Vale the Newsprint Media. My Last Reflection….

Some time ago I wrote about the problems of generating income under the internet business model due to the difficulty in controlling property rights. For example, with music and movies/DVD the marginal profit is zero because the only one copy needs to be sold for it to be freely available to all consumers. As such, many elements of the music and film industries as they were historically structured are being forced to reinvent themselves into new viable business models.

Well it seems recently, that the online news market is now thrashing around with the realisation that giving it away isn’t a necessary going to pave the corporate hallways with gold. The historical business model for printed news has been to generate income partly from a product fee and partly from advertising – particularly classified advertising (houses, motor vehicles etc.). But on the net, generally there has been no charge and the advertising revenue is insufficient to pay the rent and the journo’s.

So the solution according to some news providers is to charge people to view it. One option is to charge intermediary services who aggregate the news on the web. Another option is to charge the consumer, for example, per article or a service access subscription fee.

First of all, the internet model for printed news was really a pretty poor business model.  It merely transports on to the web what was once printed on paper.  It looks pretty much the same on the web as it does on paper. The only real value is that news is delivered to the consumer a bit more quickly, and lets you vent your spleen (but does anyone really care).  It never really leveraged any greater value from the web than it provided on paper.

The end of newsprint on the web is coming because  the news market has both privately and publicly funded competitors. So if the privates start charging, unless the publics follow suit the news will still be available for nothing. Furthermore, the average day to day news item is typically highly substitutable, not just between online providers, but also other media mediums – television and radio for example. So if I can’t get news for free from company A, I can probably get it from company B for free.   The only reason I would pay for something from company A is if their value proposition provided something unique that I really wanted and couldn’t get anywhere else for free.

The solution is far from clear.  Are you and I going to pay for it, or are there too many other options to get the same information?  Even the idea that news providers could charge the intermediaries is only viable if they can make a buck out of it.

The newspaper owners and defendants argue that there is no solution then the the old privately owned news print providers are on a crash course with market failure.  And if the privates fail and leave only the publics, then who owns the publics?  Governments of course.  And do we want governments controlling and filtering the news we get – NOT.

More pertinent is the fact that the news market is a lot more than printed news in this day and age – in fact both public and private  newspapers compete with a mass of 24 hour television news services not to mention the radio news services available across the globe on the internet and twitter and blogs which report first hand in moments from the heart of the latest global catastrophe.  In this context, the death of newsprint is really like an aged grandfather; admired and loved but past their prime.  Struggling to grasp a world which is evolving beyond their grasp.

Of course, much of the news print media is filled with garbage fed to us by those who can afford the  cost of running publicity strategies.  Police reports, government reports, companies trying to flavour their public perception.  It’s all stuff which forms the background of  the day, to which we pay little attention, which we forget almost as we hear it and which has no real impact on our own lives.   We can surely fill that space with other more invigorating stimuli – a novel, some music or idle chat with another person?

Defendants also emphasise the history of investigative journalism uncovering  some corruption or fraud vital to the ongoing stability of our society.  Alas – we listen and watch this on TV now – reports, debates and analysis until our minds are boggled with information.  Maybe that’s the issue.  When something’s written down in front of you logically – you have time to think about it (if you make the time).   Perhaps that will be the major loss.  The unique value of the written news report – the opportunity for reflection.

Perhaps what we need is is a new business model to reflect on complex issues in our society.

Corporate Fashions – Suit Down Unless You’re Part of the Industrial Age

If you look around the office, do you see men and women in suits. Some are daggy, worn and crumpled and unkempt (reflecting the way they feel about the grinding job which pays the mortgage)  while others perhaps higher up in the organisation are a little smarter, perhaps trying to make a power statement.

For many years I suited up for the office. It was an unspoken law. As I rose up the ranks I had to spend more money on suits to look a bit flashier and fit in with the higher management tiers.

I even recall that in one (strange but listed)  company I worked for at the end of the last century they actually put managers  through a training program not just on dress codes but which suits to buy, how to match ties and look suave,  powerful and influential.

When I look back on it, the suited office is one of the strangest norms in the world of business. For some reason, someone somewhere, sometime years ago decided that it is appropriate for everyone to conform to a set of dress rules.  And the rule was the suit…. and unless you had money to wast, it was a bad idea.

Men and later women would suit up to signify their knowledge, power and influence.  Or if you were lower down the corporate ranks, to indicate your willingness to conform and work your ass off for the company.

But if you think about it – that’s plain stupid.  You end up in a room with your client and you’re all dressed up together; all trying to overpower and influence each other, and all nullifying the others effect.  you just end up looking like a bunch of conformists and in the end the deal just comes down to the value and the money.

Interestingly, in the noughties it has become fashionable for entrepreneurial companies to throw away the suit unless its with an open neck for the males.  Immediately, this defined the suited companies as old and conservative.

Now it’s banks, insurance companies and lawyers who do the power dressing suit thing and  modern (and often) entrepreneurial companies who do the smart casual and comfortable thing.

So  now the suit has become a symbol of the industrial age, when work was about getting the staff to conform and a status symbol for those with power and influence.  If you wear a suit you work in an old industry doing business with other old companies.

A suit doesn’t mean you’re  knowledgeable or trustworthy. It just means you’re conservative and old school.  In fact today when I see a banker or financial expert dressed in a suit I assume their incompetent based on the past couple of years of economic mishaps.

Now of course, I have the luxury of not having to wear a suit except to meet with those old industrial age clients from whom I am seeking fees for service. In fact, I have the luxury of spending most days in jeans and a t-shirt.

Executive Bonuses – are they getting paid to much, or is there a downside risk?

Well, I can’t help a few observations on the current debate about salary capping. The word out on the newswire is that the big executive salaries and bonuses are coming back and there is some conjecture about whether it signifies the western economies are returning to the bad habits which brought the house of cards tumbling down. Particularly that, as much as no one wants to believe it, there are still many people suffering from the past years conundrums and many economies aren’t really recovering as quickly as everyone is pretending.

I heard an interesting interview with some bloke who had walked away from the arguably excessive salaries typical of the pre-economic crash economy.

Of course the capitalists argue that bonuses are a necessary component to drive risk and creativity vital to economic growth in a free market. The free market fundamentalists will even say the that the cost of the past 2 years is negligible compared to the entropy of government interference. They’ll point to failures of communism and certain Southern American experiments. Of course it hardly relevant and not really that helpful if you are one of the unlucky ones who no longer owns their home or is suffering the weight of lost superannuation or savings.

The reactionaries argue that the level of irresponsibility inherent in the behaviour which caused the mess demands price controls.  The response of these heavily bonused  play people wasn’t the downside risk of creative aspiration and innovation, it was just plain GREED.  Accordingly, you need to stop providing the cheese which makes these mice push the financial levers of destitution.

In my experience, bonus incentives are really interesting beasts.  No doubt, they helped me pay off my mortgage, but didn’t make me wealthy.  They drove me to find new and better ways to run the business and increase the profits which we did – substantially.  It was all honorable and would make the capitalists proud – some years ago.

But I heard an interesting interview with some chap who had made some bucks before he walked guiltily away from a major financial market job, but not before he’d pocketed a small fortune.   He suggested that the problem was that typically bonuses carry a unilateral risk – you can only win and you can’t lose.  When there is only an upside, you’ve got nothing to lose and so who cares  - got an idea let’s try it.  The worst that can happen is that the shareholders cop it, but I’m OK – I’ll still get my base salary so at least I can pay the rent.  One way risk apparently is the formula for the it’ll be OK derivative.   The it sounds good so let’s try it without really thinking it through solution which helped to bring some of the great financial powerhouses.

I have a feeling that he has a point but it’s not quite that simple.  Sure if you can only gain if you try an idea and you reckon the likelihood of success is good – you’ll give it a go if you think it’s your best idea.   That sounds pretty like the human mind to me.  But what if you are SO SURE that it’s a winner that you personally risk a bit too much.  For example, what if you think it’s really likely that you have a great idea and you expect that you sure to get a bonus so you go and buy a new house at inflated prices, based on your expected bonus.    And what do if it wasn’t such a good idea and doesn’t quite deliver the bonus you thought it would.    Maybe you’ll try and pretend everything will turn out OK.  But maybe,  just maybe, you might be a bit naughty and rather than respond rationally (i.e. stop the stupid behaviour) , your in so deep that you try something which maybe you shouldn’t, but its OK because hopefully no one will find out.    Anyway, everyone’s doing it….

There is of course a downside when everyone gets overconfident. It’s like that decision you make after a bottle of wine which you think twice about when your soothing the headache the next morning.  It sounded good in the alcoholic euphoria but in the sober light of day – it was a crap idea.

I have  a feeling that a lot of people  realised the folly of their ways, entranced by the euphoria of the promise of everlasting  growth, but then they woke up and realised the fix they were in.   The downside risk emerged over time for those high flying executives who had totally misread their personal circumstances.  Over confident they had accumulated a lot of debt to pay for a lot of toys they couldn’t really afford.  When they realised the truth of their predicament, their only option was to keep playing the game, hoping that a miracle would turn water into wine and save them from the coming disaster.  deep down they new the miracle would never come.  But oh xxxx – what could they do…….

There is a downside risk if you lose touch with reality (and not many people didn’t).  If you start to believe those bonuses are inevitable, you fall into the downside risk trap – first you start to believe the fantasy (everlasting growth), then you have to believe it.  When these high flyers find find themselves in trouble, we just might need the government to protect us from them.

You Need a Substantive Value Proposition to Fight the Big Bear

As we have seen (yet again), greed – the achilles heel of the rational market – works its dark tricks perpetuating the bull into a rising spiral of economic mayhem.  Then, as the big bear spies the precariousness it seizes the opportunity to feed malevolently on scurrilous lechers  who grab hopelessly onto their sinking business carcasses.  So it goes….

Of course, after the mess is cleared the businesses which survive are those who have a truly competitive value proposition.  In my work I come across companies who struggle with their value proposition.  Poor value propositions often survive in the undisciplined  buoyancy of a bull market, but when the pennies are tight, buyers start to scrutinize their suppliers to see where the can cut and save.  To survive this, sellers need to ensure that their buyers are really clear on two things:

1. They know what they are getting for their money  and how they are better off from the purchase.  
2. They can’t make a better purchase from a competitor.

The problem so often encountered by sales and marketing is distinguishing between the widget (be it a service or product) and the value it creates.  The widget in itself has no value.  The value is determined by what the widget allows you to achieve.  Hence, a mobile phone is merely a piece of metal and plastic which hooks up to a telephone signal.  The value attached to the phone is that it allows you to communicate with friends or business contacts, access information from the internet or amuse yourself listening to music or playing games.  The value proposition is about what it adds to your lifestyle or business opportunities. How it makes your life or business better (if thats what you”re into).

Of course value per se is a subjective concept in the eyes of those who have a need or see a purpose.  In order to focus a value proposition, you need to identify the needs of your customers.  What is their perception of  the world  and how could they use your product to improve their circumstances.  Your value proposition isn’t about what you think your product can do for people, it’s about what they think it can do for them.  

A common error is for sellers to define the value of their product from their perspective rather than from the perspective of potential customers.   If you define the value, your placing limitations around your market (common in insurance and banking).  The alternative is to listen to your customers (or potential customers), to understand their needs and aspirations and then how your product/service could help them solve the problem.  If you can solve these questions the market is your oyster.