When the circus came to town

The partners in our little boutique consulting company agreed a long time ago on a slogan that seemed to best capture our preoccupation with business culture: “It’s one thing to climb the mountain. It’s another thing to live up there.”  We saw opportunity in the simple fact that success in business is nearly always fatal – and those two sentences seemed to sum up our observation perfectly. But as we wrap up our latest assignment, this one with a global Internet company, it occurs to me that there is another slogan that might characterize what we do more emphatically: “Truth Without Consequences.”

It’s wonderful to be at that stage in life and career where we don’t have to give a shit. It means we can answer any question without a trace of worry about political consequence. An ironic offshoot of such a happy circumstance is that our clients quickly come to trust us. They figure out pretty quickly that we’re not in it for the repeat gig. The level of trust engendered often leads to unusually open, honest and direct communication between us. That’s always productive. And it’s usually absent inside an established company. Somehow it gets lost along the way. In the end, everything has to be “positioned.”

In this case our assignment was to identify young managers who might be accelerated into more senior positions, as a small component of a much larger plan to regenerate a company losing touch and traction after many years of famously predictable profitability. It was a ballsy call by the new chief executive to get us in there, and bound to create turbulence. Transformation this deep always does.

No group feels more threatened when we walk in the door than Human Resources. HR as a discipline has evolved in 25 years from one that once provided invaluable assistance in the process of hiring, training and firing to a department that now acts as a tyrannical enforcer of established culture. Inside any company, of any age or size, norms of social behavior reinforced by HR become accreted like concrete and “that’s just the way we do things around here” becomes the daily watchword.Then we walk in…

As we began the process of probing and pushing and listening to a group of young managers below the executive level, it was astonishing how quickly some of them demonstrated a bottled-up conviction that their company had lost its way. As one manager pointed out, “if 500 people stopped coming to work here each day nobody would notice or care and the company would be just fine.” Making the number had become the only thing that mattered. Customers, markets, competitors and channel technologies were changing quickly and changing in plain sight – but to most the changes were invisible.

It quickly became clear that the scale of loss of impact from meaningless work was huge. As always, the working stiffs had their finger on the pulse and senior management, preoccupied as always with the vital business of relative conferred status, were either oblivious to or uncaring of the stasis that had taken hold at every level below them. Now, with us in the room, there was at last a chance for frustrated junior managers to buck the status quo without fear of sanction. And buck it the good ones did. So they were the ones we focused on for accelerated advancement.

We had to be careful. We’ve been around the block a time or two so we knew that some would try to game us, seeing in our work just another opportunity to get ahead. Let’s face it, many younger members of the digerati , especially in Silicon Valley  – and here I’m talking about people aged between 30 and 40 – are nothing if not desperately ambitious. That, after all, is how they got to where they got to. There’s nothing wrong with extreme ambition and career focus of course, but what we’ve noticed is that successful Internet companies are often crammed with people who are narrow of outlook and life experience, rigid in argument and absolutely preoccupied with career trajectory – to the exclusion of everything else. What do they say at Amazon? “Work-life balance is for people who don’t like work?” Something like that.

The point is such people have achieved a lot in their early careers but they lack the genuine breadth of character and functional flexibility required for successful management today – not to mention a decent relationship. They don’t seem prepared to make the critical career transition from technical skills to people skills, the transition which ultimately determines successful entry into the ranks of management. Life, for them, is a resume.

Often they imagine they will work real hard in a linear direction until they arrive at some distant goal, and then they will be happy. But happiness is not an objective. It is the result of a life lived with purpose. It is found through curiosity and discovery, not a single- minded ascent up a ladder suspended inside a departmental silo, bowing your head to the status quo as you climb cautiously upwards from rung to rung – until you get stuck and can climb no further. Then what the hell do you do? Meekly settle in for the long haul? Or take the money and run?

It’s always important to remember that the behavior you see is usually the result of incentives you don’t see. “It is difficult to get a man to understand something when his salary depends on his not understanding it,” Upton Sinclair once said. We had to find young managers who would respond not just to appeals based on net worth but also to appeals based on self-worth. We were looking for people motivated primarily by the value of doing work they could be proud of irrespective of the opinion of those around them, people open to risk and adventure, people strong enough to take a crack at the status quo and smart enough to explain why, in each case, what they wanted to change made sound sense for the business.

Research has consistently demonstrated that we humans weight the potential downside of deviating from the status quo much more heavily than we do the potential benefits. We learn early of the advantage of following social rules about what to say, how to say it, how to act, even how to dress. Conforming makes us feel like we belong. Inside a company conformity leads to interpreting information in a way that supports the prevailing belief system and to positioning unexpected or unpleasant truths as a threat – which means we shun them or band together to stamp them out. Shrinks call that “motivated skepticism.”  In business, it’s deadly.  Among other nasty things, it leads to market myopia. Successful but myopic companies draw concrete conclusions about how smart and good they are – so the people in them have a self-satisfied smile on their faces as they tumble over the cliff.

Two of the five partners in pwinter&co spent their careers in the media business, like me. We learned a long time ago how slavish devotion to the status quo can bite you. Hard. We learned it from watching how newspapers behaved when the digital media revolution began – a couple of us still carry the scars of that experience. When their franchise came under unprecedented attack and the walls of their monopoly markets were breached, newspaper companies had a choice to make, a binary choice, a choice between losing or refusing to lose. But not one was prepared to put at risk the industry’s Wall Street reputation for reliable return, even though it was built on a shell game of short-term promotions that artificially spiked subscriber numbers and egregious ad rate inflation. Newspapers had 25 years of second chances – and never took one of them. They chose to lose.

It all comes down to leadership and its capacity for risk. Having prowled around newspapers for a very long time I decided I would have a shot at writing a piece where I put myself inside the mind of a newspaper chief executive confronted with the first signs of the digital revolution. I wanted to illuminate the attitude of mind that lay behind the decision to fold instead of fight. You’ll find it here: An easy call, a fatal mistake

Here’s another quick story to illustrate the hold of the status quo on newspaper companies everywhere. You’ll find it hard to believe, but look, not even I could make this up. It’s a salutary tale and it goes like this:

In the early 1900s, as soon as the circus arrived in town and the big top went up, the owner would go see the local newspaper proprietor and order a page of advertising for each night of the run. Typically, he would promise to pay out of proceeds before he left town. Usually he would honor the obligation, but occasionally an unscrupulous owner would pack up the monkeys and acrobats and elephants and midgets immediately the last show ended and light out of town without paying. He’d be 50 miles away before the publisher woke up the next morning. This drove local newspapers nuts.  A few publishers in downstate Illinois decided to fix the problem once and for all. They instituted a special promotional rate for out-of-town advertisers. It was set much higher than the price local advertisers had to pay, on the simple-minded notion that those that paid the higher rate would more than make up for those who got out of Dodge without paying the bill.  Before long “the circus rate” became known as “the foreign rate” and then “the national rate.” It spread through newspapers quickly and it made advertisers furious.

I’m a student of media, and I have in my files an old leather volume containing the minutes of a publishers meeting – from back in 1921. One James O’Shaughnessy, then executive secretary of the American Association of Advertising Agencies, was so annoyed about “the local-foreign rate differential” that he complained to the publishers present that “any inequity is hurtful to business…when a national advertiser is confronted with a double standard condition in newspaper rates, it disturbs his going.”

The publishers didn’t care.

Here’s the thing. That was back in 1921. But newspapers still don’t care.  Even today any national or big regional advertiser is forced to pay four or even five times as much as a local retailer for the very same print advertisement – same size, same design, same everything. The special national rate has always made newspapers prohibitively expensive for major advertisers, even, on occasion, more expensive than a network television buy. That explains why newspaper share of national and brand advertising has never amounted to a hill of beans. It wasn’t just the sales power of television imagery that confined newspapers to the advertising category of price and item promotional dollars. It was economics, the economics of the status quo.

There were several attempts by newspapers over the years to get together and lower the national rate to make them competitive with television, to simplify buying across the decentralized, fractionated, multi-market newspaper chains, to standardize display, particularly color display. The champions of those efforts were all brought down by internal vested interests unwilling to ding today’s return for a bet on a bigger return tomorrow.

What lies behind the legacy of the national rate? A culture that viewed change like a Temperance Lady regarding a saloon.

That opened up an opportunity for a guy by the name of Al Neuharth. He founded USA Today on the simple proposition that a new, nationally distributed newspaper would make print national advertising easy and economical to buy where before it had been complicated and expensive.

And that’s what always happens in the end, isn’t it? Blind subservience to the status quo always makes you vulnerable to new competition. Newspapers weren’t nailed by the Net. They committed mass suicide. There’s only one way to protect yourself from that vulnerability, and that’s to hire people committed  enough and smart enough to challenge “the way we do things around here.”  That’s precisely what our client wanted us to help with this year. He could see the threat, the threat of success.

So I know what I would do if, god forbid, I woke up tomorrow and found myself running a newspaper company – after I’d had a hefty scotch, that is. I would immediately embark on a course of turning over people. Without a set of different people with skills very different from the skills on which newspapering was based I know I could not build the highly-focused, highly-targeted media products users and advertisers are now seeking. Nor could I distribute them and sell them.

The tough and painful people step – that’s always the first step in the regeneration process.

I make this point without intending any disrespect for the people who continue to labor away for newspapers. I have one foot in the traditional media world and the other in the digital media world, and many colleagues in both. Lots of newspaper people are friends of long-standing and I know how hard many of them have fought to save their newspapers from themselves.But the brutal reality is that the challenge of digital media requires a completely different set of competencies than the ones found inside their companies.

As business circumstances change in response to evolving market forces, great pressure is placed on the existing financial formula. But there is usually very little room for adjustment. No business formula can be applied outside the competitive context for which it evolved. It must be jettisoned and replaced. But newspaper companies simply substituted “users” for “readers” in their formula and carried on happily replicating their print product on the Internet, trying to make the comforting principles of local news and monopoly pricing and broad reach work in the new world of targeted, databased, digital distribution. They simply substituted digits for trucks. The driving force of advertising efficiency may have changed the worlds of media and marketing forever, but it couldn’t change the way newspapers go to market. The status quo saw to that.

The overpowering tidal wave of advertising efficiency that has propelled Google and Facebook to worldwide dominance and splintered the entire media landscape left newspapers with only one realistic strategic alternative – the radical disaggregation of the print product. But newspaper people could not view the world in that way. So they stood by and watched as Autotrader.com destroyed their largest advertising category and LinkedIn grabbed their most profitable advertising category and Buzzfeed stole their news future. For a small few it was deliberate. They simply decided that a cold-hearted policy of cash extraction until their properties finally fell over was a better deal for shareholders than a risky course of transformation. But for most, it was the direct result of constricted vison.

And life for them can only get worse.

The world is moving fast from the desktop web, where folks come to you for a package of stuff like they used to come to a newspaper, to a world where their stuff is mediated by a set of icons on their mobile homescreens. Welcome to the era of distributed content, distributed value…and distributed revenue. It’s a tough world, the distributed, non-monopoly world. Users are busy re-imagining and re-assembling their own personal bundle of news and information, plucking content pieces out of the digital stream that flows by them every day. In other words, the pre-assembly of a big bundle of news and information is no longer the exclusive purview of a publisher or an editor. Those days are gone. Users do that on their own now.

That means your content has to stand out in the digital stream and that, in turn, mandates expertise in three things:

• The ability to generate  ideas, present them in an enticing way and deliver them precisely to the user for whom they are intended.

In the digital world, when creative ideas lead to products that users love, natural monopolies that generate enormous revenues are the result. Think Buzzfeed and Vox. Generating ideas is where the risk and real expense has always been in the media business. But in the digital media world, generating ideas and delivering them is much more complicated than ever before. For a start, there’s the unremitting pressure of time. As Bill Gates has said, “intellectual property has the shelf life of a banana.”

Media products based on the constant delivery of ideas  – not once a day or once an hour but constantly – ultimately depend on the ability to identify, attract and keep the most talented digital creators and distributors around. And of all the problems newspapers faced, most of them self-inflicted, I think one of the the biggest was that they never offered a refuge for digital talent like that. It went elsewhere, where it felt welcome. And newspapers turned inwards, to their own people, whose vaunted “experience” promptly blinkered competitive response and diminished competitive intensity. What a lesson that is.

It’s a big lesson because the value of general business experience is highly over-rated. There is a fundamental difference between experience and skills, between people who coast along and people committed to constantly learning. This is why so many studies have shown that length of time in a business or occupation is only weakly related to actual performance. In today’s disruptive world, people who had demonstrated a desire to learn new skills, particularly discontinuous new skills, offer more value than any internal candidate with years on the job.

The issue wasn’t just that newspaper newsrooms were old and threadbare. Even if they were. And it wasn’t just that newspapers didn’t allow anybody to bring their pet to work.  Pets should be banned from the workplace, are you nuts? No, extraordinary digital talent needs something else, something much more important, the very same thing I talked about at the start of this post. Talent like that is looking for a mission, a shot at something meaningful, a job where the appeal lies as much in boosting their sense of self-worth as their net worth. They are innovators. They cannot be stewards.

I’ve written about the distinction between innovators and stewards before. You’ll find that piece over on my LinkedIn page, at: Stewards and Innovators

Something meaningful? How about re-inventing the news business from top to bottom? How about starting over, taking the assets buried deep inside newspapers and re-inventing them for digital markets? .

That would be quite a mission. But engineers and developers and data scientists and content packagers and distribution analysts took one look at newspapers and quickly concluded there could never be real, sustained re-invention inside them. So, as the re-invention of news continues newspapers are left further and further behind, forced to rely on ten buck banners and Macy’s pre-print revenues – as Macy’s closes its retail stores.

We are hurtling through an extraordinary new era in news. It’s cable television and CNN, again. Television, and CBS. Radio, and NBC. This time the Millennials and Generation Z are up for grabs. Neither generation grew up with the newspaper habit, the race to win their loyalty and build highly valuable digital media franchises is still wide open. Grab just a tiny share of their time each day, and you too can build a billion dollar franchise. Buzzfeed has 36 seconds average time per user per day. It’s current valuation? North of $1.5 billion.

As always, it’s the quality of the talent inside a company that will determine who wins this battle.

“Tell me how online can pay for my newsroom,” Arthur Sulzberger Junior, chairman of the New York Times, used to ask everyone he met.

He doesn’t ask that question anymore. It can’t.

Only a very different kind of product could have done that.