Wednesday, May 04, 2011


In today's Crikey Margaret Simons writes about the decision made at Fairfax to outsource some sub-editing.

In describing the task facing Fairfax's senior execs she writes;

The whole thing is bloody and awful, and while it is part of my job to criticise what Hywood and Matthews do, I also recognise that, despite their fat salaries, their jobs are far from enviable. God knows why people scrap so hard to be in these positions. One assumes it is because they believe they can pull gold out of the shit. I wish I shared their belief.

There are no easy answers to trying to save dying media business models, and they are right to do what their predecessors have failed to do -- admit the depth of the problem and try to do something about it.

She goes on to note that the new CEO has fronted-up to the idea that the classifieds business - the old "Rivers of Gold" - is basically dead.

There are a few observations to make. The first is that Fairfax had plenty of opportunity to act about on-line much earlier. In about 1994 when I was the Account Director for the media portfolio at Telstra the Fairfax CIO Frank McMahon asked us to talk to him about online services. (For the record Frank was responsible for the initial computerisation of the production process at Fairfax - no slouch).

He was particulary interested in what was called "On Australia" which was a Microsoft/Telstra JV. At that stage it was about Microsoft's non-internet based MSN - in the days when AOL and other dial-up subscription services were booming.

To the credit of the guys from telstra Multimedia who met Frank, they told him all about On Australia, but really recommended he have a look at a thing called Mosaic - which was the first web-browser.

In the end Fairfax took a decision to go with a "corporate" style on line service buying something that had a large base in libraries. This route was partly chosen because it could be achieved by acquisition.

The second is that the media are not alone in fronting what Clayton Chritensem dubbed The Innovator's Dilemma. This is the fact that to expolit the new business as it develops means sacrificing some of your revenues and profits from the old business. The example he used is the manufacture of hard disc drives.

Whenever in business you hear a CEO or exec team reject a strategy because it will "cannibalise our existing business" then you know you need to get out. Quite simply, if the existing business can be cannibalised then it will be cannibalised by someone else if not by you. It is closely related to a problem in business case development of what is the base case - the do nothing case - against which a strategy should be implemented. Too often it is a flat line or worse an extrapolation of historic growth when the reality is that the base case is declining revenue. As an example, AAPT was unable to develop a strategy for VoIP in conjunction with broadband because of how healthy the voice resale margins were.

The important thing to remember though is that CEOs are ultimately paid the big bucks to make the hard decisions. they should all sign-up to JFKs invocation "We choose to go to the moon, not because it is easy, but because it is hard".

Novae Meridianae Demetae Dexter delenda est

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