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.

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.

Adventures in Making a Business Profitable Part 2 (The Maverick Lessons)

A while back I talked about the influence of Al Dunlap on my early management experience (see Adventures in Business Part 1).  The cut and burn approach to making an unprofitable business thrive.  This of course was a very 1990’s approach – primarily a reaction to the extravagence of the 1980’s globalisation evolution which placed an abundance of capital in the hands of often un-talented entreprenuers who pursued growth by building massive and usually unprofitable conglomerate businesses, of which they new little about.  It was about making the hard decisions that restructure resources and strategy back to a core business which is in demand and costs less to run than the revenue it generates.  Obviously this is an ongoing process but if the business is in poor shape then it can be necessary to take a more acute approach.  As is common with most periods of economic decadence, when money is too freely available it gets into the hands of people who lack the talent to use it wisely.  So eventually the market draws its sword and the whole mess gets cleared up – be it often at the expense of many innocent members of society (another issue).

Shaping a business to operate profitably is one foundation of sustainability.  The next challenge is to motivate your staff working effectively to achieve the new business goals.  Not uncommonly, following a restructure, when you’ve set new goals, changed peoples roles and farewelled some of your employees, the culture is hit what I call post restructure traumatic disorder. Commonly, staff are overwhelmed with uncertainty about  their and the company’s future, may become afraid to speak freely, mistrustful and focus on doing what is necessary to keep their jobs.

My search for useful ideas on how to inspire these circumstances led me to Ricardo Semmlers extraordinary Maverick which is today one of the most easy to read accounts of a real life adventure in employee management at the company SemCo – owned by the author.  You need to read the detail to understand how and why it worked  but the gist of it is that Semmler handed the operational decisions to the employees in an extraordinarily democratic and open framework.  Employees set their own salaries, chose how to distribute the profits amongst each other the management structure was flattened, employees were handed joint responsibility for the manufacturing process and chose their bosses. Semmlers overarching premise is that company survival in a volatile economy depends on the quality of life for its employees and the rest – productivity, profits, product quality will follow.  Not surprisingly, the employees  had to learn how to work in this environment but less intuitive was the success the company had once they got the hang of it.  (Yes, I’ve vastly over-simplified it which is why you should read the book).

 

Semmler’s story is a slap in the face for much leadership theory, basically because rather than assuming that employee motivation and performance is the responsibility of a few select managers, it assumes that employees respond productively when they are allowed to organize and participate democratically in decisions about business operations.  The idea is of common to western Governments, but quite intuitively unbelievable in the context of a business where survival depends on risky decision-making must occur efficiently.  Its is all the more extraordinary that the owner of the business would conceive and place their capital at risk enacting such a plan. 

 

The problem with this as a manager in a traditional hierarchical company is that you don’t have the power to give the power away.  The Semmler solution started at the top and was largely designed by the owner who had total control over the decision.    In my case it was impossible to rid the shackles of the company’s rules and procedures, which govern the hierarchical reporting structure, the salary and bonus rules, and the human resource processes which govern much of employee management  (union agreements hiring and firing, performance and promotion etc.). 

 

I realized quickly two key facts.  Firstly, the extent to which the traditional organization frameworks contain and impede the way management is practiced to the extent that it suffocates flexibility and enforces a numb acceptance of the framework.  Employees lumber along the path set by the framework, and if they climb any part of it do their best to reinforce and preserve their position.   The second is that just how hard it is to change such a framework.

 

The only approach was to take from Semmler what I was able to, within  the constraints of the organization.  In retrospect, this involved some pretty fundamental ideas.   Firstly, legitimizing the opportunity and responsibility for everyone to make a contribution.  Getting rid of the inherent class system which ordained those  further up the management hierarchy with the right to be right.  The managers ego is often fragile because they just aren’t exposed to disagreement – the people below are just two scared to say what they feel (check the comments in well designed anonymous employee survey), and the manager is kind of enjoying the respect which she/he thinks they deserve.   Getting everybody to be unafraid to say what they really think is the first step to good decisions.  Getting managers to confront the critics and justify their decisions is critical to making sure the people in those positions (if you have to have them)  are actually make good decisions.

 

The second thing was to actually get people to think about their job rather than just do it.  To achieve this, I had to go hunting for good ideas in the beginning, and then back those ideas to become a reality.  When people saw that they were allowed and could take control they wanted to in many instances (though I introduced some training and discipline around the process.)

 

I was able to introduce a more equitable merit based salary structure and fought and one a performance based employee bonus.   We increased the transparency about our true performance, argued a lot about how to fix it from the mail room to the IT department to the customer service people and the accounts.  Staff who had never contributed anything started sharing ideas and resourced projects. 

 

 It was a long way from the Semmler strategy  but definitely inspired by the great man.   In the end customer retention and acquisition went up dramatically the business’s profit increased by about 200 per cent and employee turnover rate went down below 10 percent.

 

 As time went on the more I was in awe of his approach. I remain convinced that while many companies talk about leveraging the potential of their employees, few if any take the risk.  As a consequence, the true capacity of human ability and ingenuity  becomes lost amidst the mayhem of bureaucracy, politics and survival.  Most people end up coming to work just to pay their mortgage, and miss out on the exhilaration of being part of a successful winning company.  And in the end, the company matures, withers and dies, or goes up in a puff of smoke the next time the economy takes a down turn.

The Times are a Changing in Business

The times are changing and I put my money on the fact that they are are changing faster than most people realise.

For example, if I was a young engineer with my eye on the motor vehicle industry, I am not sure I’d be putting my money on one of those mature old time vehicle manufacturers that President Obama runs. I wouldn’t be looking to work for a Euro car company about to be pulled out of a former Eastern bloc country to die quietly in the backyard of its mother country.  No, I reckon I’d be stepping as far away away from the old dinosaurs as possible – maybe develop some green technology, or perhaps some new bicycle design- cheap and fast – which would go well in Asia.  It doesn’t have to be a bicycle – just something that moves people quickly and cheaply to their destination of choice.

 

Anyway – so the point being that I can’t see how a lot of these old industrial revolution companies are going to have much of a future.  While their all talk and enthusiasm about re-strategising, re-structuring, re-vitalising, re-generating; its pretty uncommon for this to actually happen ever, and its my money its not going to happen this time.  The simple reason is that they are inflexible monoliths.  The whole point of  corporatising is to  make the company robust – deepen its foundations and arc its power  to influence and control markets and crush any on-coming competitors.  But God help the mature monolithic company if there is structural change – re-invention just isn’t one of its talents.  Like all good dinosaurs, it can stamp the crap out of a slow moving predator (no wonder its still so hard to buy cars which run on alternative fuel), but by gosh if its fleet of foot there’s no chance.  

To my knowledge there have been very few mature industries which have been able to recast the die – shift the paradigm, and actually redefine or even start up a new product or service market.  Apart from the fact that they all their eggs in their current product basket (that it, massive capital investment, immobile workforces etc..) they don’t attract the sort of people who are going to come up with that great new idea which is going to catch on and change the way we live.  The sort of people who work for big mature industrials want to play it safe – their low on risk taking, for whatever reason. They’re tolerant of the bureaucracy and politics which is the backbone of a mature monolith, but which makes it so unable to turn corners and change gears quick enough to avoid the bump in the road of consumption preferences.  OK?  So their just not entrepreneurial.

 

So who am I really talking about?  Well there are quite a few mature monoliths tramping around the western economies.  Obviously the car companies – but they’re easy (saddest in the US where they just don’t get it – like no one there has any money to buy 8 cylinders and no one anywhere else can possibly understand why they would buy 8 cylinders. ).  of course its not just cars – but really anyone producing anything to do with oil production or consumption – it’s about to become oh so 20th century…).  How about newspapers,  daily’s  in particular – never saw the internet come up and bite their backside – it’s over for them – also like free to air television (the idea that you can dictate when I am going to watch my show is so 20th century – and if you one of the product’s still paying to advertise in that industry – what can I say?).  

 

Oh – and I’d put my money on Asia being the new economic power region.  I wouldn’t put my money on the $US or the Euro (no ones put it on the pound for about 30 years a anyway).  I would put my money on India as a place for innovation and teamwork and with China for the cheapest production for many years to come.  Oh and blogs – I think they might have been twittereed.  

In fact if you’re in the West – try and think of something Indians are going to want that you’re better at than they are …..ummmm.,