What are you supposed to do about shifting markets - Tribune and P&G

"TribCo Papers Will Try Ditching AP to Cut Costs" is the Crain's Chicago Business headline.  Tribune is in bankruptcy because it  is losing so much money trying to sell newspaper ads.  Subscribers are disappearing as more people get more news from the internet, so advertisers are following them.  So what should Tribune Corporation do?  You might think the company would focus on other businesses in order to go where customers are headed. 

But instead Tribune has decided to stop buying AP content for it's newspapers in a one week test.  Not sure what they are testing, as one week rarely changes a subscriber base.  What they know is that AP content has a cost, and Tribune is so broke it can't afford that cost.  Seems Tribune is redefining its business - to selling papers rather than newspapers.  They've dropped much of their content the last 2 years, so now they are going to drop the news as well.  This is an example of trying as hard as they can to keep the old business alive, even after it's clear that Success Formula simply won't make money.  In this case, we're seeing management ready to throw the baby out with the bathwater trying to keep a hold on the tub.

Interestingly "Vivek Shah Leaving Time Inc. to Go 100% Digital" is the MediaPost.com headline.  Mr. Shah headed the digital part of Time, and he's decided to throw in the towel personally, promising that he is going to a 100% digital operation.  He's tired of guys who think ink trying to manage bits - and doing it poorly.  So another option for dealing with market shifts is to Disrupt your personal Success Formula by going to an employer positioned in growing markets.  Not a bad idea if you can arrange it - even though there are lots of risks to changing employers.  While the risk of change may seem great, the probability of ending up unemployed because your company fails is a very likely risk if you work for a traditional publisher these days.  We often are afraid to go to the next thing because we hope that things will get better where we are.  Even when we're standing on a the edge of an active volcano.

"P&G Considers Booting Some Brands" as headlined in the Wall Street Journal is yet another alternative.  This one is more like GE used in the past where it sold underperforming businesses in order to invest in new ones.  This has a lot of merit, and really makes a lot of sense for P&G.  P&G is desperately short of any real innovation, and has been going downmarket to poorer products at lower prices in its effort to maintain revenues.  A strategy that cannot withstand the onslaught of time and competitors with new products and better solutions.

I don't know if the new CEO is really serious about changing the P&G Success Formula or not.  He hasn't demonstrated that he has any future scenarios for a different sort of P&G.  Nor has he talked a lot about competitors and how he hopes to remain in front of companies with new solutions.  Nor has he offered to Disrupt P&G's very staid organization or its very old Success Formula - which is suffering from lower returns as ad spending has less impact and younger people show less interest in old brands.  So there's a lot of reason to think his buy and sell approach to shifting with markets may not really happen.

What's most important to watch are P&G's business sales.  Any big company can make acquisitions to create artificial growth.  That's easy.  But it doesn't signal any sort of change in the company.  What does signal are the kinds of businesses sold.  McDonald's sold Chipotle's to invest in more McDonald's stores - that's defend & extend.  Kraft sold Altoids and other growth businesses to invest in advertising for Velveeta and "core brands" - that's defend & extend.  If P&G sells growth businesses - theres' little to like about P&G.  But if the company sells old brands that have big revenues and little growth - like GE has done many times - then you have something to pay attention to.  Selling off the "underperformers" that some hedge fund wants (like the guys that bought Chrysler from Daimler) so you get the money to invest in growth businesses can be very exciting.

When markets shift you have to go where the customers are headed.  If your employer won't go there, you should consider changing employers.  It's not about loyalty, it's about surviving by being where customers are.  But what's best is if you can convert your business to one that is oriented on growth. Shake up the old Success Formula by attacking Lock-ins and setting up White Space and you'll remain a company where people want to work - and customers want to buy.

Comments

[Joseph Joel Sherman]

Great analysis Adam. Rather than cutting the Associate Content subscription, the Tribune should look for ways to add value. Would you suggest that newspapers such as the Tribune eliminate print editions that do not turn a profit?

[compléments alimentaires]

Hello
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[Adam Hartung]

Yes Joseph, I think anybody in the news business needs to think hard about what format is appropriate for being successful. In many cases that might well mean either dramatically changing the print format, or eliminating it entirely. Thanks for your comment