executive who almost attended divinity school. He avoids the limelight as much as he avoids being abrasive with colleagues. The outgoing Mr. Zucker is by all accounts brash,abrasive and quick to make decisions, as he was portraited in PaidContent.org “Was Jeff Zucker Really So Bad For NBC Universal?“
But it isn’t executive style that will determine whether Mr. Burke succeeds. Although NBCU just returned its highest profits since 2004, the television and media industries are in dramatic transition. Things aren’t like they used to be, and they will never be that way again. Growing revenues, and profits, at the combined NBCU/Comcast will require Mr. Burke quickly move both companies into a different kind of competitor focused on the changed market of 2015 – when media customers and suppliers will both be very different, with quite different demands.
Although Mr. Zucker is blasted for allowing NBC’s ratings to fall to last among the Big 3 networks (including CBS and ABC), it’s not at all clear why that wasn’t a smart move. What has grown NBC’s profits has been far removed from network programming. It was the acquisition of cable channels USA and Sci Fi (now Syfy) via Universal, and later Bravo, Oxygen and The Weather Channel that contributed greatly to NBC’s revenue and profit growth. These were also enhanced by building, from scratch, the #1 business-content television channel at CNBC, and the profitable, somewhat populist counter-channel to powerhouse conservative Fox News with MSNBC. Despite what the critics (who are largely interested in programs rather than profits) have said, it may have been an act of brilliance to avoid investing in the declining business that is prime time network programming.
What anyone thinks about the brouhaha over Jay Leno’s attempt at prime time, and Conan O’Brien’s stint leading The Today Show, is immaterial to revenue growth and profits. I’m a late boomer, so I remember when there were only 3 stations, and Johny Carson dominated the post-news late evening. But now I have college age sons that don’t even own televisions, have almost no idea who Jay Leno is (other than know of him as a car and motorcycle collector) and find all interview programs boring. “Network” TV is something they don’t quite understand – since their tolerance for watching entertainment on someone else’s pre-determined schedule is non-existent, and their patience for sitting through commercials of real-time programming is even lower. In other words, what happens in the “prime time” race, or with network celebrities, really doesn’t matter any more. And if NBCU can’t grow viewers it can’t grow ad revenues – so why should it invest in the prime time business? Just because it used to? Or started that way?
While lots of media “experts” are screaming for Mr. Burke to “fix” NBC, that business is already well into the hospice. Network share of entertainment interest is falling rapidly as boomers die, dozens of new offerings are micro-targeting across the channel spectrum, and we all turn to the internet for downloads, ignoring the TV for news or entertainment several additional hours each year. Meanwhile, people under the age of 30 aren’t even watching much television any more. They just pretend to watch while sitting with their parents as they text, check Facebook or watch a downloaded program on their iPhone.
“Network” programming is a business which is not going to grow again. Given how costs are increasing for traditional shows, and the over-explosion of inexpensive “reality” or “news” shows, and fragmentation and decline of advertising why would anyone ever expect this to be a profitable business? Being last in that 3 horse race is about as interesting as tracking share of market for printed phone directories. Probably the first to quit ist he big winner. So why should Mr. Burke spend much time, or money, fighting the last war? “Fixing” that outdated business model is fraught with high risk, and low return. Now that tthe artificial limits on news and entertainment programming have been removed (thanks to the internet) isn’t it time to let go of that historial artifact and focus on the future?
We know the future will be a mix of traditional TV (at least for a while, but don’t make any bets on it being too long), as well as targeted channels we now refer to as “cable” (even though that moniker is clearly losing meaning in a WiFi world.) Some of these will be free access, and some will be paid content. But all of that now must compete with downloads from Netfilx, Hulu (in which NBCU is a part owner) and YouTube (partially owned by Google.) People can create and post their own programs, and even do their own marketing. Instant availability, reviews and promotion will be couresy of Twitter and Facebook. This is a lot more complex than just ordering a new crime drama series, or situation comedy, and foisting it on a market with only a handful of channel options.
Viewership will range from 50″ panels, to 2″ hand-held screens – with a plethora of optional sizes in between. Program length will be infinitely variable from hours of non-stop viewing to constantly interrupted sound bites, no longer proscribed by 30 minute increments. Traditional programming, like local or national “news” will have little meaning, or value, in 2020 (or maybe 2015) when we will be receiving instant updates several times each day on our mobile device.
Mr. Zucker did a yeoman’s job of steering NBCU toward the future. He was smart enough to understand that only historians, locked-in media critics and old farts in Lay-Z-Boys care about what’s happening on The Tonight Show or the NBC News. His primary investments were oriented toward understanding the future, and getting NBCU’s toes into that rapidly churning water where future growth lies. But he’s leaving just as the stream is turning into a torrent. Even what he did could well be out of date within a few years – or months!
Now it is Mr. Burke’s turn. The very pleasant fellow has a daunting challenge. If he isn’t supposed to “double down” his bets in network TV, and traditional “cable,” what is he supposed to do? In a dramatically changing advertising world, where Google, Facebook and mobile device ads are now becoming the hot markets, what is the role for NBCU/Comcast? If we no longer need the physucal cable (say in 2020), won’t Comcast lose subscribers for cable access just like we’re seeing declines in subscribers for newspapers, DVD subscriptions, land-line telephones and land-line long distance? What is the role of a “programmer” like NBCU if viewers all have unlimited access to everything, anytime, anywhere, in any format? And what is the value of a content provider if self-published content streams onto the web by the terabyte daily? And is sorted by engines like Google and YouTube?
What Mr. Burke must do, regardless of style, is develop some scenarios about the future, and understand the much more complex playing field that is today’s media business. He has to find the holes in competition, and learn how to leverage what the “fringe” competitors are doing that drives all that usage, and viewership. And, most importantly, he has to keep experimenting – just as Mr. Zucker did. He has to create opportunities to test the newly developing markets, figure out who will buy, and what they will buy. He has to set up white space teams who have permission to be experimental, even if they attack the old businesses like “network” TV – even cannibalizing the historical viewr base as they transition toward future media markets. If he can create these teams, give them the right permission and resources, NBCU/Comcast could be the next great media company.
We’ll have to wait and see. Will the sirens of the past, looking backward, pull the company into gladiator battles with old foes trying to hold share in narrowing, declining markets? That path looks like a sure disaster. Despite being an early leader with satellite TV and MySpace that approach has not helped NewsCorp. But betting on the future is more a bet on the journey, and finding the right path, than betting on any particular destination. The future-based approach takes a lot of faith in company leadership, and the company management team. It will be interesting to see which way Mr. Burke goes.
by Adam Hartung | Dec 11, 2009 | Current Affairs, Defend & Extend, Food and Drink, In the Rapids, In the Swamp, Leadership, Television
If you can't sell products, I guess you sell the business to generate revenue. That seems to be the approach employed by Sara Lee's CEO – who has been destroying shareholder value, jobs, vendor profits and customer expectations for several years. Crain's Chicago Business reports "Sara Lee to sell air care business for $469M" to Proctor & Gamble. This is after accepting a binding offer from Unilever to purchase Sara Lee's European body care and detergent businesses. These sales continue Ms. Barnes long string of asset sales, making Sara Lee smaller and smaller. Stuck in the Swamp, Ms. Barnes is trying to avoid the Whirlpool by selling assets – but what will she do when the assets are gone? For how long will investors, and the Board, accept her claim that "these sales make Sara Lee more focused on its core business" when the business keeps shrinking? The corporate share price has declined from $30/share to about $12 (chart here) And shareholders have received none of the money from these sales. Eventually there will be no more Sara Lee.
Look at Motorola, a darling in the early part of this decade – the company CEO, Ed Zander, was named CEO of the year by Marketwatch as he launched RAZR and slashed prices to drive unit volume:
Chart supplied by Silicon Alley Insider
Motorola lost it's growth in mobile handsets, and now is practically irrelevant. Motorola has less than 5% share, about like Apple, but the company is going south – not north. When growth escapes your business it doesn't take long before the value is gone. Since losing it's growth Motorola share values have dropped from over $30 to around $8 (chart here).
And so now we need to worry about GE, while being excited about Comcast. GE got into trouble under new Chairman & CEO Jeffrey Immelt because he kept investing in the finance unit as it went further out the risk curve extending its business. Now that business has crashed, and to raise cash he is divesting assets (not unlike Brenda Barnes at Sara Lee). Mr. Immelt is selling a high growth business, with rising margins, in order to save a terrible business – his finance unit. This is bad for GE's growth prospects and future value (a company I've longed supported – but turning decidedly more negative given this recent action):
Chart supplied by Silicon Alley Insider
Meanwhile, as the acquirer Comcast is making one heck of a deal. It is buying NBC/Universal which is growing at 16.5% compounded rate with rising margins. That is something which suppliers of programming, employees, customers and investors should really enjoy.
Revenue growth is a really big deal. You can't have profit growth without revenue growth. When a CEO starts selling businesses to raise cash, be very concerned. Instead they should use scenario planning, competitive analysis, disruptions and White Space to grow the business. And those same activities prepare an organization to make an acquisition when a good opportunity comes along.
(Note: The President of Comcast, Steven Burke, endorsed Create Marketplace Disruption and that endorsement appears on the jacket cover.)
by Adam Hartung | May 18, 2009 | Books, Lifecycle, Phoenix, Trends
What Thought Leaders are saying about Create Marketplace Disruption
“Companies that cannot change die. Companies that respond eventually survive but see their profits squeezed, their growth flattened. Long-term winners create their own disruptions and thrive on change. Hartung shows how to become one of the winning companies: how to attack competitors’ lock-ins, make their success formulas obsolete, and create the space needed to invent formulas for success.”
Harvard Business School Bulletin, March, 2009
“How do you participate in market disruptions which threaten your current leadership status? In this book Adam Hartung shows the kind of thinking needed to deal with the creative destruction that underlies global capitalism today.” Geoffrey Moore, author Dealing with Darwin” and “Crossing the Chasm,”
Managing Director TCG-Advisors venture capital, September, 2008
“Create Marketplace Disruptions is as thought-provoking as it is entertaining. Adam Hartung offers business managers and leaders new insights to long-term success that apply across markets and industries.”
Steve Burke, President Comcast, August, 2008
“This is a disruptive book. In times of ever accelerating, deep change survival through “ever better management” is an illusion. This is the book for the entrepreneur in us. Unite the entrepreneurial soul with corporate resourcefulness. Adam’s framework should be tried.”
Jost Stollman, Shadow Minister Economy and Technology Federal Republic of Germany, July, 2008
“The Fortune 1000 is a very fluid list. They become successful doing something right, but then keep doing that (because it’s what they know) even when marketplace conditions change. Companies need to reinvent themselves, become flexible, and do something completely different.”
Nick Morgan, CEO Public Words, February, 2009
“In what is possibly one of most stimulating books ever written on business management, Adam Hartung explores various ways for a corporation to achieve adaptive success: such as stop the ‘Defend & Extend’ old habits, generate controlled disruptions of the corporate personality, and create autonomous ‘White Space’ to continuously create revised success formulas.”
Jean-Louis Vullierme, global venture capitalist, January, 2009
“Talking innovation is easier than practicing innovation. Adam offers an excellent approach for corporations to identify how to innovate to gain competitive advantage. A must read. ”
Praveen Gupta, President, Accelper Consulting, author Business Innovation in the 21st Century, The Six Sigma Performance Handbook and Six Sigma Business Scorecard, September, 2008
“Adam Hartung gives a workable guide to overcome business inertia. Create disruption in your own business to keep ahead of the competition. Hartung looks at the reasons why businesses have difficulty changing, and provides help in overcoming those issues. Create Marketplace Disruption is an easy to read, helpful book and recommended.”
Sacramento Book Review, November, 2008
“Adam Hartung has forever changed the paradigm of what constitutes the leadership of change and innovation. He provides answers to why so many good organizations fail. He shows how leaders trained to focus on core competencies and customers may be sowing the seeds for their organization’s destruction in a time of accelerating change.”
Paul Davis, President Scanlon Leadership Network, October, 2008
“Adam Hartung offers courageous leaders a new language system and framework for generating long term profitable growth. Rich with compelling metaphors, stories, and illustrations, Create Marketplace Disruptions explains why even aggressive efforts to reinvent fail. Hartung provides leaders with practical tools for keeping companies ahead of declining results and obsolescence. Every leader needs to understand Hartung’s framework and heed his advice.”
Judi Rosen, Managing Director, CSC Index and President, The Concours Group, August, 2008
“Create Marketplace Disruption provides a model for competing more effectively in our constantly changing markets. Leapfrogging tired concepts which have largely focused on doing more of what you’ve always done, Adam Hartung focuses us on doing what it takes to do better. This is the book that all executives who want to leave a positive legacy must read!”
Ron Kirschner, Chairman Heartland Angels venture capital, December, 2008
“Adam Hartung blends stunning lessons learned from the fallen giants of business with set-you-back-in-your-seat insights that make this a must read for all business leaders of large and small companies alike. Hartung provides an intelligent blueprint for achieving what every business craves — competitive advantage and renewable growth. Smart, sophisticated treatment of a topic that no business executive worth his /her stock options can ignore — how to grow and differentiate your business”
John Popoli, President Lake Forest Graduate School of Management, January, 2009
“Create Marketplace Disruption is an engaging, enlightening, frightening, and occasionally upsetting book. Its contents will repay careful thought and periodic revisiting. It’s a book to keep in mind, and close at hand, whenever an organization faces the need to develop an effective plan for the future.”
Dr. Michael Vitale, Asia-Pacific Centre for Science and Wealth Creation, October, 2008
“The insights provided by Adam Hartung makes this book a must-read for all entrepreneurs. This is a blueprint for generating more wealth and getting to investor returns faster.”
William A Johnson, Founder and CEO CAER Group, March, 2009
“Creating Marketplace Disruptions is an outstanding approach for creating and maintaining growth and profitability in an increasingly dynamic and uncertain global economy. More importantly, the book moves beyond concepts with a well crafted set of tools and techniques for implementing change that are relevant regardless of industry or company size”
Sumeet Goel, Managing Director, HighPoint Associates, July, 2008
“Adam Hartung presents a fresh perspective and compelling case that demands business leaders pursue new markets – thirst to disrupt the status quo. Every business should apply Mr. Hartung’s principles – only hiring those individuals prepared to question the corporate culture, and vigorously willing to pursue White Space.”
Ken Daubenspeck, Chairman and CEO KDA global management recruiters, October, 2008
by Adam Hartung | Mar 12, 2009 | Current Affairs, General, Leadership, Lock-in
What do you think of when someone says "The Dow"? Most people think of the Dow Jones Industrial Average – a mix of some roughly 30 companies (the number isn't fixed and does change). But very few people know the names on the list, or why those companies are selected. As time has passed, most people think of "The Dow" as "blue chip" companies that are supposed to be the largest, strongest and safest companies on the New York Stock Exchange. For this last reason, it's probably time to think about killing "The Dow." It's certainly clear that what the selection committee thought were "blue chip" a year ago was off by about 50% – with many names gone or nearly gone (like AIG, GM, Citibank) and many struggling to convince people about their longevity (like Pfizer).
Quick history: "The Dow" is named afrer the first editor of the Wall Street Journal Charles Dow (co-founder of Dow Jones, owner of the Journal) who wrote in the late 1800s. Building on his early thoughts about markets, something called "Dow Theory" was developed in the early part of the 1900s. Simply put, this said to get a selection of manufacturing companies, and average their prices (the Dow Jones Industrials). Then, get a selection of transportation companies and average their prices (the Dow Jones Transportations [see, you forgot their were 2 "Dows" didn't you]). Then, watch these averages. If only one moves, you can't be predictive, but if both moves it means that businesses are both making and shipping more (or less) so you can bet the overall market will go the direction of the two averages. So it was a theory trying to predict business trends in an industrial economy by following two rough gages – production and transportation – using stock prices. [note: the first study of Dow Theory in 1934 said it didn't work – and it's never been shown to work predicatably.]
Don't forget, in this most quoted of all market averages the third word is "Industrial." The reason for creating the average was to measure the performance of industrial companies. And across the years, the names on the list were all kinds of industrials. Only in the most recent years was the definition expanded to include banks. But that was considered OK, because above all else "the Dow" was a measure of leading companies in an "industrial" economy and the banks had become key components in extending the industrial economy by providing leverage for "hard assets".
Marketwatch.com today asked the headline question "Is the Dow doing its job?" The article's concern was whether "the Dow" effectively tracked the economy because so many of its components have recently traded at remarkably low prices per share - 5 below $10 – and even 1 below $1! Historically these would have been swapped out for better performing companies in the economy. Faltering companies were dropped (like how AIG was dropped in the last year) – which meant that "the Dow" would always go up; because the owners could manipulate the components! [the owners are still the editors at The Wall Street Journal now owned by News Corp.] But even the editor of the Dow Jones Indexes said "While we wouldn't pick stocks that trade under $10 to be in the Dow [Citi and GM] are still representative of the industries they're in, and their decline in the recent past is part of the story of the market recently."
Recently, "the Dow" has taken a shellacking. And the reasons given are varied. But one thing we HAVE to keep in mind is that any measure of "industrial" companies deserves to get whacked, and we should not expect those industrial companies to dramatically improve. In the 1950s when the thinking was "what's good for GM is good for America" we were in the heyday of an industrial economy. And that phrase, even if never really used by anyone famous, made so much sense it became part of our lexicon. But we aren't in an industrial economy any more. And the failure of GM (as well as the struggles at Ford, Chrysler and Toyota) shows us that fact. If "the Dow" is a measure of industrial companies - or even more broadly, companies that operate an industrial business model – it is doing exactly what one should expect. And to expect it to ever recover to old highs is simply impossible.
The industrial era has been displaced, and in the future high returns will be captured by businesses that operate with information-intensive business models. Google should not be placed on the DJIA. We need a new basket – a new index. We need to put together a collection of companies that represent the strength of the economy – where new jobs will be created. Companies that use information to create competitive advantage and high rates of return — like how in an industrial economy businesses used "scale" and "manufacturing intensity" and "supply chain efficiency" to create superior returns. If we want to talk about "blue chip" companies that are more likely to show economic leadership, gauge the capability to succeed and the ability to drive improved economic output, we need a list of companies that are the big winners and demonstrate the ability to remain so by their superior understanding of the value in information and how to capture that value for investors, employees and vendors.
This index is not the NASDAQ. It would include Google, currently leading this new era as Ford did the last one 100 years ago. But other likley participants would be Amazon for demonstrating that the value of books is in the content, not the paper and that the value of retailing is not the building and store. Apple has shown how music can eclipse physical devices, and is leading the merger of computer/phone/PDA/wireless connectivity. Infosys is a leader in delivering information systems in 24×7 global delivery models. Comcast is leading us to see that computers, televisions, gaming systems, telephones and all sorts of communications/media will be delivered (and used) entirely differently. News Corp. is blurring the lines of media spanning all forms of content development as well as delivery in a rapidly shifting customer marketplace. Nike, or maybe Virgin, is showing us that branding is not about making the product – but instead about connecting products with customers. Roche for its ownership of Genentech and its deep pool of information on human genetics? What's common about these companies is that they are not about making STUFF. They are about using information to make a business, and capturing the value from that information.
RIP to the Dow Jones Industrial Average. It's future value looks, at best, unclear. What we need to do now is redefine what is a "blue chip" in this new economy. What are your ideas? Who should represent the soon to be exploding marketplace for biotech solutions based on genetics? Who will lead the nanotech wave? Who would you put on this new "blue chip information index"? Send me your ideas. And in the meantime, we can recognize that even those who created and manage the venerable "Dow" aren't really sure what to do with it.
