Changes in how we have to manage for innovation in a disruptive marketplace

1. 1
Howdy
I’m really
thrilled you
could make it!
Creating context for
organizational changes
in a rapidly changing media
marketplace.
For AAN 2007
Presented by
Terry Garrett
1

2. 2
Today’s agenda
Innovation
Systematic process
Reinventing your
organization
“Wow! You know that’s a
really good word. I’m
probably not the first
person to use that term,
but I’m sure (and Dwight
can back me up on this)
I’m sure I’ve used it more
than any person on Earth.”
2

3. POV
3
Global Local
3

4. Objective Reality 4
Global
1. Media Ecosystem: advertising sales proportion
2. Historical Perspective:
fluctuating status of media and innovations
3. Social & Political Changes
Two of the most important
factors effecting media.
4. Demographic Changes
4

5. Media Ecosystem 5
2005 Ad Sales (U.S.)
Business papers
$4 B
Magazine
Other
$12B
Direct Mail
Print
Alt-weeklies
$55B
$35B
$550M
Internet
$12.5B
Daily
Newspapers TV
$49B $68B
Radio
Yellow $20B
Outdoor
Pages
$6B
$14B
5

6. Rise of Newspapers and Magazines tied 6
to a new socio-political reality 1873—1968.
Socio-political changes: Government as the progressive
cause controlling the economy and direction of society.
Why Industrialization advancing on a major scale: mechanization of production
processes, the rise of the city, vast expansion of communication facilities,
the age of steel, harnessing electricity for light and power, invention of
‘invention’, population doubled and new business growth exploded.
1873 1968
Explosive growth
1870 1900
period
1,967
# of Dailies 489
15 M
Circulation 2.5 M
12,000
# of Weeklies 4,000
6

7. Rise of Newspapers and Magazines tied 7
to a new socio-political reality 1873—1968.
Socio-political changes: Government as the progressive
cause controlling the economy and direction of society.
Why Industrialization advancing on a major scale: mechanization of production
processes, the rise of the city, vast expansion of communication facilities,
the age of steel, harnessing electricity for light and power, invention of
‘invention’, population doubled and new business growth exploded.
1873 1968
Explosive growth
1870 1900
period
1,967
# of Dailies 489
15 M
Circulation 2.5 M
12,000
# of Weeklies 4,000
7

8. 19th Century Print Innovations 8
Other innovations added mightily to
James Gordon Bennett founded accelerate the financial viability of
the New York Herald (1835) on periodical publishing:
the premise that a newspaper
had to: High-speed typesetting
1) have enough income to be Stereotyped plates and webs replacing
editorially independent and type-revolving presses
2) cheap enough to reach mass Use of half-tone photographs
circulation. JGB, Jr.
Color presses
He used the tech knowledge-
Innovations
bases of the the telegraph and Chemically produced wood pulp, which
high-speed printing. lowered the price of newsprint from
$440 per ton to $42.
He also relied upon the rise of
mass literacy, which supported Improved labor relations and localization
the notion of mass circulation. of conciliation and arbitration
procedures.
8

9. Contrast scale of newspaper economic 9
power from 1890 to 2005
Created
Joseph Pulitzer’s
advertising to
New York World a mass
Innovation
1890 audience.
Net income
$1M
Adjusted to 2005 Dollars Created bid pricing and
$822M self-admin advertising to
a targeted audience.
Google
NY Times Group
2005
2005
Net Income
Net Income
$1.46B
$253M
2004 $399M
9

10. 10
The Socio-political Divide of 1973
“The period 1968—73 is a divide fully
comparable to 1873. Whereas 1873 marked
the end of laissez-faire, 1973 marked the end
of an era in which government was the
“progressive” cause, the instrument
embodying the principles of the
Enlightenment.”
Peter Drucker 1989
10

11. 11
Ch-ch-ch-changes
Socio-political Demographic
Civil Rights movement Baby Boomers
Economic upheaval Segmented database
(oil shock, floated dollar) marketing
Women’s Rights movement
Environment movement
Shift to non-conformity
11

12. 12
Print media has been losing relative economic status
for 50 years.
Electronic media has gained significantly.
1955 1980 2005 $161 B
$100 B
$75 B
$50 B
Web ’06
$17B
$25 B
Ad sales
target to
maintain
relative share $10 B
of GDP, or
economic
power status
relative to
1955 level. N M TV R Tot N M TV R Tot N M TV R Tot
Newspaper — N • Magazines — M • TV — TV • Radio — R • Total — Tot
12

13. 13
“Innovation is the specific tool of entrepreneurs, the means by
which they exploit change as an opportunity for a dierent business
or a dierent service. It is capable of being presented as a
discipline, capable of being learned, capable of being practiced.”
Peter Drucker 1985
Focus on creating systematic innovation
within your company.
As a means of survival in disruptive times.
For future prosperity.
13

14. 14
Innovative perspective...
Half empty?
Half full?
Is there a third POV?
14

15. An efficiency expert 15
might say,
The container is too big for the contents.
15

16. 16
What Innovation Isn’t
Rarely, is it ever...
Reliance upon the “flash of genius”
Being kissed by the muses
16

17. Innovation Do’s
17
Analysis of opportunities
organized and performed on a
Aim at leadership
systematic basis.
doesn’t have to be a big
business, but does need to strive
Conceptual perceptual to be a leader.
must satisfy the values and needs
of users.
Start small
capable of consuming little
Simplicity investment, few people, serve a
small or limited market.
Focused, singular objective that it
satisfies a need, produces a
result.
17

18. Druckerisms 18
There is no such thing as
a resource until Black gold, Texas tea
someone finds a use for
something and endows it
with economic value.
Innovation changes the yield of resources.
Defined in demand terms instead of supply,
i.e. changing the value and satisfaction
obtained from resources by a consumer.
18

19. 19
If necessity is the
Mother of innovation,
then who’s your Daddy?
19

20. Areas of Management Concentration: 20
Strategic
Development
Technology
Sales Organization
Culture
Marketing Project
Management
Financial
Performance
20

21. Organization Culture 21
Three Structures for getting things done
Responsible
Hierarchy Heterarchy
Autonomy
The one most Dispersed rule,
No external rule;
commonly used. balance of
complete autonomy.
Top down, powers. Relies
Specific objectives
command and on cooperative
for outcomes
control in principles instead
monitored for
pyramid of bosses of absolute
performance.
and staff. authority.
21

22. 22
Organization Culture
Most companies
Company A Company B
blend structures
80% 60%
Hierarchy
20% 30%
Heterarchy
Responsible
0% 10%
Autonomy
22

23. Management By Responsibility Matrix 23
7 Dimensions
Basic Performance Leader-
Use of Goal Conflict
Management Delegation Evaluation ship
Power Setting Resolution
Philosophy Methods Style
Responsible
Achievement
5 levels
Conformist
Self-
protective
Unconscious
23

24. Lower Levels 24
Basic
of functioning
Management Use of Power Goal setting Delegation
dimensions of
Philosophy
management
Conformist View of staff (VOS): Seldom delegates
Aversion - power Let the staff do it.
weak, need to be effectively.
seen as domination. Permissive - feels
protected. Unable to assign
Low need, unwilling staff won’t like
People concerns realistic priorities
to use power. them if they push.
emphasized. meaningful tasks.
Viewed as indecisive Low to moderate
MO: Maintenance of Creates staff wanting
inconsistent commitment.
status quo. to be “rescued”.
Sets goals for
Delegates only
VOS: incompetent, Domination power staff not with
functions they
lazy. used to control them.
dislike.
Productivity and High need - used for Feels that to let
Creativity and
Self-protective people concerns authority to demand staff be involved
decision making
mutually exclusive. obedience. is a sign of
discouraged.
MO: Coercion Viewed as dictator, weakness.
Creates fear of
force ruthless. Low commitment,
making mistakes.
sabotage.
VOS: powerless Powerlessness -
Avoids goal Doesn’t delegate;
trapped. power is avoided.
setting. staff should know
Productivity people Low need, perceives
Will rely on what to do.
Unconscious concerns self as weak
precedent and Non-participative.
unimportant. ineffective.
policy. Creates non-
MO: withdrawal Viewed as
No commitment. productivity.
non-involvement. incompetent.
24

25. Lower Levels of 25
functioning Performance
Conflict Resolution Leadership Style
dimensions of Evaluation Methods
management
Conformist Provides little direction for
Accommodating (yield/lose)
Infrequent others.
Relationship - primary
Used to build morale. Acts as support person to
importance
Positive; cliche ridden. provide social and
Conflict viewed as destructive
Negative - -avoided- staff technical needs.
of relationships.
viewed as fragile. Self-viewed: morale
Hesitant, timid approach.
booster and provider.
Competing (win/lose) Expects strict and rapid
Infrequent
Personal goals - primary compliance with orders.
Used to display authority.
importance. Insist on close, constant
Self-protective Positive - seldom given.
Social survival at stake; to lose supervision.
Negative is punitive and to
means weakness. Self view: strong and
determine fault and blame.
Aggressive dogmatic approach. dominant.
Non-existent Avoidance of any contact.
Avoiding (lose/leave)
Avoidance of all feedback. If necessary, resorts to
Hopelessness; no win, total
If forced by organization will policy or refers to
Unconscious avoidance.
have staff make out their superiors.
Withdrawn and detached
own or prefer adjective Self-view: weak, my
approach.
checklists. hands are tied.
25

26. 26
Higher Levels
Basic
of functioning
Management Use of Power Goal setting Delegation
dimensions of
Philosophy
management
VOS: productive and Delegates maximum
Inclusion of staff
creative. Altruistic - used for authority functions,
in goal setting
Productivity and common good. priorities with staff.
process.
people concerns High need to have Aware of staff
Promotes
Responsible integrated. impact and be capabilities and
creativity in
MO: involvement influential. motivations.
objective setting.
with staff through Viewed as fair, just Creates teamwork,
High level of
delegation and and strong. harmony and
commitment.
participation. accountability.
Achievement
VOS: moderately
Personal Doesn’t delegate
productive, but need
aggrandizement - Sales specifics.
for manipulation.
used for personal consultative Last minute
Productivity
gain. approach - “sells” delegation, changing
concerns
High need - to build staff on goals. priorities, improper
emphasized.
empires. Moderate to high planning.
MO: management
Viewed as level of Creates urgency,
by crisis; inadequate
exploitative and commitment. frustration and
planning and
aggressive. confusion.
delegation.
26

27. 27
Higher Levels of
functioning Performance Evaluation
Conflict Resolution Leadership Style
dimensions of Methods
management
Frequent, regular basis.
Leader views self as
Synergistic: win/win Used as learning
team member.
If relationship is to last, all experiences.
Encourages others to
Responsible goals must be met. Positive-realistic, genuine
contribute.
Candid, creative, problem- feedback.
Self view: a contributor
solving approach. Negative-constructive,
of special resources.
candid.
Achievement
Frequent, though based on
Maintains open door
Compromising: win some/ positive or negative
policy.
lose some performance.
Management by
Attempts to soften losing by Used to increase
exception, fire-fighting
limiting the gains. performance.
when necessary.
Persuasive, manipulative Negative: based on
Self view: flexible and
approach. productivity failures, due
adaptable.
dates, etc.
27

28. Culture Determines How You’ll Proceed 28
with Strategic Development
Arrives at Develops and
Objectives Implements
Top management Key performance
mandates goals and expectations handed
Hierarchal
objectives. down, implementation
Achievement-oriented
tightly controlled from
“Sells” it to staff. top.
Team approach, key
Group conference
performance
establishes goals and
distributed, authority
Hierarchy/Heterarchy objectives.
levels assigned,
Responsible
group and individual
Staff buy-in by virtue of
responsibility
participation.
balanced.
28

29. 29
Important Questions to Ask
1.What results are needed?
2.Where within our own system do we do this
already?
3.If not within our company, where within our
industry is someone doing this?
4.How do they do it? Can we replicate it?
5.What does management do that supports you
getting results?
6.What does management do that hampers getting
results?
29

30. 30
Preparation for Strategic Development
Historical Perspective
Where have we been, what have we
accomplished?
Where are we now? Where can we
improve?
Benefits
Establishes congruent story among
all staff members; provides
understanding especially for newer
staff.
30

31. 31
Preparation for Strategic Development
Mission, Values, Major Objectives
Where do we need to be next year?
In 2 - 3 years?
Key performance indicators identified:
Financial, marketing, etc.
Quality of life issues
Benefits
Establishes same page starting point
and defines scope of plan.
31

32. 32
Two-sided Market
Content
Supply Demand
Advertiser Media Audience
Demand Supply
Attention
32

33. Long Tail of the Web 33
Aggregators/Portals Long Tail
100 Google, Yahoo, MSN
80
60 Head
40
Top news sites
20
Millions of sites
0
Long Tail
Aggregators attract huge volumes
of attention and broker ads to
reach subsets of audience with
price variables unique to each
subset. Their reach is from the
head through the long tail.
33

34. Seeing Opportunity 34
Brainstorming Ideas
What do they What are our
Who are they?
need/want? ideas?
? ? ?
Customers
Non-
? ? ?
customers
“Marketing starts with all customers in the market rather than with our customers.”
“The first aim of any business is to create a customer.”
34

35. Prepare Ideas for Implementation 35
Identify assumptions and risks
Quick financial parameters
Identify resources needed
Finances
Personnel
Processes
Technology
Space/place, tools
Prioritize best ideas
35

36. Example of a Web 36
Business Directory Idea
Idea:
Create a web business directory to
mirror an annual print directory
}
source guide with 1,400 listings.
Critical assumptions:
• Advertisers would pay to be online Research,
survey, assess
in addition to print; some may opt
risks, i.e. what
for print or web only.
happens if this
• Sales reps would sell it. assumption is
• Consumers would use it. false? Can it be
• It would be cash flow positive within corrected or
converted to
6 months
true?
36

37. Quick Financial Resource View 37
Calculation for Salary Wages
Salaries Staff per week
$ 3,850
% of 40 hr. wk dedicated to
selling product
10%
Costs
Time
Leads
37

38. Quick Financial View 38
Breakeven Analysis—Directory Model # Sold Ads
Monthly Revenue
Months
Monthly Cost
600 $7,000
Monthly Net
1 2 3 4 5 6 7 8 9 10 11 12
$6,000
500
$5,000
437
401
$4,000
365
400
327 $3,000
Ads Sold
289
300 $2,000
250
211 $1,000
170
200
$0
129
87 -$1,000
100
44
-$2,000
0
0 -$3,000
38

39. 39
Financial Statements
The 3 Bottom Lines
Dollar figure that shows whether or not
Net Profit your sales are greater than your
expenses.
Operating Cash Flow Dollar figure that shows whether or not
OCF you’re converting your profits into cash.
Return on Assets Ratio that tells whether or not you’re
ROA optimizing the value of your resources.
39

40. Flat sales, declining profits and operating cash flow.
40
40

41. 41
Mobley Matrix
41

42. Key Performance Indicators 42
KPI
KPIs are only
meaningful when they
are connected to
your triple bottom
Standard KPIs
line.
Average page yield (tot.) Average page yield (ads)
AND Sales per 1000 circulation Net profit per employee
Sales per page per 1000 circ Production costs per page
When everyone Sales per employee (tot.) Print costs per page
knows what they Sales per employee (sales) GA expense per employee
mean and how to Sales per category Distribution costs per 1000
effect them positively. Number of ads per issue Editorial costs per page
42

43. Financial Literacy 43
Income
statement Owners/
Management
Balance sheet publishers/ Staff
Team
Cash statement CFO
KPIs
See regularly
? ? ?
discuss financials
and performance
Understand
? ? ?
interpret financials
with strategic obj.
Project financials
to plan future
? ? ?
performance
metrics
43

44. Sales and Marketing 44
Aligning with Local Interests
Resource Coordination
BALLE/Media Model
for Collaboration
Coordinate for Start-
BALLE up of local network Media
Executive
Staff Company
SF
Co-create Co-create
Local
BALLE
Recruit members for
Recruit members Network
start up from existing
through promotion
ad customers.
network volunteers.
M M M M M M M
M M M M M M M M
44

45. Sales Marketing Follows Strategic Plan 45
With the new Implementing
Operations
ventures,
Strategy
products, etc.
Largely, the
Workflow processes
management
challenges are Changes in hiring criteria
found in
Multiple products
operations. Training requirements
across multiple media
platforms
This is true to Compensation plans
some extent for
Rep dedicated to one or
other
more product lines?
departments.
45

46. Project Management 46
Strategic
Strategic
Inputs Outputs
Initiatives Project
Results of
Need/ Management
Value
Opportunity
Process Steps
Project High level Plan
Execution Close-out
Initiation Planning Development
46

47. Technology 47
Hierarchy of Questions
What does it enable us to do
that we can’t do now?
Treat tech Does that serve the results we
like any need in our plan?
capital How much should we invest?
What’s the return? (NPV-calc)
expense.
What’s our learning curve to
assimilate it?
47

48. 48
The End
48