It's been about 20 years since Tim Berners-Lee invented the World Wide Web on the back of the Internet. For more than a billion people on the planet, the Web today is an alternate, digital universe that is gradually overtaking the analog, physical world as a source of information and connections.
Earlier this month, the Pew Research Center for the People & the Press conducted a survey that rendered two obvious conclusions: the Internet has overtaken newspapers as a source of national and international news, and television, led by CNN, continues to serve as the main source.
(Credit:
Pew Research Center)
According to the Pew survey, 40 percent of respondents (versus 24 percent in 2007) said the Internet is their primary source for national and international news. That compares with 35 percent (versus 34 percent 2007) who rely on newspapers and 70 percent (versus 74 percent in 2007) who use television as their main source. Given the historic presidential campaign and economic woes this year, the large percentage increase year-over-year for the Internet is not surprising.
Among Americans under 30, 59 percent (versus 34 percent in 2007) said they get most of their national and international news from the Internet. Television tied with the Internet at 59 percent for that group, but that was a decline from 68 percent in 2007. (The figures add up to more 100 percent, by the way, because people could offer multiple answers.)
Television and printed newspapers are clearly stressed by financial pressures, which have been amplified by the ailing economy. While some of the newspapers have leading Web sites, their financial staple--classifieds and job and real estate listings--has been dominated by independent Internet services such as Craigslist, Monster.com, and Redfin. Mainstream television is competing with the likes of YouTube for eyeballs and is still trying to figure out how to swim with the Internet fishes and generate revenue, which at this point is a rounding error.
Most newspapers have figured out that you create content for the Web first and that the print edition is a byproduct of that output. Television programming can be viewed on a TV, PC, smartphone, or digital billboard. But as NBC's Jeff Zucker said recently, "People had been counting on digital exposure. I had been trying to talk about the fact that even as it grew, it was not necessarily the big growth engine for legacy media companies that were trading those analog dollars for digital dimes. We're now up to dimes. That's an improvement. It's still not a dollar for a dime kind of business that I would like to be in."
While the Internet is growing as the place where people go for news, the revenue simply isn't catching up fast enough. The less obvious part of the Internet overtaking newspapers as the main source for national and international news is that much of the seed content--the original reporting that breaks national and international news and is subsequently refactored by legions of bloggers--comes from the reporters and editors working at the financially strapped newspapers and national and local television outlets.
Memeorandum aggregates and ranks content from leading media outlets and blogs covering politics.
(Credit: Memeorandum )New publishing entities, such as Politico, the nonprofit ProPublica, the Huffington Post, and numerous blogs are making original contributions to national and international news, and some are trying to make money while they're at it.
As the financial pressures mount--the outlook for 2009 is dismal--and the cost cutting continues, we can only hope that the original news reporting by top-flight journalists is not a major casualty.
Barack Obama will be the most shadowed president in history, and it won't be just the Secret Service and press corps surrounding him.
Citizens and paparazzi armed with camera phones and a variety of other multimedia devices will chronicle every movement he makes in public and post it online.
President-elect Obama visits a Chicago deli to pick up some corned beef sandwiches. According to various reports, Obama and troop arrived at Manny's Cafeteria and Deli at 12:29 p.m. and walked out at 12:45 p.m. with two cherry pies and three corned beef sandwiches, paying $48.34 in cash.
(Credit: Change.gov)Obama's visit on Friday afternoon to Manny's Cafeteria and Deli in Chicago was treated as a major event. Some footage was recorded by the Associated Press (see below), and in the background you can see employees, as well as a horde of press members, pointing their cameras at Obama. With half the planet in possession of increasingly capable camera phones, Obama's life will fill enormous disk space in the cloud.
Politico is also keeping track of Obama's daily life with its "44" blog, documenting the president-elect's movements and important announcements during the transition to the White House. The forthcoming Obama White House will be treated like a reality TV show or West Wing, broadcast 24x7 on the Internet.
(Credit:
Politico 44)
Other presidents, including George W. Bush, have been similarly tracked online, but the Obama presidency brings a more finely tuned understanding to this phenomenon. Obama's pre-inauguration site, Change.gov, is providing its own play-by-play of Obama's activities, including briefly detailing the deli visit with a photo slideshow.
Posting its own version of events is a way for the Obama team to gain some control over the chaos and messaging in the midst of the incessant Obama lifestreaming that will occur over the next four or eight years. The disciplined, focused, and modulated Obama has already had a lot of practice on a big stage. Now the spotlight is all on him. Every gesture and word from Obama accessible to the public will be recorded and posted online, from a multitude of sources and points of views. His lifestream will be endlessly scrutinized and measured for meaning.
The Obama office of communications will be very busy building on the lessons learned from the campaign. Obama will likely hold more press conferences than his predecessor, but his team will continue its use of the Internet to directly reach the American people, as in Obama's weekly radio address, which is also a Web TV show that reached nearly 900,000 YouTube viewers with the November 14 edition.
Dan Manatt of PoliticsTV offers some useful suggestions--such as making the U.S. budget comprehensible to mere mortals--to the Obama communications team in a blog post on TechPresident.com:
The president's budget should become a multimedia document that makes the numbers--and the policy questions--accessible to the average citizen. The budget should be released online--not just as a pdf, as it is now, but as a multimedia, dynamic document with Web apps, widgets, and appendices applying Quicken-style functionalities, dynamic charts, etc. That way Americans can visualize and understand where their $3 trillion in tax dollars (minus the $1 trillion deficit) goes to. (Perhaps not surprisingly, private sites, including Wikipedia, http://en.wikipedia.org/wiki/United_States_federal_budget, offer citizens better digital tools to understand the budget than the White House and the OMB, http://www.whitehouse.gov/omb/budget/fy2009/).
Given the lack of confidence in the economy and the measures taken by the current administration, as well as Congress, providing more transparency into the budget process and bailouts would be helpful to the national psyche. You can expect Obama to use his online TV channel to further change the course of history.
Guest post: Frédéric Filloux, editor of Monday Note, which covers media, tech and business models, explains why death reports of paid-for models on the Internet have been greatly exaggerated and how Facebook might need subscription fees to survive in the current economic climate.
Death reports of paid-for models on the Internet have been greatly exaggerated. Granted: the network's genome carries the "free" nucleotide. As in both freedom and free goods and services. Like it or not, its publicly funded origins (universities and the Pentagon) led to the emergence of widely adopted services such as search engines or Wikipedia. In turn, these have sealed the fate of the paid-for model as the dominant one. Right. I intentionally emphasize dominant. Because like everywhere else, hybrid forms are likely to emerge.
In the news media sector, we've seen many attempts to make readers pay for Internet content. From Slate to The New York Times, almost every publisher tested its own recipe. They all came back to free. Truth is: the fully paid-for model doesn't work online, unless it is: a) highly specialized (financial information and services, for instance), or b) provides unarguable value added (e.g. premium dating, tax or accounting services). Now the free model is facing a new hurdle: with this recession, advertising is suffering way more than expected. Further, alarming trends preceded the recession: click-through rates were falling, and the display ad system was labeled as a no-future thing. Now, the stream of ads is drying up quickly: double-digit drops are not uncommon. All business models built on advertising are now in grave peril.
Take Facebook. The tip of the iceberg is shines brightly: 100 million users, most of them active, a trillion page views per year, about two hours spent per month and per user. (Write down "engagement", a new word, soon to be the de rigueur metric.) As it turns out, this assiduous crowd loves photography: 300,000 images are uploaded every second, creating by far the biggest photo library in the world with more than 10 billion images, four times Flickr's.
Under the surface (the huge part of the iceberg, expenses), numbers are equally staggering:
• 13,000 servers were running few months ago, and analysts say the company will need 50,000 machines next year (no wonder why Rackable Systems, the leading provider of datacenter equipment enjoys a 44 percent growth for Q2 08 vs. Q3 07 -- it draws 17 percent of its revenue from Facebook)
• a $1m monthly electricity bill
• another half-million per month for bandwidth
• the 2 terabytes of data (mostly photos) uploaded every day require the purchase of one NetApp 3070 (a mammoth storage systems) each week
• maintaining this infrastructure, dealing with the output of a half-million developers, requires a big staff. For this activity only, Facebook 's headcount is between 700 and 800, costing about $80m a year.
In other words, Facebook is burning cash like a furnace.
What about the coal, you might ask? Good question. Advertising was supposed to feed the beast. Which leads us back to this note's item #2: a shrinking supply of ads, a superb ignorance of the target group (just look at your kids -- or yourself -- how often do you click on a banner?) As a result, the financial community keeps raising questions. Emarketer estimates the 2008 revenue of Facebook to be about $265m. Unlikely to be enough to cover expenses. According to Techcrunch, most of the $500m raised by Facebook is already gone, and the company would turn to Dubai investors to get a cash infusion.
Facebook is learning the hard way that eyeballs, once they are counted by millions, are expensive to serve. What's the solution?
The online magazine Slate came up with an interesting idea: charging people. In fact, a small fraction of them. Introducing another flavor of the hybrid model: a tiny proportion of users paying a fee that will subsidize the vast majority of non-paid ones. This is the idea outlined in the story "A Radical Business Plan for Facebook":
"Judging from some of the folks in my social network," wrote Farhad Manjoo, "a sizable minority of Facebook users have hundreds of 'friends' and check in to the site multiple times a day--call them superactive users. Let's imagine that Facebook became a tiered service. A free plan would limit you to 200 friends, one status update per day, or some other non-Draconian combination of restrictions. But for $5 a month, the limits would be lifted. Certainly, many users would balk; tens of thousands would join Facebook groups to protest the new pay model. Let's assume that 95 percent of users will refuse to pay a dime. That still leaves 5 percent, or 5 million people, to pay $60 a year. That's $300 million in the bank."
Farjoo confesses to be inspired by David Heinemeier Hansson, a developer for 37signals, and advocate of the paid-for model.
Nothing quite new, in fact. In China, the software industry has been working that way for long: 80 percent is bootlegged versus 20 percent generating license fees, but the market is so huge that even a tiny monetized slice is sufficient to insure a sizable revenue stream for software makers (that goes also for entertainment products).
These are not the only examples where the free model can be a powerful commercial engine. Last week, at the Monaco Media Forum, Avinash Kaushik, Google Analytics' chief evangelist, mentioned the example of TurboTax, an American tax filing software and service company. For a limited period of time, TurboTax decided to give away its basic application. It has two effects: of course, taxpayers rushed to download the free version -- a zero-cost massive promotion campaign, since the production and delivery costs of the software are close to zero -- but more surprisingly, at the same time, the sales of the Deluxe version ($59.95) rose significantly. That was the free model as a sales engine.
To what extent the examples mentioned above could inspire the media industry is a complicated question. A part of the answers lies in the publishers' ability to conceive not only great news services but also clever applications and services that could draw an audience willing to pay for it, that will, in turn, subsidize the bulk of the readers/users enjoying free basic (and bait) content.
Frédéric Filloux is currently editor for the international division of the Norwegian media group Schibsted ASA and of Monday Note. In 2002, he was part of the team that launched the free daily 20 Minutes, which is now the most read newspaper in France with 2.5 million readers (the online version, 20minutes.fr, has about 200,000 visitors per day). Prior to that, he spent 12 years at Liberation, successively as a business reporter, New York correspondent, editor of the multimedia section, manager of online operations, and, finally, editor of the paper. He also has an experience in the advertising business after a one year stop at the Paris group BDDP agency (now TBWA). He is a graduate from the Bordeaux school of journalism. He lives in Paris.
Updated at 11 a.m. to clarify that the change.gov site with the YouTube video of the Obama's radio address has text links to the same video on AOL, MSN, and Yahoo. YouTube still has premier position as the secretary of video...
It's great that President-elect Barack Obama is delivering his regularly scheduled Saturday address in both audio and video form. After using the Internet to help him get elected and connect with younger voters, it's clear that his team will continue to exploit the media to deliver its messages and stimulate dialog.
Obama has chosen to upload the video of his Saturday address to Google's YouTube, by far the most dominant video-sharing service, and embed the video on his Change.gov transition site.
The video has already garnered more than 500,000 views, and this is just the beginning of the Obama's administration's use of video. Post-inauguration, there will likely be a White House YouTube channel to push the administration's agenda and to hopefully to provide more transparency.
My question is why favor YouTube? It's obvious that YouTube is the way to reach the most people. According to Nielsen Online's VideoCensus, Google's service served 5.35 billion video streams in September 2008. Yahoo, the closest competitor, had 264 million.
But why should the incoming president, or public official, favor one Internet video service over another? Yahoo, MSN, Blip, Veoh, and other video-sharing sites shouldn't have to lobby the White House for equal time or at least some time. I am sure the choice of YouTube was practical, and has nothing to do with Google CEO Eric Schmidt's very public support of Obama.
Implicit product endorsements are difficult to avoid for any public official. If Obama prefers a BlackBerry, Apple can't do much to fix that problem. But, Obama is rarely seen in pictures with his Blackberry and The New York Times reports that he is going to have to give up his favorite communications device.
In the case of uploading video, the Obama team can create its own branded, video-sharing service neutral video player that allows anyone in the world to embed the content. That might be a more equitable way for Obama to spread his message, and he could still have a YouTube channel.
(Credit:
change.gov)
ObamaCTO.org provides a forum for defining, ranking and discussing the key tech priorities for the nation.
While the technology pundits are debating the role of an Obama administration CTO, a few programmers in Seattle yesterday decided to do something more useful. Using an application from UserVoice, they launched ObamaCTO.org, a site, unaffiliated with the Obama machine, that allow citizens to list and vote on what should be the top tech priorities for the new administration.
"User voting is an easy way for people to prioritize ideas," said Matt Lerner of Frontseat.org, which created the site. While the voting on this site is more like on Digg than a scientific sampling, and can be gamed, it is part of the Internet-fueled movement to give more of voice to the populace. The Obama campaign provided ample evidence of the benefits of using the Web for massive outreach. Now the question is how much weight the wisdom of the crowd will carry in influencing the direction of government policy.
Lerner and his co-workers are focused on making use of public data for civic good. "We have been interested in all the government data that is available," he said. "There is a treasure trove, such as data on campaign finance and voting records, but it is not standardized or structured, and doesn't have any APIs. Many innovations would be created if the data were available to programmers."
He gave a few examples of applications built around government data. Voting records are publicly available but must be accessed from each county in the U.S. and then normalized. "You could have maps of a block and see who hasn't registered to vote as a way to get out the vote," Lerner explained. Voter data is available from private firms such as Catalyst Consulting, Lerner said, but is expensive.
With census data on whether people drive, walk, or take public transportation to work, activists could encourage people to be more environmentally responsible. Frontseat.org developed Walk Score, which ranks the "walkability" of 2,508 neighborhoods in the largest 40 U.S. cities.
Walk Score rates thousands of neighborhoods and ranks them on how walkable they are.
See also: Micah Sifry--Obama's CTO: Never Mind Who; What Should S/he Do?
Guy Kawasaki, the oracle of technology startups, is publishing a new book, Reality Check: The Irreverent Guide to Outsmarting, Outmanaging, and Outmarketing Your Competition. It's a robust collection (450 pages) of posts from his blog, "How to Change the World." If you are seeking to change the world, especially in this economy, Guy's advice will be very worthwhile and entertaining. Check out the BNET video below with some tips from Guy:
Google CEO Eric Schmidt is out of the running for the chief technology officer (CTO) position that the Obama administration is planning to create. In an interview with CNBC's Jim Cramer, Schmidt said, "I love working at Google and I'm very happy to stay at Google, so the answer is no." Schmidt will remain a close adviser to President-elect Barack Obama, but his first call to duty is Google.
Based on the job description below, it could be difficult to find a worthy candidate from the private sector willing to take on a task of such enormous scope in an environment known to chew up and spit out White House policy czars.
Obama will appoint the nation's first Chief Technology Officer (CTO) to ensure that our government and all its agencies have the right infrastructure, policies and services for the 21st century. The CTO will ensure the safety of our networks and will lead an interagency effort, working with chief technology and chief information officers of each of the federal agencies, to ensure that they use best-in-class technologies and share best practices.
The Obama administration's CTO job could be one of those bureaucratic positions that ends up consumed by turf wars rather than making real progress against initiatives. CNET News' Stephanie Condon noted the overlaps, which could turn into conflicts, between a White House CTO and CTOs working in various agencies:
The jurisdiction of a CTO could overlap with other agencies or executive positions in areas such as innovation policy, cybersecurity, or intellectual property enforcement. To avoid those overlaps, the Obama team will have to decide, for instance, whether the CTO would focus on goals like making agencies more efficient or take on a broader agenda such as dictating policy.
Just creating and implementing a coherent technology plan and policy for the numerous agencies under the Department of Homeland Security is an incredibly daunting task for a CTO. The DHS Directorate of Science and Technology, for example, has a budget of $830 million. It has 250 projects in process and 50 percent of them are expected to fail, according to Jay Cohen, Under Secretary for Science and Technology for the DHS.
The Department of Homeland Security organizational chart. The DHS is trying to achieve information flow across 87,000 different federal, state, and local governmental jurisdictions.
(Credit: Department of Homeland Security)The Obama administration has a long list of tech initiatives (see below). The focus should be on having the best technical minds and management working on each initiative--the White House CTO as chief tech policy evangelist, inter-agency liaison and human capital recruiter.
Speaking at the Web 2.0 Summit, HP CTO Shane Robison, who has been touted as a White House CTO candidate, believes that a White House CTO would need to focus on a few key tech initiatives and not just serve as an administrator or liaison between CTOs across the government.
This approach to the White House CTO job makes the most sense in terms of being able to accomplish specific objectives. In addition, Obama is fielding his own technology council of private and public sector titans, as his predecessor did with his President's Council of Advisors on Science and Technology (PCAST), to advise and help out on key issues.
(Credit:
CBS News)
As the rookie U.S. senator who was catapulted into the White House on the back of the Internet, Obama knows that technology is a key enabler for his President 2.0 administration. He keeps a BlackBerry or iPhone on a holster on his hip, although his campaign Flickr photo library appears to devoid of pictures of Obama using his smartphone. (It must not yet be considered appropriate to show the president-elect text messaging.)
The technology to accomplish his long list of goals exists, but the funding, expertise, focus and political will is lacking in many areas. Transforming the U.S. government technology infrastructure from a plodding battleship (outside of the NSA and a few other high-tech agencies) into a speedy, adaptable ship built for the Internet age isn't going to be solved in the Obama era. But great progress can be made if the White House CTO can recruit into agencies the kind of people who helped Obama transform the way electoral campaigns are run and stimulate young people to study science curriculums.
Guest post: Christopher Lochhead, the retired chief marketing officer at Scient and Mercury, offers some turnaround strategies (learned the hard way) for weathering the economic storm.
Economic downturns require extraordinary leadership. They require brutal honesty. They require action. If your market and company are truly in trouble, here are some turnaround strategies (learned the hard way) to weather the storm so you can live to fight another day.
1. There Is No Such Thing As One Bad Quarter
When your markets get weak and/or you really screw up, fixing it will take a lot longer than you think it will. Pray for spring, but get ready for a long, cold winter.
2. Get The Facts Yourself
People don't like to deliver bad news. As an executive, your job is to get to the heart of the problem fast. You (not someone who works for you) need to figure out how bad your problem is.
How bad is the sales forecast? How late is the next release of the product? What is the cash burn rate? How many critical projects are broken? You must drill into the "whys" to make sure you understand the facts and the causes of the problems. The key is to ask "why?" five times.
Why is the project late (you will get an answer)? Then ask why that is the case (you will get another answer), then ask why that is the case (you will get yet a deeper answer), and so on.
Once you've asked why five times, end every conversation with the most powerful question you can ask, "Is there anything else?" Before my grandmother was heading into surgery to fix a broken hip, I asked her doctor that question. He told me something he had not wanted to tell us--that there was a 25 percent chance she would die during the operation. People don't like to deliver bad news. Real leaders get the real facts so they can take real action.
3. Get 2 Top 10 Lists Fast
Get the smartest, most courageous people in the company together this weekend (no more than 10 as big groups do stupid things) to brainstorm about the top 10 ways to drive revenue and the top 10 ways to cut costs. Here are a few ideas to get you started.
Drive revenue:
- Assign every big deal in the pipeline to an executive and make the execs and the salespeople accountable for closing the deals
- Give customers a new incentive to buy this quarter
- Focus on your core markets and ignore the rest
- Announce a competitive replacement program (provide an incentive for customers of your competition to switch)
Cut cost:
- Do a lay-off
- Pull out of under-performing markets or geographies
- Sell under-performing assets or business units
- Stop all stupid travel, off-sites and trade shows (anyone at AIG from there?)
4. Horde Cash
In March of 2000 as the tech bubble was getting ready to burst, my accountant, the legendary Greg Finely, called me and yelled, "Horde cash!" It's good advice in bad times. Meet with your CFO and finance team to figure out how to optimize the cash, and never forget the sage words of the Coen brothers, "Where's the money, Lebowski?"
5. Tear Off The Band-Aid Once
Take all the pain in one big shot. Cut deeper and make bigger changes than you think you need to. The more quarterly forecasts you miss and layoffs you do, the harder it is to recover. Once you know that your company is in trouble, assume it's in worse shape than you realize. Because it is.
If you are going to miss quarterly numbers and forecasts, miss them once. If you have to do a reorg, do it once. And if you are forced to do a layoff, do it once.
6. Fire Executives
It is stunning how many companies do a layoff without firing any executives. You can't layoff 20 percent of the company without letting go of some of the executives (who are at least partially responsible, if not completely responsible for the problem). And don't just demote them, or move them to some other job. Fire them.
7. Chop The Dead Wood
Every company has people on the team who are "C" players. Rather than doing an across-the-board 10 percent cut, make sure that the people you are cutting are the worst performers in your company. Your "A" and "B" players will appreciate the fact that you did the right cutting. This may sound harsh, but no one wants the "C" players around anyway.
8. Tell The Truth
Some executives think that lying, misleading, and otherwise obfuscating will "soften" the blow in bad times. Wrong. Lying never works. It sounds obvious, but companies and executives do it all the time. It can land you in jail or ruin your career (trust me--I've seen this happen to well-meaning but misguided execs). People hate delivering bad news, so they tell a "white lie," which they often rationalize as somehow doing good for others.
Be honest and direct about the facts. Brutally honest. Be honest with your stakeholders. If you are laying off 25 percent of your people, then say that's what you are doing. Don't say, "We are laying off 15 percent and expect some additional headcount reductions through normal attrition."
9. Communicate Clearly and Powerfully
The truth will never be as bad as the rumors will become. "No comment" will increase the untruths and gossip. It will also unleash the venom of the people you used to be forthright with. The press will attack harder, and your employees' distrust will grow deeper. Both will undermine your efforts with customers and drive your stock price even further down. It doesn't matter how much it hurts. You must over-communicate.
When you're in trouble, get clear about what you are going to say before you open your mouth. Rambling or trying to make 16 points will make you look confused, defensive, or stupid. Then get clear on three--and only three-- key messages to deliver: the facts as you know them, the actions you're taking now, and how your actions today position you for future success. Write these messages down, and practice saying them.
10. Sign A Pact In Blood
In November of 2005 Mercury's board of directors fired our CEO, CFO, and general counsel because of a stock-option accounting problem. Our stock tanked, our competitors attacked, and our employees were scared. The key executives in the company agreed to stick together come hell or high water (and boy, did we go through hell and high water, but that's another story).
We didn't wavier. And neither should you. Nine months later, we had settled the accounting problem, turned the company around, produced some of our best quarters ever, did an acquisition, and ultimately Hewlett-Packard bought us for a significant premium. That turned out to be a big win for shareholders, customers, our people and HP.
11. Drive It Like You Stole It
Legendary teams execute their turnaround plans like it is the last thing they will ever do. Take action. Bust your butt. Get on planes and meet with all of you key customers. Rally your teams in town hall meetings in all of your key offices. Refine your strategy. Focus your efforts. Get your people focused on results. Meet with your top investors to tell them how and why your turn around will work. Get help from some wicked advisers. Recruit new talent to the company. Sell, sell, sell, and lead, lead, lead.
Leading a company through a turnaround is arguably the hardest thing to do in business. If you actually do it and pull through, it will become the most rewarding thing you have ever done in business. Good luck and knock 'em alive.
After 20 years in business and being the marketing chief at three public companies, Christopher Lochhead retired at 38. Now, he serves on a few boards and is a part-time strategy adviser. Every year he gives a handful of speeches, and from time to time writes something. Check out www.lochhead.com.
Reading The Wall Street Journal and watching CNBC lately can drive a person (namely me) to drink. Which is fun, but beyond answering the question, "Which scotch will I drink?" the seminal question is "How do we thrive in a downturn?"
Downturns are the best time to take market share. Most companies overreact. They get too conservative. They also forget that they are not the victims of the market.
Customers buy (or they don't) based on the way we do business with them, not the other way around. So now is the time to get aggressive, compel customers to buy and hit competitors when they are weak.
I am reminded of the sage words of Steven Tyler, the lead singer of Aerosmith, who said, "Love in an elevator, livin' it up when I'm going down." Well, it's time to live it up.
Invest in new technology
Time has proven that companies that leapfrog with technology win. It is surprising how slowly Web 2.0 and other important new technologies are being adopted in the enterprise. Much of the innovation seems to be coming in the form of new consumer services and technologies. Now is the time for the enterprise to move from Web 1.0 to 2.0. There is a whole new range of new 2.0 stuff to look at and implement. Here is a list of a few of my favorites:
- Cloud services
- Enterprise social software (Social networks, wikis, blogs, prediction markets)
- New software as a service (SaaS) apps
- The emerging category of PaaS (platform-as-a-service)
- Blade servers and storage
- New virtualization & provisioning technologies
- New mobile apps (Anyone notice the iPhone & BlackBerry growth?)
- Whack 10 percent of all development projects (At least that many are no longer needed.)
- Cut production apps by 10 percent (At least that many are under-used.)
- Increase data center and application consolidation efforts
- Look at more areas to outsource
Launch a bold marketing campaign
In bad times, customers look for solid companies. Brands that are visible win. The worse thing you can do in a downturn is cut the marketing and sales budget by too much. While some belt tightening across the enterprise is prudent, this is one cost center where too much cutting can kill you. One area you can cut in marketing is the reach and frequency advertising. It is more powerful and cost effective to go big, in a very targeted way for shorter lightening strikes, than to spread an advertising budget evenly over 12 months. Don't forget, if you make your brand disappear for a while, it may disappear forever.
The seminal move is to figure out what the key differentiator is for your company. Then launch a campaign to drive home that differentiation while building the category for your offerings. Consider traditional approaches (advertising, PR, direct, events, etc.), but emphasize nontraditional, highly-viral ideas. Here are some great recent examples:
- Trek Bikes challenges people to ride their bikes more with their new Web site.
- Kinesio, the new athletic tape, gave their product away to athletes from 58 countries for use at the Olympic Games. One look at the wild, black spidery-like tattoo-tape on Kerri Walsh's body as she swatted volleyballs down opponents throats and a lot of people started buying the stuff.
- This summer legendary billionaire corporate raider and oil man T. Boone Pickens launched a bold campaign to create a breakthrough in market demand for alternate sources of energy. His ads, Web site and PR (appearances on CNN, Fox News, the New York Times and many, many more) make his case for reducing American use of foreign oil and embracing wind, solar, and natural gas, all while creating demand for his new companies.
Buy companies
Downturns are the best time to buy companies, and here are four reasons:
- Valuations and market caps are way down. Any company you want to buy is a lot cheaper today then it was a year ago.
- Doing acquisitions now allows you to expand your market footprint fast, with new offerings, customers, geographies, or markets.
- The dreaded word "synergy," which is a euphemism for layoffs and cost cutting. It may be harsh to say, but acquisitions are a great excuse to take unneeded people and costs out of both the company you are buying and your own company.
- It sends a strong message to your customers, people, competitors, and shareholders that you are a bad-ass company that is going for it, when most of your competition is hiding under their desks. This will often drive them to buy more of your product and your stock.
Making smart cuts is part of winning in downturns. But no one ever cost-cut their way to greatness. Now is the time to go on the attack. It just takes courage, cash, and conviction.
Click here for ongoing coverage from CNET News, 'Tough times for tech'
After twenty years in business and being the marketing chief at three public companies, Christopher Lochhead retired at 38. Now, he serves on a few boards and is a part-time strategy advisor. Every year he gives a handful of speeches, and from time to time writes something. Check out www.lochhead.com.
The proverbial wheels are coming off. The financial crisis is spreading across the globe. The political mudslinging is getting into full gear as the U.S. presidential election nears its conclusion and inflation continues to rise. Basically, everything costs more, with the exception of gasoline spurred by slowing demand as consumers look for ways to stay afloat financially.
The well-heeled country of Iceland, with 320,000 residents (about half the population of Alaska in an island the size of Kentucky) is nearly underwater financially. Europe, not just the U.S., is in the midst of a once-in-a-lifetime economic crisis.
Governments, via taxpayer funds, are stepping into the breach with the equivalent of Band-Aids and bailing wire to stop the potential slide into financial oblivion. But there is no escape from this perfect storm. The financial institutions played fast and loose and now they can't cover their bets. (See the 60 Minutes segment in which the credit crunch is explained in plain English.)
For the tech industry it means hunkering down. A few days ago, the legendary Bill Gates said that companies will continue to invest while the economy sputters somewhat, but "nothing like a big recession or a depression."
His remarks seem overly optimistic, given the crisis of confidence in financial markets spreading like a virus throughout the world. A hacker or terrorist hoping to destabilize economies couldn't have done a better job than the financial industry itself.
Already a steady stream of companies are lowering their forecasts, taking out any surprises as the typically more lucrative fourth quarter gets under way. The stock prices of the top tech companies are in the tank, which is indicative of a very spooked investor community. The investment community looks at those prices and sees a buy order--the stocks are really cheap--but after the last few days it's difficult to have any confidence that a seemingly good bet would pay off.
In the midst and aftermath of this perfect storm, brewed out of years of habit and taken down by mortgages for the masses, both consumers and businesses will be far more conservative in their spending habits in the coming months. As in other epochs, such as the tech meltdown at the end of the 20th century, only the strong will survive. Consolidation or extinction will be the exit strategy, reaching way beyond the broken banking industry, which has been whittled down to a handful of players.
Out of this perfect storm new financial infrastructure and regulations will emerge that bring back confidence into the markets and reignite innovation, that is until the next destructive cycle driven by irrational exuberance comes around.
Click here for ongoing coverage from CNET News, 'Tough times for tech'
