Transitions
In the fall of ‘07 I wrote a column titled “Global Brands,” where I stated, “As we transition to a digital world, managing our brands becomes ever more demanding….All of us in the B2B or B2C world tasked with transitioning to the digital world are looking for the Holy Grail, an umbrella brand that inspires confidence and trust and at the same time can support many vertical channels…” These challenges in the spring of ‘08 look even more daunting, with an economy that has stalled and a digital revolution that has accelerated. Clearly, ‘08 is turning out to be the most challenging year for our industry since ‘01-’02. The current economic malaise will accelerate the movement to digital from analog. Measurable marketing programs will be the demand of the day and will be married to social networks. In sectors like Information Technology, challengers like Tech Target and ITToolbox will gain share at the expense of the incumbents unless they respond with ever more speed to the demands of their customers. There are always clear winners and losers in transitions. Shareholders will not be patient as they see shareholder value diminished.
Look at the newspaper industry and the carnage that has taken place. Will McClatchy’s public shareholders and family board members continue to back current management while their stock has fallen from a 52-week high in the mid-30s to below $10 per share? What happened to CEO Gary Pruitt’s “once in a lifetime deal”? When one looks back to the announcement of the acquisition of Knight Ridder, the loss of shareholder value has been even more pronounced. Why did management double down and buy more newspapers, as opposed to digital assets? Will McClatchy become the target of an activist shareholder group, or will the family look to take it private with a change in management?
It is not just the traditional B2B companies that are faced with these challenges. Will CNet respond to their activist challenge to move from a Web 1.0 company to a Web 2.0 company and beyond? Is current management up to the task or do we find incumbents trying to protect themselves at the expense of the shareholders? These dramas will continue to play out, many of them under the spotlight of the public markets.
Our response time to these challenges has become shorter, out of necessity, and the margin for error has become very small. For the B2B industry to escape the fate of the newspaper industry, we must accelerate our response and put managers in charge that can deliver on their promises. We have never been a capital-intensive industry, but we need to find a way to make the resources available to our star performers to execute against a blueprint for change. As I have argued previously, private equity firms are ready to assist in this process at a time when many of the large strategic players have moved on to new horizons.
We will be judged as an industry and as individual companies and management teams by how well we manage these transitions. I sense that our industry knows that we can manage this transition as we have managed others, and that new leadership will emerge as it has in the past to guide us. But the next several quarters will clearly test us all.
While we are on transitions, with the Pennsylvania Democratic primary behind us, it is becoming very clear that the Clintons and Senator Obama cannot make a successful transition to the general election. I am coming to believe more and more, with each body blow back and forth, that Hillary and Bill are going to go to the convention and have a credentials fight over Florida and Michigan and that either side will leave the August convention with John McCain in the lead. I have been surprised by how many Obama supporters have told me that they would prefer to vote for McCain if the Clintons deny the nomination to what was once a fresh face, who brought with him a message of putting partisanship behind us.
Finally, the sports excitement in New York this weekend was the NFL Draft. I am certain that both Jake Long, from the University of Michigan, and Chris Long, Howie’s son from the University of Virginia, respectively the #1 and #2 draft picks overall, will make the transition from the collegiate ranks to starting in the fall for the Miami Dolphins and the St. Louis Rams. Matt Ryan, from Boston College, the #3 pick by the Atlanta Falcons, has a much more difficult transition facing him this fall, but I am confident that over time he will establish himself as a legitimate leader along the lines of Tom Brady and Peyton Manning.