by Adam Hartung | May 19, 2010 | Current Affairs, Defend & Extend, In the Swamp, In the Whirlpool, Leadership, Web/Tech, Weblogs
Do you lament "the way things used to be?" I remember my parents using that phrase. Now I often hear my peers. And it really worries me. Success requires constant growth, and when I hear business leaders talking about "the way things used to be" I fear they are unwilling to advance with market shifts.
For 5 years newspaper publishers have been lamenting the good old days, when advertisers had little choice but to pay high rates for display or classified ads. Newspaper publishers complain that on-line ads are too inexpensive, and thus unable to cover the costs of "legitimate" journalism. While they've watched revenues decline, almost none have done anything to effectively develop robust on-line businesses that can offer quality journalism for the future. Instead, most are cutting costs, reducing output and using bankruptcy protection to stay alive (such as Tribune Corporation.) Even as more and more readers shift toward the digital environment.
Source: Business Insider 5/18/10
While most of the "major" newspapers (including Tribune owned LA Times) have been trying to preserve their print business (Defend & Extend it) HuffingtonPost.com has gone out and built a following. There's little doubt that with the last 3 years trajectory, HuffingtonPost will soon be the largest site. And reports are that HuffingtonPost.com is profitable.
In 2006 the CFO at LATimes told me he couldn't divert more resources to his web department. He felt it would be jeopardize to the print business. "After all," he said "you don't think that the future of news will be bloggers do you?" Clearly, he was unprepared for the kind of model Arianna Huffington was building – and the kind of readership HuffingtonPost.com could create.
On Tuesday I presented the keynote address at the Innovation and Energy Summit in Grand Rapids, MI – and as reported in West Michigan Business "Energy & Innovation Summit Speakers Urge Business Leaders to Seek New Businesses, Not Protect Old Ones." Defend & Extend management always "feels" right. It seems like the smart thing to try and preserve the old Success Formula, usually by cutting costs and increasing focus on primary revenue sources. But in reality, this further blinds the organization to market shifts and makes it more vulnerable to disaster. While NewsCorp and others are busy trying to think like newspapers, emerging news market competitors are developing entirely different models that attract customers – and make a profit.
That's why it is so important to use future scenarios to drive planning (not old products and customers) while passionately studying competitors. Talking to advertisers gave these publishers no insight as to how to compete, however had they spent more time watching HuffingtonPost.com, and other on-line sites, they might well have used Disruptions to change their investment models – pushing more resources to the web business. And had they set up dedicated White Space teams not constrained by old Lock-ins to traditional revenue models and goals of "avoiding advertiser cannibalization" they might very well have evolved to a more effective Success Formula necessary for competing on the internet into 2020.
by Adam Hartung | Sep 2, 2009 | Current Affairs, Defend & Extend, General, In the Rapids, In the Whirlpool, Leadership, Openness
"Huffington Says Her Site Is Close To Making Money" is the video headline at Marketwatch.com. For years this blog has chastised traditional news publishers for trying to Defend & Extend their traditional business, when the market has shifted on-line —- both for readers and advertisers. Of course, the newspaper companies counter this argument by saying that they can't make any money on-line. They have to defend their traditional business – even from web competitors.
When shifts happen it's best to get started experimenting and migrating early. You may hate the political bent of HuffingtonPost.com, but that it's near making money shows that the model can work. Just differently than a newspaper or magazine. Unfortunately, most traditional media have been too busy trying to fend off the web to learn anything. For example, Tribune Corporation has long owned equity stakes in CareerBuilder.com and Cars.com as well as FoodChannel.com. But the company refused to learn from these ventures and migrate toward a different Success Formula.
Now it's too late for these traditional companies. You may think that if HuffingtonPost.com is still not quite profitable there's still time to compete. But reality is that Ms. Huffington's organization has been experimenting and learning and creating this Success Formula for 4 years. That kind of learning you can't pick up overnight. You have to participate in the marketplace, then make what you learn (good and bad) available for everyone to see. Then you have to discuss what you've learned openly so the organization can become knowledgable about what works and migrate toward a new Success Formula in which they have confidence. And that's why most companies react to market switches way too late. They think they can jump in at the last minute. But by then the HuffingtonPost.coms and Marketwatch.coms and MediaPost.coms have already learned how to succeed at this business, developed a subscriber base and created a viable ad sales program.
Take for example "Clunkers Program Boosts Ford, But Not GM, Chrysler" as headlined on Marketwatch.com. Now that the results are in from the government stimulated "clunkers" program, we know that the market has shifted away from GM and Chrysler. Year-over-year, Hyundai sales were up 47%, Honda up 9%, Toyota up 6.4%. Ford scored big with sales up 17%. But GM sales were down over 20%, and Chrysler sales fell 15%. We can see from this data that people were ready to buy cars, given a boost. While the overall market was up, we can see that it has shifted to a new batch of competitors. GM and Chrysler simply weren't prepared to compete – and it's doubtful they ever will be. They've missed the market shift, and now they don't have the R&D, products, distribution, marketing, etc. to remain competitive with companies that are seeing volumes and revenues rise.
Of course, every company has the opportunity to shift with markets – or be crushed by changes. The latest economic reports show that too many American businesses, like GM and Chrysler, are waiting to be crushed. "US productivity rises at fastest pace in nearly 6 years, while labor costs plunge in spring" is the ChicagoTribune.com headline. This is bad news for those thinking an economic upturn will save them.
When an economy grows productivity improvements are good. Imagine you sell 100 items. You have 100 employees. Productivity is 1. A growing economy allows you to sell 105, your employment remains the same, and productivity jumped 5%. Lots of winners – between the employees (more pay or bonus), the customers (possibly lower prices down the road based on rising volume), for investors (more profits) and for suppliers (more volume and less pressure on prices.) Let's say the economy slackens – like 2009. Volume drops to 90. But through cost saving measures employment drops to 86. Productivity just went up almost 5%! But nobody won. And that's what's happening today. Labor rates keep dropping because there's more labor supply than product demand – and if businesses keep cutting costs we'll improve our productivity right up while the economy keeps going down.
Business leaders need to be more like Huffington Post, and less like GM. To improve profits they need to recognize that markets have shifted, and move quickly to develop new Success Formulas which get them growing. Trying to Defend & Extend the old business, like newspaper publishers, simply drives you toward bankruptcy. Instead, it's time to Disrupt the status quo and create some White Space projects to learn what the market wants. It's time to experiment and get the whole company involved in applying the collective brainpower to develop new a new Success Formula which gets you growing, making more money, and improving productivity for real!
by Adam Hartung | Jul 26, 2009 | Uncategorized
"Is the Party Over for Microsoft?" is the headline at Marketwatch.com. In case you missed it, last week Microsoft reported sales and earnings, and "Microsoft declines on disappointing results" was the most appropriate headline. Sales dropped 17%. Let's see, the last time we heard about a mega-corporation with double-digit revenue declines that would have been – oh yes – GM – and Chrysler.
This blog has been brutally negative on Microsoft for over 3 years. A quick look at the long-term chart and you'll note that the stock has not come near its 2000 high this decade. It's been mired in a go-nowhere range, and has recently broken down to prices last seen in the late 1990s. For investors, Microsoft has been only a disappointment.
But that's because the company has been equally disappointing for customers. Microsoft has been very consistent about trying to "milk" it's near-monopoly in desktop operating systems and office software. Even though the market has moved, Microsoft has done little to move with it. It's applications are "more of the same." It's operating systems have become bloated, and new versions have offered practically no advantages to switch. Meanwhile, customers are learning to enjoy Linux – and Macs again – as well as Unix for servers. There's literally been nothing for customers, investors — or suppliers to get excited about. Ask Dell, itself stuck in the doldrums as a Microsoft devotee.
It's not due to a lack of opportunities in the dynamic IT world. Since 2000 we've seen the emergence of Google, which simply cleaned Microsoft's clock in search and ad placement. The world of digital music became dominant, but that was claimed by Apple. Hot websites for information became valuable – but Marketwatch and HuffingtonPost (examples) are laying claim to attracting lots of readers. Microsoft simply missed these markets. Always late, and never really in step with shifting market requirements. The company tried, failed, and just kept "clipping coupons" from its near- monopoly.
It hasn't been hard to see the market shifting. Customers were put off by Microsoft's disregard for their needs in the 1990s. They searched for better solutions, and found them. Microsoft kept being Microsoft, but the world moved. Now, Microsoft is stuck. And what are they going to do to get out of their rut?
When a company is large, has a lot of cash, and has strong market share analysts are reluctant to predict it will do poorly. But Microsoft has been so Locked-in, for so long, it has been quietly letting all new markets go to new competitors. There have been NO Disruptions to the Success Formula. Windows and Office have dominated the investments. "Taking care of the franchise" has been the mantra. That meant doing more of the same. Which got us Vista – an operating system that was over a year late to market, and very easy to ignore. There hasn't been any White Space to develop new solutions. And as a result whenever Microsoft has tried to do anything new it has been late, with inferior product, a significant lack of knowledge about what the market really wanted, and out of step with new requirements for performance and price.
Microsoft won't declare bankruptcy in 2009 – or 2010. But it's acting just like GM. It's spending all its time trying to Defend & Extend its past. But in fast changing markets, that's not enough to remain viable. In markets moving as fast as IT, it's deadly. Remember DEC? Wang? Lanier? Burroughs? Univac? IBM mainframes? Cray supercomputers? Microsoft is more like GM than it's like Google. Thus, it's future isn't hard to predict. If you're an employee, time to brush up the resume. If you're an investor, time to look for the exit.
Do'nt miss the new ebook "The Fall of GM: What Went Wrong and How To Avoid It's Mistakes"
by Adam Hartung | Mar 30, 2009 | Current Affairs, Defend & Extend, General, In the Rapids, In the Whirlpool, Leadership, Quotes, Television
"This is the future of media. Whether in print, over the air or online — the delivery mechanism isn't as important as the unique, rich nature of the content provided." That's what the Tribune Corporation's COO, Randy Michaels, said in "Tribune Merges Conn. paper, stations" as reported on Crain's ChicagoBusiness.com. After filing bankruptcy, and seeing both newspaper subscribers and advertisers hacked away dramatically, Tribune is merging together all operations – newspaper and 2 TV stations – in Hartford, CT. They are cutting costs again.
We can hope Mr. Michaels means what he says, but excuse me if I'm doubtful. Despite the rapid acceleration of on-line news readership, and the fact that in most major markets Tribune has one or more TV stations as well as a newspaper, Tribune has never consolidated it's news operations or its advertising sales force. This is sort of remarkable. Going back at least 5 years, it made sense when gathering the news, or talking to an advertiser, to discuss how you could maximize his value for ad money spent. That meant a sharp company would have laid out programs showing how they could give advertisers access to eyeballs from all sources. But instead, at Tribune each station had its own salesforce, each newspaper, and each on-line edition of the newspaper. There was little effort to give the customer a good value for his spend – and no effort to discuss how he could transfer dollars between media to be a big winner. Even though Tribune was an early investor in the internet, it has not learned from its investment and migrated to a new Success Formula.
At a time when advertisers are unclear about how to justify their spending, a sharp media company would be explaining how many eyeballs in are in each format, the demographic profiles and the cost to reach those eyeballs. A company that really is "media independent" would have a big advantage over one trying to sell only the legacy products, because it isn't learning from the marketplace how to offer the best product at the best price and make a profit.
And Tribune had better move quickly. Arianna Huffington has announced the launch of the "Huffington Post Investigative Fund," as announced on the website HuffingtonPost.com. This is her effort to create a pool of investigative journalists for on-line sites who will do the kind of work we historically expected newspapers to do. She is throwing in $1.75million, and asking others to put up additional money. Thus giving this White Space project not only permission to figure out a "new age" model for investigative reporting, but hopefully the resources with which to experiment and learn. Whether this project will succeed or not is unclear, but that it is intended to make on-line news (and her website) more powerful and successful is clear. With each step like this, and this one she took all over the airwaves Monday discussing on multiple television stations, the case against quality of on-line news declines – and increases the on-line competition for eyeballs with television, radio and newspaper formats.
What we'd like to see is an announcement that the Tribune project in Hartford is a White Space project intended to figure out the Success Formula for future media. As we come ever closer to the "Max Headroom" world, depicted in the 1980s of a future where there is 24×7 news around all of us all the time, what no one knows for sure is how the profit model will work. Those who experiment first, and learn the fastest, will be in a strong position to be the leader.
Unfortunately, the Tribune announcement does not look like White Space. The Tribune leadership has still not Disrupted its grip on the old Success Formula. The project in Hartford looks more like a cost-saving effort, trying to defend the old newspaper, than a learning proposition. The project seems to lack the permission to do whatever is necessary to succeed (like perhaps stop printing), and it has no resources coming its way with which to experiment as it keeps trying to maintain all 3 of the legacy business units. Rather than a learning environment, this looks more like an effort to save 3 troubled businesses by cost saving - a Defend practice that doesn't work when markets shift and new competitors are trying all kinds of new things.
