HowdyCreating context for organizational changesin a rapidly changing media marketplace.

I’m really

thrilled you

could make it!

For AAN 2007Presented byTerry Garrett

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Innovation

Systematic process

Reinventing your organization

Today’s agenda

“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.”

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POVGlobal Local

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Objective Reality

1. Media Ecosystem: advertising sales proportion

2. Historical Perspective: fluctuating status of media and innovations

3. Social & Political Changes

4. Demographic Changes

Two of the most important factors effecting media.

Global

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Media Ecosystem2005 Ad Sales (U.S.)

TV$68B

DailyNewspapers

$49B

Direct Mail$55B

Radio$20BYellow

Pages$14B

Outdoor$6B

Magazine$12B Other

Print$35B

Internet$12.5B

Alt-weeklies$550M

Business papers$4 B

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Rise of Newspapers and Magazines tied to a new socio-political reality 1873—1968.

Socio-political changes: Government as the progressive cause controlling the economy and direction of society.

1873 1968

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.

Explosive growth period 1870 1900

# of Dailies 489 1,967Circulation 2.5 M 15 M

# of Weeklies 4,000 12,000

Why

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Rise of Newspapers and Magazines tied to a new socio-political reality 1873—1968.

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Socio-political changes: Government as the progressive cause controlling the economy and direction of society.

1873 1968

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.

Explosive growth period 1870 1900

# of Dailies 489 1,967Circulation 2.5 M 15 M

# of Weeklies 4,000 12,000

Why

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19th Century Print Innovations

James Gordon Bennett founded the New York Herald (1835) on the premise that a newspaper had to:

1) have enough income to be editorially independent and

2) cheap enough to reach mass circulation.

He used the tech knowledge-bases of the the telegraph and high-speed printing.

He also relied upon the rise of mass literacy, which supported the notion of mass circulation.

Other innovations added mightily to accelerate the financial viability of periodical publishing: High-speed typesetting Stereotyped plates and webs replacing type-revolving presses Use of half-tone photographs Color presses Chemically produced wood pulp, which lowered the price of newsprint from $440 per ton to $42. Improved labor relations and localization of conciliation and arbitration procedures.

Innovations

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JGB, Jr.

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Contrast scale of newspaper economic power from 1890 to 2005

Joseph Pulitzer’s

New York World1890 Net income$1MAdjusted to 2005 Dollars

$822M

NY Times Group 2005Net Income

$253M

Google2005Net Income$1.46B2004 $399M

Created advertising to a mass audience.

Created bid pricing and self-admin advertising to

a targeted audience.

Innovation

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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

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Ch-ch-ch-changes

Civil Rights movement

Women’s Rights movement

Environment movement

Shift to non-conformity

Economic upheaval (oil shock, floated dollar)

Socio-political DemographicBaby Boomers

Segmented database marketing

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Print media has been losing relative economic status for 50 years.

Electronic media has gained significantly.

1955 1980 2005

$10 B

$161 B

$25 B

$75 B

$100 B

N M TV R TotN M TV R Tot N M TV R Tot

Ad sales target to maintain relative share of GDP, or economic power status relative to 1955 level.

$50 B

Newspaper — N • Magazines — M • TV — TV • Radio — R • Total — Tot

Web ’06$17B

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“Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different 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 innovationwithin your company.

As a means of survival in disruptive times.

For future prosperity.

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Innovative perspective...

Half empty?

Half full?

Is there a third POV?

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An efficiency expert might say,

The container is too big for the contents.

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What Innovation Isn’t

Reliance upon the “flash of genius”

Being kissed by the muses

Rarely, is it ever...

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Innovation Do’s

Analysis of opportunitiesorganized and performed on a systematic basis.

Conceptual & perceptualmust satisfy the values and needs of users.

SimplicityFocused, singular objective that it satisfies a need, produces a result.

Start smallcapable of consuming little investment, few people, serve a small or limited market.

Aim at leadershipdoesn’t have to be a big business, but does need to strive to be a leader.

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DruckerismsThere is no such thing as a resource until 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.

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Black gold, Texas tea

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If necessity is the Mother of innovation,

then who’s your Daddy?

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Areas of Management Concentration:

OrganizationCulture

StrategicDevelopment

FinancialPerformance

Sales &Marketing

Technology

ProjectManagement

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Organization Culture

Three Structures for getting things done

Hierarchy HeterarchyResponsible Autonomy

The one most commonly used. Top down, command and control in pyramid of bosses and staff.

Dispersed rule, balance of powers. Relies on cooperative principles instead of absolute authority.

No external rule; complete autonomy. Specific objectives for outcomes monitored for performance.

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Organization Culture

Most companies blend structures

Company A Company B

Hierarchy 80% 60%

Heterarchy 20% 30%

Responsible Autonomy 0% 10%

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Management By Responsibility Matrix

Basic Management Philosophy

Use of Power

Goal Setting Delegation

Conflict Resolution

Performance Evaluation Methods

Leader-ship Style

Responsible

Achievement

Conformist

Self-protective

Unconscious

7 Dimensions

5 levels

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Lower Levels of functioning & dimensions of management

Basic Management Philosophy

Use of Power Goal setting Delegation

ConformistView of staff (VOS): weak, need to be protected.People concerns emphasized.MO: Maintenance of status quo.

Aversion - power seen as domination.Low need, unwilling to use power.Viewed as indecisive & inconsistent

Let the staff do it.Permissive - feels staff won’t like them if they push.Low to moderate commitment.

Seldom delegates effectively.Unable to assign realistic priorities & meaningful tasks.Creates staff wanting to be “rescued”.

Self-protective

VOS: incompetent, lazy.Productivity and people concerns mutually exclusive.MO: Coercion & force

Domination power used to controlHigh need - used for authority to demand obedience.Viewed as dictator, ruthless.

Sets goals for staff not with them.Feels that to let staff be involved is a sign of weakness.Low commitment, sabotage.

Delegates only functions they dislike.Creativity and decision making discouraged.Creates fear of making mistakes.

Unconscious

VOS: powerless & trapped.Productivity & people concerns unimportant.MO: withdrawal & non-involvement.

Powerlessness - power is avoided.Low need, perceives self as weak & ineffective.Viewed as incompetent.

Avoids goal setting.Will rely on precedent and policy.No commitment.

Doesn’t delegate; staff should know what to do.Non-participative.Creates non-productivity.

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Lower Levels of functioning & dimensions of management

Conflict ResolutionPerformance

Evaluation Methods Leadership Style

ConformistAccommodating (yield/lose)Relationship - primary importanceConflict viewed as destructive of relationships.Hesitant, timid approach.

InfrequentUsed to build morale.Positive; cliche ridden.Negative - -avoided- staff viewed as fragile.

Provides little direction for others.Acts as support person to provide social and technical needs.Self-viewed: morale booster and provider.

Self-protective

Competing (win/lose)Personal goals - primary importance.Social survival at stake; to lose means weakness.Aggressive dogmatic approach.

InfrequentUsed to display authority.Positive - seldom given.Negative is punitive and to determine fault and blame.

Expects strict and rapid compliance with orders.Insist on close, constant supervision.Self view: strong and dominant.

Unconscious

Avoiding (lose/leave)Hopelessness; no win, total avoidance.Withdrawn and detached approach.

Non-existentAvoidance of all feedback.If forced by organization will have staff make out their own or prefer adjective checklists.

Avoidance of any contact.If necessary, resorts to policy or refers to superiors.Self-view: weak, my hands are tied.

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Higher Levels of functioning & dimensions of management

Basic Management Philosophy

Use of Power Goal setting Delegation

Responsible

VOS: productive and creative.Productivity and people concerns integrated.MO: involvement with staff through delegation and participation.

Altruistic - used for common good.High need to have impact and be influential.Viewed as fair, just and strong.

Inclusion of staff in goal setting process.Promotes creativity in objective setting.High level of commitment.

Delegates maximum authority functions, priorities with staff.Aware of staff capabilities and motivations.Creates teamwork, harmony and accountability.

AchievementVOS: moderately productive, but need for manipulation.Productivity concerns emphasized.MO: management by crisis; inadequate planning and delegation.

Personal aggrandizement - used for personal gain.High need - to build empires.Viewed as exploitative and aggressive.

Sales consultative approach - “sells” staff on goals.Moderate to high level of commitment.

Doesn’t delegate specifics.Last minute delegation, changing priorities, improper planning.Creates urgency, frustration and confusion.

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Higher Levels of functioning & dimensions of management

Conflict Resolution Performance Evaluation Methods

Leadership Style

Responsible

Synergistic: win/winIf relationship is to last, all goals must be met.Candid, creative, problem-solving approach.

Frequent, regular basis.Used as learning experiences.Positive-realistic, genuine feedback.Negative-constructive, candid.

Leader views self as team member.Encourages others to contribute.Self view: a contributor of special resources.

Achievement

Compromising: win some/lose someAttempts to soften losing by limiting the gains.Persuasive, manipulative approach.

Frequent, though based on positive or negative performance.Used to increase performance.Negative: based on productivity failures, due dates, etc.

Maintains open door policy.Management by exception, fire-fighting when necessary.Self view: flexible and adaptable.

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Culture Determines How You’ll Proceed with Strategic Development

Arrives at Objectives

Develops and Implements

HierarchalAchievement-oriented

Top management mandates goals and objectives.

“Sells” it to staff.

Key performance expectations handed down, implementation tightly controlled from top.

Hierarchy/HeterarchyResponsible

Group conference establishes goals and objectives.

Staff buy-in by virtue of participation.

Team approach, key performance distributed, authority levels assigned, group and individual responsibility balanced.

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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?

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Preparation for Strategic Development

Historical PerspectiveWhere have we been, what have we accomplished?Where are we now? Where can we improve?

BenefitsEstablishes congruent story among all staff members; provides understanding especially for newer staff.

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Preparation for Strategic Development

Mission, Values, Major ObjectivesWhere do we need to be next year?In 2 - 3 years?Key performance indicators identified:

Financial, marketing, etc.Quality of life issues

BenefitsEstablishes same page starting point and defines scope of plan.

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Two-sided Market

Advertiser Media Audience

Content

Supply Demand

Attention

SupplyDemand

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Long Tail of the Web 33

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60

80

100Long TailAggregators/Portals

Google, Yahoo, MSN

Top news sites

Millions of sites

Head

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.

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Seeing Opportunity & Brainstorming Ideas

Who are they?What do they need/want?

What are our 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.”

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Prepare Ideas for Implementation

Identify assumptions and risks

Prioritize best ideas

Identify resources neededFinancesPersonnelProcessesTechnologySpace/place, tools

Quick financial parameters

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Example of a WebBusiness 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

in addition to print; some may opt for print or web only.

• Sales reps would sell it.• Consumers would use it.• It would be cash flow positive within

6 months}Research,

survey, assess risks, i.e. what happens if this assumption is false? Can it be corrected or converted to true?

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Quick Financial & Resource View

Calculation for Salary WagesSalaries Staff per week

$ 3,850

% of 40 hr. wk dedicated to selling product

10%

Time

Costs

Leads

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Quick Financial View

Breakeven Analysis—Directory Model

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87

129

170

211250

289327

365401

437

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200

300

400

500

600

1 2 3 4 5 6 7 8 9 10 11 12

Months

Ad

s S

old

-$3,000

-$2,000

-$1,000

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

# Sold AdsMonthly RevenueMonthly CostMonthly Net

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Financial Statements

The 3 Bottom Lines

Net ProfitDollar figure that shows whether or not your sales are greater than your expenses.

Operating Cash FlowOCF

Dollar figure that shows whether or not you’re converting your profits into cash.

Return on AssetsROA

Ratio that tells whether or not you’re optimizing the value of your resources.

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Flat sales, declining profits and operating cash flow.40

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Mobley Matrix41

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Key Performance IndicatorsKPI

KPIs are only meaningful when they are connected to your triple bottom line.

AND

When everyone knows what they mean and how to effect them positively.

Standard KPIsAverage page yield (tot.) Average page yield (ads)

Sales per 1000 circulation Net profit per employee

Sales per page per 1000 circ Production costs per page

Sales per employee (tot.) Print costs per page

Sales per employee (sales) G&A expense per employee

Sales per category Distribution costs per 1000

Number of ads per issue Editorial costs per page

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Financial Literacy

Income statementBalance sheetCash statementKPIs

Owners/publishers/

CFO

Management Team

Staff

See & regularly discuss financials and performance

? ? ?

Understand & interpret financials with strategic obj.

? ? ?

Project financials to plan future performance metrics

? ? ?

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Sales and MarketingAligning with Local Interests

Resource Coordination

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MediaCompany

Local BALLE

Network

M

M M M

M M

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BALLEExecutive

StaffSF

Coordinate for Start-up of local network

Co-createCo-create

Recruit members for start up from existing ad customers.

Recruit members through promotion & network volunteers.

BALLE/Media Modelfor Collaboration

MMMM

M MM M

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Sales & Marketing Follows Strategic Plan 45

With the new ventures, products, etc. Largely, the management challenges are found in operations.

This is true to some extent for other departments.

Implementing Strategy

Operations

Multiple products across multiple media

platforms

Workflow processes

Changes in hiring criteria

Training requirements

Compensation plans

Rep dedicated to one or more product lines?

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Project Management 46

Strategic Initiatives

Need/Opportunity

Project Management

Strategic Results of

Value

Project Initiation

High level Planning

Plan Development

Execution Close-out

Process Steps

Inputs Outputs

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Technology 47

Hierarchy of Questions

Treat tech like any capital

expense.

What does it enable us to do that we can’t do now?

Does that serve the results we need in our plan?

How much should we invest? What’s the return? (NPV-calc)

What’s our learning curve to assimilate it?

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The End

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