Remember back in the 1990s when Microsoft seemed unbeatable? That was a time when worries about anti-trust violations began to surface and most pundits figured Apple Computer would soon be out of business. Windows ruled the world.
Remember circa 2001 when just about every newspaper company in the world was trying to figure out how to turn its web site into a portal? The goal was to be the one web site anybody ever really needed. We talked about being sticky and keeping people on our site as long as possible. Where did the idea, and the buzzword, come from? We all wanted to be the local Yahoo!
This week, Microsoft, battered by declining market share and slowing profit growth decided that its best bet to survive was to buy Yahoo! — but not the Yahoo! of 2001, which was worth an estimated $90 billion back then, but a Yahoo! whose fortunes have sunk so deeply, its market cap was about a quarter that price (Microsoft is offering a 62 percent premium on Friday’s share price).
In a little more than a single decade, what happened to these two once seemingly invulnerable companies?
Change happened. Markets shifted. New competitors arose. New ways of doing business and making money were invented.
The names and business models of the competitors doesn’t really matter, because competitive turbulence is inevitable for any business.
Except, of course, newspapers.
No, wait. Newspapers are in trouble now, too.
Twelve years ago, who could blame a newspaper publisher for looking back on nearly 300 years of newspaper industry dominance in the media and think, “we will live forever.”
When you haven’t seen any real change in your lifetime, or whatever change came along (radio and TV, say), made only a marginal difference (“hey, we’re still running at 35 percent profit margins!), why worry?
We now realize, of course, that the same laws of business that change markets and make ensured survival impossible, can kill newspapers, too.
I’ve just finished a great book: The Halo Effect.
It’s a good book to cause a little further reflection on what business survival means.
The Halo Effect, by Phil Rosenzweig, makes a great case that following the management principles in those books is really like chasing unicorns.
For example, the research in Good to Great is faulty and incomplete. Jim Collins and his team failed to account for, among other things, the Halo Effect, which is what you get when you measure performance by post hoc evaluations. Because the performance was good, than the management must have been good, and if the management was good, then the leader must have been good, and if the leader was good, then he created a good work culture, etc. Those attributes add up to a cascade of halos.
Collins also failed to look for companies that did all the things his “good to great” companies did but still failed.
In other words, the book lacked scientific rigor.
The fact of the matter is, the real research, the boring research (not the good story weaved by Collins) is that all of the management rules in the world, if well implemented, can at best only achieve a 10 percent improvement in performance (or so cites Rosenzweig). At best.
And none of that matters if market forces change and the company does nothing to respond. That’s when sticking to what you know best becomes a liability rather than a good business practice.
What’s more important than “having the right people on the bus” and “level five leadership”? How about strategy and understanding competitive advantage, not to mention simply getting the job done once you know what to do?
Of course, When your business is essentially a monopoly, as newspapers were for many, many decades, who needs to worry about strategy?
Our industry hasn’t (collectively) done strategy well, and the worst part is, strategy is scary stuff.
The problem: You never really know if a strategy is going to work. If you know a business plan will work, it isn’t really strategy. Then, it’s merely tactics. Strategy is about taking risk and trying the untried.
We all know how willing newspapers have been to try new things.
That habit is changing, but there is still a big tendency among some industry managers to buy into the “Good to Great” hedgehog theory (which Rosenzeig notes Collins got completely wrong both in mythology and application).
Newspapers can’t simply just “stick to the core business,” as a Collins-like hedgehog would do. Newspaper managers must be more fox like — more nimble, more willing to seek and seize opportunities.
Which, I suppose, raises the question of whether we have the right people on the bus?
Probably at some companies and not at others.
It’s a hopeful sign that many managers have been willing to explore, if not embrace, the API NewspaperNext initiative, which at least attempts to get newspaper executives to dive deep into strategic thinking.
My question is: Are newsrooms willing to learn the lessons of business history and allow the news/journalism industry to evolve. Or will they insist that nothing at all needs changed. That seems to have been Jim O’Shea’s answer, and the journalism world applauded his “principled stand.”
I’m not sure, however, that taking a stand constitutes a well conceived business strategy.