Geoff Colvin writes a clever piece in FORTUNE magazine about How To Manage Your Business in a Recession.
Well, his recommendations are right to the point and apply with no exceptions to our newspaper business.
So, I did the exercise of rewriting and editing his list with a newspaper-business focus.
Here is INNOVATION’s custom-made list in our own order of priorities:
1. Keep investing in the core.
The most successful companies never stop funding their most critical competencies: product innovation and customer service.
Kohl’s, the big retailer, actually spent more on marketing this past holiday season than it did last year.
Intuit’s CEO Brad Smith says:
“We’re not going to cut innovation. This company for 25 years has been fueled by new-product innovation. We’re protecting the innovation pipeline so we come out of this strong.”
For virtually all companies, a critical part of the core is the continual development of employees.
Yet it’s remarkable how many businesses cut training and development in a downturn.
The best never do.
Journalism is our core business.
Journalists and the newsroom are at the heart of our company.
But, yes, they can and must be more efficient.
New work flows are needed, like new open-space and multimedia-integrated newsroom facilities.
Train them to serve not just readers but new audiences and communities.
More editing is more important than more pages.
This is time for journalism caviar.
We need selective and relevant newspapers.
Paté newspapers, not pottage newspapers.
2. Reset priorities to face the new reality.
As Jamie Dimon, CEO of J.P.Morgan Chase recently said at the Harvard Business School with regard to the current recession:
“I am shocked at the number of people who are watching that train coming down the track, and they’re still worrying about their strategic plan for 2009. We canceled all that stuff – all of it – meetings, travel, you name it, to focus on the fact that we’re in the middle of a real crisis.”
Keep in mind that these are not new realities for newspapers.
They have been around for a while now.
The new reality is that you cannot ignore them anymore because you won’t have the high profits that made you contemptuous to change.
This is key to the overall message of the crisis. It wasn’t the financial crisis that changed the nature of the game for newspapers.
It changed long ago.
The financial crisis just reduced your number of shots to get it right.
3. Communicate like crazy, balancing realism and optimism.
In a recession, all of a company’s constituencies are nervous: Employees are worried that they’ll be fired, suppliers that they won’t be paid, customers that quality will decline or prices rise, investors that the stock will tank, communities that operations will close down. Your silence just makes them worry more.
Newspaper companies need to send a clear message to their news and business people, and to readers and advertisers.
In a crisis like this, real information is needed more than ever.
And our best journalists must be encouraged to do great watchdog journalism.
Advertisers must be treated like partners.
And we need to be seen as partners by advertisers as well.
No business can survive with no advertising and promotion.
And more important than ever: don’t get involved in the short-minded discussions about the end of newspapers.
Look for innovations.
This is time to invest in your core products and in your product’s core.
This will be the clearest message to your company and to your market.
4. Your customers face new problems, so give them new solutions.
The best performers deeply understand their customers’ businesses and can respond in sophisticated ways.
No matter what business you’re in, you can redefine value for the customer.
It’s time for real service journalism.
The financial crisis deserves more and better personal finance coverage.
The jobless people deserve more and better how-to-find-new-jobs coverage.
Consumer Journalism rules in a time of crisis.
Create new hot-lines.
Publish more advice columns.
Develop new online forums around health insurance, jobs, savings, training, entrepreneurship …
New content for the new realities.
Tell the readers how to do more with less.
Advertisers also are our customers.
Help them to do more with less.
Find out what their problems and needs really are and give them new solutions.
New ways to get their message to their potential customers.
To interact with them.
As O Globo says: “In print. Online. Full time.”
So, not necessarily on paper.
And wherever and whenever you may reach them.
Advertisers are trying to help their customers.
So they can also help you to help your readers.
5. Don’t rush to cut prices.
McKinsey research finds that in a typical S&P 1500 company, a price cut of 5% would have to generate increased sales volume of 19% in order to pay for itself – and that almost never happens.
Now is the time to study price sensitivity in your markets much more closely than before.
Cheaper newspapers? Wrong way.
Cheaper advertising? Wrong way.
As I said, in a time of crsis, real information (journnalistic and commercial) is more crucial than ever.
Our news content “saves money” for our readers.
And our commercial content “makes money” for our advertisers.
We sell caviar papers, not McPapers.
Instead, let’s give more value, better service and greater multimedia packages to our advertisers.
This is the time to expand our online advertising with more creative options and more unique formulas.
And don’t be trapped by media buyers who are always heralding our advertising crisis … in order to get better deals.
Invest in marketing research.
Show your strengths.
6. Focus on capital – how you’re getting it and where you’re using it.
In good times, and especially in a period of low interest rates, it’s easy to get lax about capital and to forget the most fundamental rule of business: that you must earn a return on capital that exceeds your capital’s cost.
Companies that are managed explicitly for capital efficiency are stronger now than they would be otherwise.
Think twice before you place an order for a new printing press.
Explore joint ventures with competitors.
As News Corporation and The Daily Telegraph did.
Remember: printing is not our core business.
Invest, instead, in your 24/7 multimedia-integrated newsroom operations.
Or in the Multimedia Content Management System.
Cash in on those inefficient, traditional downtown buildings and go for new facilities that save a lot of money.
And if you can, or if you must, instead of going public, make strategic alliances with other media companies that share your values and best practices.
7. Reevaluate people – and steal some good ones.
Just as most investment managers look like geniuses in a bull market, most employees can look like excellent performers in a booming economy. Now is when you identify the impostors.
Mel Stark of the Hay Group consulting firm points out that in his survey of the World’s Most Admired Companies as ranked by Fortune, the best ones take extra pains to reassure their “most driven and focused employees,” the ones it is most important to keep. Instead of spreading the pain, reward your best workers well, even in a recession. Then scout for competitors that are sharing the misery equally and steal their best performers.
After your review, fire the impostors and hire talented people that left other good newspapers with bad HR operations.
Or steal from competitors.
It is important here to look beyond your direct competitors.
Newspapers need to acquire new capabilities that don’t exist in the industry.
Like technological knowledge.
So, it is a good time to get people who can bring these in.
8. Reexamine compensation – what is it offering incentives for?
While you’re making sure that pay arrangements at your company don’t encourage too much (or too little) risk, think more broadly about what they encourage. At Deere, for example, incentives are based on economic profit, a measure that includes capital costs, and bonuses earned in any given year are paid out over four years; if performance falters, part of the bonuses can be canceled. The system encourages long-term thinking and seeing the recession as part of a larger cycle.
This a pending isue for many newspaper companies.
Long-term view is crucial.
You need to reward efficient loyalty.
Another reason to invest in better HR departments.
9. Think twice about offshoring.
A time of greater cost pressures may seem an odd moment to ask whether offshoring still makes sense, but in fact the economics have changed drastically.Manufacturing costs aren’t the only factor in an offshoring decision. Taxes, tariffs, speed, and transition costs can make a big difference. But at a time when costs count more than ever, don’t assume that offshoring is still your best option
You have heard about all these Indian offshoring operations.
Well, you can do that with some non-core business operations.
But not with your local, local, local premium news coverage.
That is core.
But at the same time, newspaper companies can outsource many business and news operations.
This is not new.
We have done this in the past with newswire services, photos, graphics and illustrations.
And we got great stuff at very competitive prices.
So, do your homework, like the reevaluation of your people, and you will find many ways to save a lot of money.
10. Be smart about mergers and acquisitions.
It seems obvious that a recession is a great time to buy assets cheap. The wonder is that so few companies do it. Merger activity tends to peak when markets are at their height, while most companies see a recession as a time to hoard resources until things improve. Companies are twice as likely to acquire businesses in their major segments during an upturn as they are during a downturn, the opposite of what makes sense.
Of course if you’re strapped, you can’t follow Warren Buffett’s dictum to be greedy when others are fearful. But if you’re financially strong, this is your moment. McKesson’s Hammergren says, “This is a great opportunity to pick up small companies and their talent,” for which he is scouting avidly.
Look in the online classifieds.Look in the online communities.Bring in the new social networks.