Healthy organisations, like organisms, need to evolve


An organisation or industry that fails to embrace evolution will ultimately have to endure revolution ... and revolution is far less desirable. It involves trauma, hardship, and casualties.

I will begin this blog with an apology to my international colleagues if the relevance of my subject matter/content is too specific to the United States. I have for many years envied the relatively progressive thinking evident among our European, Scandinavian, Australian, and Asian colleagues and wondered why so many trends in print and digital media first emerge abroad and then migrate stateside. I am sure there are many reasons I have not considered, but, having said that, I feel compelled to address the subject matter, especially in the context of our current (yet ongoing) crisis.

The scope of culture change required in the U.S. newspaper industry is so broad it almost defies comprehension. At its roots lie the mindset of an industry that for decades was actually legally barred from engaging in multi-media innovation, and yet for so many years was so financially successful that risk-taking and straying from the path that maximised margins was discouraged, if not punished.

At the advent of the golden age of television, the federal government barred newspapers from owning/operating TV or radio stations in the markets where they published. The evolution (or lack thereof) of the industry and its leadership since the 1950s was shaped by this government-imposed constraint, that we were in the newspaper not the media communications business. While multi-media companies developed ownership of TV, radio, cable, and magazine, as well as newspaper properties, these properties were operated in silos as separate industries. Newspaper management was just that — newspaper management — with limited, transferable, multi-media thinking, knowledge, or vision.

For decades, innovation in newspapers was centered around how to operate a better newspaper. In the late ’70s, an innovative, adaptive newspaper was distributing pre-prints to subscribers. In the ’80s, progressive newspaper leadership stretched its thinking as far as expanding distribution of pre-prints to non-subscriber households. Technological advances in production and business systems were significant but predominantly developed with newspaper-only applications in mind.

At a national marketing conference in the early ’90s, I referred to the phrase newspaper innovation as an oxymoron. My perspective at that time was shaped, in part, by the emergence of the Internet as a consumer medium. The Internet was encountering a decidedly lukewarm embrace by many U.S.newspaper executives. Here we were with the first major new media entry in half a century that the government didn’t tell us was “hands-off,” and we had to a large degree lost the capacity for innovative thinking. As an industry, our capacity for change, innovation, and evolution had endured such an extended, enforced dormancy that we were institutionally dysfunctional in this regard.

Fast forward to the current day, where the challenges we face are complicated by the current financial crisis and economic downturn. The events that have unfolded in the past decade have traumatised the American newspaper industry. The severe downturn in the economy depressed retail sales, auto sales, home sales, and employment, in turn causing a severe downturn in advertising expenditures. Add to that the migration of marketing dollars out of print and into digital and you can account for a significant portion of the 50% loss in ad revenues for the U.S. newspaper industry.

There are other factors impacting our revenue loss and our future prospects for success that have not been given their due consideration, although they are hardly unknown to those of us coping in the industry today:

  1. Debt/brand damage: The Wall Street investment market penchant for acquisition/expansion, financed by leveraging anticipated earnings, led to the recessions of 1991, 2001, and 2009. The retail, real estate, radio, and technology markets were most impacted in the 1991 and 2001 recessions. But the 2009 recession was incredibly damaging to newspapers. Our industry underwent an unprecedented spate of acquisition fueled by billions of dollars of borrowing prior to the 2008/2009 financial collapse.

    Some of the nation’s most widely respected and highest profile newspaper titles and chains were unable to sustain the impact of lost ad revenue because they were burdened with “mortgage” payments they could no longer afford. High profile bankruptcies at respected, even venerated major market properties severely damaged the brand of newspapers overall, painting the entire industry with the brush of anachronism. Newspapers aren’t dead yet, but that is the public perception, and our advertising clients are intent on minimising their dependency on us. I have written about the damaged brand in earlier blogs — but these much publicised bankruptcies are the primary culprit for it, and few people have recognised the negative impact the damaged brand has had on our prospects for sales retention or growth.

  2. Legacy obligations: Think of it as another form of debt or mortgage; the generous commitments to deferred obligations (pension and health care, long-term labour agreements) at many newspaper companies make it difficult to adapt to reduced revenues by shedding expenses. Commitments made in a better economic environment linger to burden the industry and make it difficult to fund innovation and change.

  3. Culture: Our industry struggles with long-tenured staff reluctant, if not resistant, to change. And many of the individuals who do recognise the need to change and adapt are in some cases not able to fully grasp the scope of change needed. As an industry we have deferred evolution for so long that now circumstances have forced us to endure revolution.

Well, no one has the crystal ball that points the way to the safe and secure destination, and I am no exception. But we all have our thoughts and perspective, and I will share a few of my own.

There is no safe and secure destination: The new status quo is change. The marketplace is changing rapidly, and our long- and short-term goals and strategies also need to be dynamic and change with the marketplace. Cutting-edge competencies five years ago are obsolete today. “Constant learning and constructive change” is the new mantra we should live by.

It is not all about us: For all our talk of being customer-centric, a close look at our business practices will reveal we still expect the customer to conform to our needs, policies, practices, and priorities. Even how we define our market is all about us. Our market definitions mean nothing to advertisers; we need to know how they define the marketplace — geographically, demographically, and psychographically.

Growing our audience is a good thing, but it will not automatically grow our advertising revenue: It is not just about how many homes, readers, visitors, or page views we deliver with our newspapers, apps, or Web sites. Our audience or distribution growth is no longer automatically monetised into increased sales revenue. Our advertising sales teams are being held to a higher standard; they are being asked to deliver quantifiable return on investment — results by whatever measure is of importance to the client. How many customers did you deliver to their retail or e-commerce stores? How many visitors, friends, or followers did you create for their business Web site, app, or social media pages?

In this new world, almost every client owns their own media: Our clients are pouring money into Web sites, social media applications, mobile apps, e-newsletters, and other CRM tools that are, in effect, client-owned and -operated media. And we are not for the most part competing for this spending. While we try to sell banner impressions and ads at low CPMs on our media sites and publications, other companies are thriving by providing our clients with the professional expertise to launch, manage, and maintain their own. When are we going to monetise our expertise? Multi-media newspaper companies have some of the best developers, designers, and audience strategists, but we haven’t recognised the potential here. There are far more dollars spent on Web site hosting and development, for instance, than on Internet advertising.

I could go on, but I have probably already exceeded the readers’ available time and/or interest, so I will wait for the next blog entry. I would be very interested in any thoughts or reactions to this post. Although my tone may have sounded pessimistic, consider it an attempt to explain how we, as an industry, got to where we are today. I am actually very optimistic and excited about the future and the metamorphosis of our business model. In fact, I have been called delusionally optimistic — but that is another blog altogether.

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