Our world is filled with tops and bottoms. When you're on the bottom, your quest is to get to the top. When you're on top, your quest is to stay there, lest you fall, and we've known all our lives that gravity is an omnipresent, natural force that threatens to take us to the bottom. We're obsessed with tops and bottoms. We want to be top dog, because the view is incredible, but the way to get there is through the bottom line. Top is up, and that's good. Bottom is down, and that's bad. Without one, the other doesn't exist. Up, down, top, bottom. These are terms and concepts that we logically use to make sense of many aspects of life.
Our modernist minds are obsessed with measuring everything, because it gives us a sense of control. This is especially important in business, and the television industry is doing a lot of it these days.
Right now, television managers are looking for the bottom, because we're in a revenue free fall. The bottom is usually discovered by cutting costs, but the quest to discover the bottom has the whole industry distracted from what's really taking place. By instinct and training, managers believe that once they find the bottom, they can — sooner or later — manage their way back to profitability. This is a dangerous illusion these days, because all the rules have changed.
Television is desperate for revenue, but revenue isn't the problem. The problem is audience. Solve that problem and the revenue will follow, but we'll never solve that problem as long as our attention is focused on revenue. It's the business model itself that's flawed and under attack. We're not just in a business downturn.
Few industries have been ravaged by disruptive innovations like the home photography business. Polaroid is gone and Eastman Kodak is going through staggering changes, but now there's a light at the tunnel for them. The research firm IDC reported a few weeks ago that Kodak had taken the top spot in U.S. digital camera sales in 2004, a key achievement for the company's new efforts. Sales of point-and-shoot cameras were up 66%, placing it ahead of perennial winner Sony Corporation and prompting an in-depth report in Time Magazine called "Getting Kodak To Focus."
Kodak's biggest challenge was this: How could it generate sufficient profit from digital sales and cut costs fast enough to offset the precipitous decline of its primary source of profit? Kodak CEO Daniel Carp brought in Antonio Perez from Hewlett-Packard in 2003 and set about the task of fixing their very broken business.
"People think our challenge in becoming digital is that we don't understand the technology," says Perez. "They're absolutely, terribly wrong. We have technology coming out of our ears." What the company didn't have was focus.
Perez provided one, organizing the company around three areas and selling off divisions that split their focus.
"I guess, as a legacy from a very rich, very successful company, [Kodak's management] was sloppier than we wanted it to be," says Perez. "We were looking for accountability. We organized the company so it was very clear who was responsible for what." Perez also had to find the right people to — as Carp puts it — 'teach' Kodak about the brave new world it was entering. Many have come from outside — including seven of the 10 most recently appointed senior managers."
Pierre Schaeffer, director of business strategy for Kodak's digital and film imaging business, wants everybody to be aware that they're blazing new trails in the world of home photography. "We're involved in a really exciting transition," he said. "Regardless of the outcome — and hopefully, we're playing it for the best — the moments we're going through now will be making the textbooks."
Broadcasting needs to take a close look at those textbooks, because its focus is all wrong as the digital revolution similarly eats away at its foundation. Cutting costs, raising rates and stunting left and right to maintain a revenue picture that resembles what used to be won't work, because the problem isn't revenue; it's the audience, and this is where our focus needs to be.
Like the legacy companies of the photography industry, we're clinging to a method of doing business that's dragging us into a bottomless pit. We're wasting our time trying to right the ship, when what we really need to do is find another boat.
Here are just a few of the lessons we can learn from Kodak.
- We must break free from denial. This was Kodak's biggest problem as the digital revolution was building. Business denial is usually accompanied by arrogance, so a little humility would also help.
- Our legacy culture is strangling us. We need freedom and room to roam. We need to find an entrepreneurial spirit and create, not sit back in the comfort of a culture destined for the tombs.
- Ossified managers need to find other employment. We need energy and fresh air, not people stuck in rigidly conventional patterns of behavior, habits or beliefs.
- We must find the courage to go on a major diet. Our real competitors — those who are taking advantage of the low cost of entry into our space — are lean and mean, and we must get there too. Fat is killing us. Not only does it drag us down (to the bottom), it also keeps us from taking risks and moving quickly.
- We need to carefully define who our competitors really are. We're not just competing with other broadcasters; we've got a boatload of new kids on the block. Cable, DVRs, Web companies, bloggers, podcasters — these are our new competition. We own the video news niche in our markets today, but that's likely not to be the case tomorrow unless we move quickly. We must view anybody who occupies the local news, information and entertainment space as our competitors.
- We need to stop leaning on our brands. Kodak's brand didn't save it during their free fall, and ours won't either. The new world is all about consumer empowerment, not who can "manage" their brand best. People are quite hip to mass market manipulation these days. The age of promotion is giving away to the age of attraction, and brand means less than service in the new world.
- We need to break our addiction to high margins and the easy fixes they bring. It's going to take a lot of hard work, but the reward will be there. Instead of one stream of high margin revenue, we need to be thinking of multiple, smaller streams to make up the difference.
Regardless of how we do it, the starting point is the people in the communities we serve. What are their entertainment and information needs and how can we best fill them? The problem is not revenue. It's the audience. They're not coming back to the old way of doing things. In fact, they've been telling us that for years, but our search to find the bottom has turned a deaf ear to their pleadings.
The road to profitability means a new vision and a new skillset. "We're a television station" used to be top dog. But he's tired and weary now, and gravity is beginning to take over. The new top dog is something like "we're a multimedia company and we also have a television station." He's fresh and new and ready to go.
So let's forget about the bottom and get busy.