The times they are a-changing have changed

Steve Denning's newest bookHere are a couple of great lines from a Forbes article by Steve Denning, “Resolving The Identity Crisis Of American Capitalism:”

Once making money becomes the goal of a firm, companies and their executives start to do things that not only lose money for the firm but cause problems for the economy…

…Customer capitalism involves a shift (of) the focus of companies to delighting the customer and away from shareholder value, which is the result of delighting the customer.

The shift to customer capitalism doesn’t involve sacrifices for the shareholders, the organizations or the economy. That’s because customer capitalism is not just profitable: it’s hugely profitable.

The shift to customer capitalism does however require fundamental changes in management. The command-and-control management of hierarchical bureaucracy is inherently unable to delight anyone—it was never intended to. To delight customers, a radically different kind of management needs to be in place, with a different role for the managers, a different way of coördinating work, a different set of values and a different way of communicating.

The shift to customer capitalism also involves a major power shift within the organization. Instead of the company being dominated by traders and salesmen who can pump up the numbers and the accountants who can come up with cuts needed to make the quarterly targets, those who add genuine value to the customer have to re-occupy their rightful place.

What I love most about Denning’s approach is the use of the word “customer,” when many others would use the term “consumer.”

Burn this into your mind and into the minds of those around you: We have entered a new era. Period. It’s not on the horizon; we’re already there. Those who take a leadership position and beat their competitors to the punch are GUARANTEED the top spot in this new era’s business infrastructure. It’s all about the customer today. Making money is the end, not the means anymore. It has to be that way. The beancounters and manipulators are lesser players in the new status quo, because, as Steven Covey wrote many years ago, “You can’t talk your way out of something you behaved your way into.”

Umair Haque wrote in 2004 that in a networked world, the emphasis must be on the product, not marketing. Jay Rosen says basically the same thing in his brilliant thoughts about “The Great Horizontal” and “Audience Atomization Overcome.”

Dylan’s classic song noted that “The Times They Are A-Changin’,” but I’m much more inclined today to say that they’ve already changed. When the brightest business minds of the day — and I certainly include Steve Denning in that group (John Hagel, too) — shift their thinking from hard core making money to hard core customer service, it’s time to give up on an agenda that only defends the past.

This bubble stuff feels eerily familiar

Celebrating after the AOL Time Warner mergerI was sitting in a conference room at the hi-tech incubator BizTech in Huntsville, Alabama with hopeful eyes fixed on the TV. It was January 10, 2000, and on the screen was the press conference during which the AOL and Time Warner merger was announced. I remember it like it was yesterday. Here I was trying to raise a million dollars for my own start-up, ANSIR (A New Style In Relating), and these guys were talking about a merger valued at $350 billion. AOL itself was valued for the deal at $165 billion. It was then and remains the biggest merger in business history.

I remember the excitement and the wonder of it all. Little did we know it was all just part of a big market bubble, and I remember especially this provocative line from Time Warner CEO Gerald Levin, a very sane, important and knowledgeable businessman at the time.

I accept that something profound is happening in the Internet space; I believe that. The new media stock-market valuations are real — not in every case, of course. But what AOL has done is get first position in this new world. Its valuation is real, and I am attesting to that.”

Levin’s attestation would later be proven wrong, and he would be forced out as the merged company shriveled under the blended brand. It is now a case study in why what Levin said is a bad reason to take such an enormous gamble. Walt Disney built his empire with what he called “the plausible impossible,” and I suspect that was at work here. Logic is great, the old saying goes, unless you begin at the wrong spot. Believing the valuations was what grew the bubble. Turns out that if it seems unbelievable, it probably is.

I’m recalling this today, because I’m feeling the same vibe as Facebook is about to approach Wall Street with an IPO valued at $100 billion, a valuation that’s roughly 100 times its earnings from last year. It sounds and feels oh so familiar.

So are we in a bubble? The always astute Mathew Ingram has a nice overview of the subject today that’s worth a read, although his conclusion tends to support those who feel we’re not.

So while some venture funds may be doing their best to inflate expectations and cash in on high valuations, that appears to be causing problems only at the small end of the startup pool — for now. Without any obvious signs of a public-stock mania that puts individual shareholders at risk, it’s hard to argue that we are in a 1990s-style bubble yet (although some critics fear that the new crowdfunding bill could accelerate the problem). Whether Facebook’s IPO triggers a broader inflationary atmosphere remains to be seen.

Dave Winer says we’re “definitely” in a bubble, and I believe him. I mean, look at the evidence. AOL’s model was based on a pre-Internet business model, one we know of as mass marketing. They could make tons of money, if they could just keep people inside their walls, a “walled garden” as many would later call it. When the fickle public disagreed, a new garden called MySpace sprang up. This social network could make money the same way, and for awhile, things looked good, until a young guy named Mark Zuckerberg took over with his Facebook. So here we are again, and the whole thing still hinges on the same value proposition, that Facebook can somehow keep those people within its walls. Old school media value, after all, is about controlling the infrastructure for content, whether its made by the New York Times, Zuckerberg or Joe Blow.

And for the last few weeks, we’ve been treated to justification and rationalization that Facebook is somehow different than its predecessors. The company paid a billion dollars for Instagram in what most (myself included) feel was an overpriced grab at real estate Facebook needed to be inside its wall instead of outside. But is Facebook substantially different that previous walled-garden approaches? Get real. It may have a few more bells and whistles and connections, but the core competency is the same. Web research and consulting firm BIA/Kelsey is hosting a webinar on the topic this week to probe this specific issue:

…questions continue to swirl about its (Facebook’s) actual worth and whether any company can justify becoming public at such a high value. The prevailing question: How will Facebook support this valuation…?

I don’t believe it can be justified, although lots of smart people who’ve doubtless done their homework will try to explain that it is entirely justified.

I’m sure Mr. Levin had done his homework when he made that infamous statement back in January of 2000, but at some point in a gamble, you must consider that you could be wrong, partly or as the AOL Time Warner deal proved, utterly and completely. So in addition to homework, what say we also consider common sense. We could also ask a few teenagers.

Everybody’s switching to Twitter,” a 17-year old family member told me. She used to be a pretty regular user of social media, but her activity has been shrinking for the last year or so. She doesn’t need Facebook anymore, and besides, “it’s pretty lame.” Think about that for a minute. It’s AOL all over again.

To everything is a season,” we’re taught. I wouldn’t bet on Facebook’s future if you gave me the money with which to do it.

An open letter to newsroom employees everywhere

The business of media has been a part of my life for over 41 years. I care deeply about it and especially the people who are in it for reasons of journalism. It is to you that this open letter is addressed:

    To Whom It May Concern:

The time to prepare for the collapse of the institution that employs you is at hand, and I thought it would be useful to lay out a scenario in which you come out on top when it happens. You may think I’m nuts or overly negative or a doomsayer or whatever, and that’s all right. I claim no special vision of tomorrow; I only follow the bigger trends as they relate to culture and our profession, and frankly, there’s just not a place for specialist newsrooms that pay living wages in the world into which we’re heading. You don’t have to believe that for it to be true, but it would be wise to at least consider the road ahead.

Most media companies are publicly-owned. In such cases, management has a fiduciary responsibility to the company’s shareholders. This is as old as the stock market, but a sweet return on investment for those shareholders is getting harder and harder to provide. That’s because it isn’t about revenue with these companies; it’s about growth, and in a fragmenting, disintermediated marketplace, the lack of growth is a real killer. Privately-held companies can absorb stymied growth somewhat better, but even the people who own these companies would like to see their compensation growing instead of shrinking. There are only two ways to produce growth: either increase revenue or reduce expenses, and these two challenges are not going away. Ask anybody who’s been in media management for very long, and they’ll tell you the growth is gone. Political advertising produces gold every other year, but there’s no guarantee this will continue and it’s a poor model to begin with.

Don’t get me wrong. There’s still a TON of money being made in the media world, but the industry has matured and the ROIs just aren’t what they used to be. There’s no sign either that things will ever be what they once were.

This reality exists in the background, as we go about our daily lives holding our collective breath. The TV upfront season is upon us, and there’ll be increases announced. The illusion will be that everything is fine. The NAB conference in Las Vegas next month will be filled with positive statements and sessions about how to capitalize on this innovation or that one. The NAA’s mediaXchange conference in Washington, D.C. next month promises that “media thought leaders” will “provoke and inspire attendees.” But managers in the industries of media know well that these are challenging times, and that the background threatens to become the foreground with each passing day.

So how does this impact you, and what should you be doing about it?

If you haven’t already done so, now is the time to begin building and refining your personal brand. The good thing about this is that you’re in charge, so you get to pick and choose how and how much you are promoted in the world of personal media. It’s not necessarily the size of the fish in the pond that will succeed tomorrow, although that’s always a nice advantage. What will be important is your niche and how valuable you are within that niche. This will produce value to the people who will want exclusive or first crack at the content you’ll create, regardless of the financial structure available. If aggregation and curation are the filters for media consumption downstream (they are), your place in the queue matters much more than which corporate brand you represent. You control this through the quality of your work and attending to the marketing of yourself. You can’t blame anybody else for success or failure here.

For lots of excellent and practical advice on personal branding, I highly recommend tuning in to The Personal Branding Blog. It’s a wonderful resource for the hows and what-to-dos of personal branding. Spending a few hours here will shortcut your learning.

This is incredibly important for you, because, like it or not, we’re moving to a scenario where you very likely won’t be employed directly by a media company. You’ll work as an independent contractor and sell your work in a variety of ways. It’s simply more cost effective for media companies to hire independent contractors than it is to carry the burdensome costs of employees, but that’s not the only reason you should be thinking this way. Telecommuting is one of the big trends in employment in 2012, and people who play in this world really, really like it. You — the currently employed — will be able to live a happy and successful life outside the bonds (that’s right) of employment. Absent the old, colonialist practice of “owning the help” through a paycheck and benefits, you’ll do better, more important work, because you’re doing it for yourself. You’ll enjoy working from your home. You’ll enjoy the growing tax benefits of the independence, and I’m convinced that insurance companies will happily create umbrella options that will work better for everybody. The whole world is drifting in this direction, and the benefits vastly outweigh the negatives, the chief of which is simply fear. Fear is tissue paper disguised as a brick wall. Never forget that.

Don’t get caught up in the details, because they can and will all be worked out. Don’t judge tomorrow’s opportunities by today’s seeming reality. Even if I’m wrong (I’m not), you can still benefit from the advice to hone your personal brand. Remember that in the world of work, the only person who really cares about you is you. Technology has given you the opportunity to better yourself through personal branding, and I strongly recommend you get busy. Don’t fall for the illusion that you just need to hang on for a few more years and everything will work itself out.

  • Internally insist that you do nothing for pay that doesn’t directly or indirectly promote you and your brand. Nothing. Don’t be a fool here and get yourself into hot water over this, so let it be an internal driver only. Don’t worry; you’ll find ways to accommodate your mandate. It simply needs to be top-of-mind.
  • Pick a niche, something for which you have a deep passion, because passion can literally take over when everything else fails.
  • The days of a mile wide and an inch deep are over. You must become a/the valued expert in the information niche of your choosing.
  • Deliver the goods. Be the best you can be at news and information (or whatever) for that beat. Let no one best you. You’ll establish yourself through your work, not what you say about your work. Spend the hours up front that it’ll take to relentlessly pursue the promotion of you, your work, and your brand, but above all, be known by and for your work.
  • Get off the market-hopping merry-go-round. Seriously. Put down roots somewhere you want to live, and start living! Roots are an enormous asset even today, but tomorrow their value will be incalculable. A part of owning your niche is geographic, for parochial attitudes and beliefs govern many issues.

Blossom where you’re planted, and Life will show you the rest. Knowing that your brand’s value will increase over time, plan accordingly. But do plan! Take a really hard look at what you want and what you need. If your needed level of compensation is above what the market will pay (be realistic here), give serious consideration to doing something else, but also weigh that against the possibilities you have as an independent contractor. Is your niche such that you can find additional compensation elsewhere? Take your time with this, for your future is at stake.

I believe that a Great Winnowing is at hand, when those who’ve chosen journalism as a way to make a difference are separated from those who view it as a channel to be a big shot. Humility is a wonderful human attribute, but one that’s increasingly absent in the people who’ve chosen this career path. This winnowing will relieve us of many of the ego-driven personalities found in those who are using their employers to see their names in lights. Again, it’s your work, not you, that matters in a meritocracy. Embrace that or find a different way to make a living. You will not get paid in media just by showing up, not in any capacity.

Be smart and begin to disassociate yourself with the industrial age concepts associated with modernity. Don’t put yourself in a position where you function as a virtual slave to the one who signs your paycheck. Put your dependence where it belongs and move it away from your “employer.” You want to be self-reliant? You can do it, and there’s no time like now to get started.

And to the managers who work in newsrooms, it’s in the best interests of your company to assist in promoting the personal brands of your employees. You know and understand the marketing value of the mass. You know that it works. You also know that there’s a commensurate value that comes back to you in promoting the people who work under your brand. Moreover, your reputation as one who advances the personal brands of those who work for you will get around. Don’t you want the top of the class working for you? Don’t you want the real experts in the community working for you? Don’t you want those people free to grow their own followers beyond the reach of your signal or your circulation? Of course you do, so do what you can to puff your own, for it’s the smart — although initially counterintuitive — business path to tomorrow.

Understand that there are personal brands with “media” minds already growing in your community, and that some of them (even one) might provide very useful content as an independent contractor already. Begin looking at systems and compensation programs that will benefit everyone.

Also to the managers, begin studying and examining the processes and systems you’ll need to create a genuinely virtual newsroom. Embedding journalists in the community makes much more sense today, because the need to work from a centralized location is increasingly unnecessary. The cloud is the center today. More time in the field produces results, from both quantity and quality perspectives. Time is, after all, the new currency.

To managers in sales departments everywhere, personal branding applies profoundly to you and your team as well, and the same rules, responsibilities and opportunities that exist for news people are also there for sales people. People buy from people, and the net provides a unique connective thread that we didn’t have just a few years ago. We’re seeing some areas where car sales people, for example, are buying ads at the hyperlocal level in order to raise their profiles in the community. We should be doing the same things — and more — with and for our people.

When is all of this going down? Gradually, at first, perhaps in the next 3–4 years. Unless something positive and dramatic happens with the economy, 2013 is going to be an absolutely brutal year for the industry (again), and all of this will accelerate. Don’t wait for somebody else to do it; YOU do it, regardless of your position within the whole.

Again, you don’t have to believe any of this, but my money’s on the folks who take advantage of what’s at their fingertips in building for themselves a better chance when the winnowing accelerates. Others will sit back and wait for more obvious signs that they’ll have to do something. By then, however, it’ll be too late. Nobody can rest on their laurels. Nobody.

Please accept this in the spirit with which it’s intended, and good luck.

Terry

   

 

Occupy is our Babel

I would have tweeted this, but it’s too long. The Occupy Movement reminds me of this verse from Genesis 11 and the story of the Tower of Babel. Theologians have used it for centuries to help children understand why we speak different languages, but the word “language” has many meanings, including any manner of expressing thoughts.

God is the speaker:

Look!” he said. “The people are united, and they all speak the same language. After this, nothing they set out to do will be impossible for them!

Come, let’s go down and confuse the people with different languages. Then they won’t be able to understand each other.”

Fast forward to today, and substitute the status quo for “God.”

Now you have an idea of what lies ahead.

While we’re at it, I might as well ask where “the church” is in all of this? Do they come down on the side of the people or the institutions?

The answer might surprise us, but not really.

Let’s blow this thing up (and start over)

Let's blow up the economyThe economy is making rumbling noises again. Its engine is sputtering, and that has lots of folks nervous (again). What’s happened to our recovery? Umair Haque (“The New Capitalist Manifesto”) argues that it’s not a recovery, because we’ve not been in a recession. He believes that we’re in the beginning of a great “resetting” of the economy. The new version of capitalism, he writes, will run on different rules. I certainly hope so, because the one we have has always been perplexing to me.

Let’s begin with my admission that I’m not an economist, which is probably why I ask these kinds of questions anyway. As George Carlin used to say, “These are the kinds of questions that kept me out of the good schools,” the implication being they were too obvious. So here’s one for today:

What person truly believes that economic growth can be sustained in perpetuity?

I’m serious, for this is the basis of the economy of the West. Making money or earning money isn’t the foundation of capitalism; it’s that such a capacity must be growing, at least in the wealth capital of Wall Street. After all, expenses increase, therefore earnings must increase. Gosh, it just seems to make such sense.

But I look around and ask, “Does anything grow forever?” The answer is no. You might make the case that deserts are always expanding, but we could stop that if we wanted. Besides, a desert is a form of death, not Life, and Life is in a constant state of renewal. To everything is a season. Everything. The biggest and oldest trees of the forest eventually fall victim to age, and when they go, their progeny assumes their former role, and, in death, they provide sustenance for many different forms of Life. Henry Adams wrote in The Education of Henry Adams, “The law of nature is change (chaos), while the dream of man is order.” He added that “Chaos often breeds life when order breeds habit.”

Certainly, the dream of our economy is order, but it competes with the law of nature. I wonder which will win?

The problem is that human beings run the “order” side of things, and we’re all in it for ourselves. Why else, for example, would “God’s law” for the economy — profit for 49 years, but then everything gets reset in a “Year of Jubilee” — not be followed by a culture that claims roots in that very thing? We don’t, because that would mean letting go of everything every 50 years, as if anybody would actually have to go through that twice. We like the “teach us to profit” promises of the Book, but we don’t go along with the resetting. Why? Don’t be an idiot, Terry.

In 1923, Russian economist Nikolai Kondratiev published his theory of cycles or “waves” in the economy of the West. He’s a fascinating character in the history of Russia and the Soviet Union, and his theories are largely unaccepted by Western economists. His research, however, revealed that these waves were each roughly 50 years of prosperity, followed by a depression. I’ve always felt this a remarkable coincidence, and again, the idea that buying and selling is beyond our control flies in the face of contemporary intellectual thinking. I would remind us, however, that such thinking is ultimately self-serving.

So I look at what’s taking place today and wonder why anybody honestly thinks perpetual economic growth stands a chance. The human beings whose greed and avarice are rewarded through controlling this monstrosity are the least likely candidates for such a position, yet the political and economic power they wield keeps everybody else beneath the crushing weight of their boots. These are the first people to scream for their “rights” and liberties to do as they please, while we must suffer the consequences — unintended or otherwise — of their actions. We bailed them out, didn’t we? One thing’s for certain: they will not suffer, not one bit.

As John Milton wrote, “License they mean when they cry liberty, for those who love that must first be wise and good.” That slogan was used in the fight against slavery, and it should be our clarion call for the 21st Century economy. “Wise and good” are not attributes I’d give to the upper echelon economic status quo.

I’m with Umair Haque. Let’s blow this thing apart and start over.

Television is back (or not)!

happy days are here again!2010 was a great year for the television industry, so much so that the doom and gloom of recent years is being replaced by a cautious optimism. Media Post’s Wayne Friedman’s report last week on New York-based media investment/adviser M.C. Alcamo & Company’s clients actually shows profit margin increases of 10 points. TEN points!

These results near the 50% or greater gains that virtually all TV station groups had garnered decades ago. Some, like Sinclair Broadcast Group and Meredith Corp., got to this magical mark, posting the quarter’s highest profit margins of 51% for all TV companies.

For the 15 broadcasting companies it covers, M.C. Alcamo says revenues rose 27.1% to $371.8 million — in part helped by the turnaround from major ad categories such as automotive marketers, as well as a surging political ad market.

The best performers: Fisher Communications grew 49% in revenue to $18.9 million; Gray Television added on 47.8% to $37.1 million.

These companies have all gone through painful restructurings during the last few years, which contributed to the profit margin gains and begs the question “what will they do with all that extra cash?” It all depends on how you view the future. Remember, public companies exist to share profits with investors, but the question still applies. Michael Alcamo told Mediapost that there are three possibilities:

…many broadcasters will continue to pay down outstanding debt…many will set aside these big cash reserves for strategic investments. Third, stations will look to upgrade station infrastructure, such as HD technology.

While companies must do what companies must do, we strongly recommend strategy #2: set aside cash reserves for strategic investments, and let those investments be in people and technology for new media, especially in the area of sales.

These wonderful numbers may suggest to some that local television is back. Automotive is certainly going strong, and there’s going to be early political money for some, because 2012 will be so huge. But there are still tremendous weaknesses in the economy and despite glowing projections for this summer’s upfront marketplace, at some point advertisers are simply going to lose interest in higher CPMs to cover shrinking audiences.

On the economy, take a look at the below graph, for it points to a major concern. It comes from a Bloomberg article entitled, “U.S. Job Rebound Misses Those Looking Longest” and shows that the number of people out of work more than six months is going down much more slowly that those unemployed less than six months.

While the jobless rate dropped for the fourth consecutive month in March, the number of people going more than six months without work rose to 6.12 million. That’s more than four times the average since 1970, the period covered in the chart.

unemployed more than six months compared to those unemployed less

The continued weakness in the economy is another reason why broadcast companies shouldn’t spend those cash reserves as if television is back. The road ahead is both uncertain and rocky, so let’s proceed optimistically but cautiously.