"Huffington Says Her Site Is Close To Making Money" is the video headline at Marketwatch.com. For years this blog has chastised traditional news publishers for trying to Defend & Extend their traditional business, when the market has shifted on-line —- both for readers and advertisers. Of course, the newspaper companies counter this argument by saying that they can't make any money on-line. They have to defend their traditional business – even from web competitors.
When shifts happen it's best to get started experimenting and migrating early. You may hate the political bent of HuffingtonPost.com, but that it's near making money shows that the model can work. Just differently than a newspaper or magazine. Unfortunately, most traditional media have been too busy trying to fend off the web to learn anything. For example, Tribune Corporation has long owned equity stakes in CareerBuilder.com and Cars.com as well as FoodChannel.com. But the company refused to learn from these ventures and migrate toward a different Success Formula.
Now it's too late for these traditional companies. You may think that if HuffingtonPost.com is still not quite profitable there's still time to compete. But reality is that Ms. Huffington's organization has been experimenting and learning and creating this Success Formula for 4 years. That kind of learning you can't pick up overnight. You have to participate in the marketplace, then make what you learn (good and bad) available for everyone to see. Then you have to discuss what you've learned openly so the organization can become knowledgable about what works and migrate toward a new Success Formula in which they have confidence. And that's why most companies react to market switches way too late. They think they can jump in at the last minute. But by then the HuffingtonPost.coms and Marketwatch.coms and MediaPost.coms have already learned how to succeed at this business, developed a subscriber base and created a viable ad sales program.
Take for example "Clunkers Program Boosts Ford, But Not GM, Chrysler" as headlined on Marketwatch.com. Now that the results are in from the government stimulated "clunkers" program, we know that the market has shifted away from GM and Chrysler. Year-over-year, Hyundai sales were up 47%, Honda up 9%, Toyota up 6.4%. Ford scored big with sales up 17%. But GM sales were down over 20%, and Chrysler sales fell 15%. We can see from this data that people were ready to buy cars, given a boost. While the overall market was up, we can see that it has shifted to a new batch of competitors. GM and Chrysler simply weren't prepared to compete – and it's doubtful they ever will be. They've missed the market shift, and now they don't have the R&D, products, distribution, marketing, etc. to remain competitive with companies that are seeing volumes and revenues rise.
Of course, every company has the opportunity to shift with markets – or be crushed by changes. The latest economic reports show that too many American businesses, like GM and Chrysler, are waiting to be crushed. "US productivity rises at fastest pace in nearly 6 years, while labor costs plunge in spring" is the ChicagoTribune.com headline. This is bad news for those thinking an economic upturn will save them.
When an economy grows productivity improvements are good. Imagine you sell 100 items. You have 100 employees. Productivity is 1. A growing economy allows you to sell 105, your employment remains the same, and productivity jumped 5%. Lots of winners – between the employees (more pay or bonus), the customers (possibly lower prices down the road based on rising volume), for investors (more profits) and for suppliers (more volume and less pressure on prices.) Let's say the economy slackens – like 2009. Volume drops to 90. But through cost saving measures employment drops to 86. Productivity just went up almost 5%! But nobody won. And that's what's happening today. Labor rates keep dropping because there's more labor supply than product demand – and if businesses keep cutting costs we'll improve our productivity right up while the economy keeps going down.
Business leaders need to be more like Huffington Post, and less like GM. To improve profits they need to recognize that markets have shifted, and move quickly to develop new Success Formulas which get them growing. Trying to Defend & Extend the old business, like newspaper publishers, simply drives you toward bankruptcy. Instead, it's time to Disrupt the status quo and create some White Space projects to learn what the market wants. It's time to experiment and get the whole company involved in applying the collective brainpower to develop new a new Success Formula which gets you growing, making more money, and improving productivity for real!
