Tag Archives: crisis

What I Learned Solving a Business Crisis

What I Learned Solving a Business Crisis

GUEST POST from Greg Satell

By 2006 we knew we had a serious problem. Our company’s onetime flagship product, called Afisha, was in a steady decline and it was becoming all too clear that something had to be done. What had once been a market leader that generated huge profits, which fueled the growth of our company had slowly, but surely, lost its market position.

It was clear that the business was in crisis, but nobody was exactly sure what to do about it. Operationally, nothing had really changed. We still believed in our product and our people. Nevertheless, the marketplace had evolved and our business model, which once had seemed bulletproof, was no longer viable.

We didn’t know it at the time, but Afisha’s brightest days were still ahead. We were able to reimagine the business model, strengthen the brand and return to profitability. What we learned is that solving a crisis is not a straightforward linear process, but a journey of discovery. You never know what you’ll find so you need to be willing to experiment.

Acknowledging The Problem

As I explained in Mapping Innovation, when Afisha came out in 2000, it was an immediate hit. At its core, it was simply a guide to restaurants, nightlife and other entertainment, somewhat similar to Timeout. Its restaurant, music and movie columnists quickly became tastemakers in Kyiv, while its sex advice column, achieved a cult-level status. Ad dollars soon came rolling in

In 2006, all of those elements that had made Afisha successful were still in place, but the business environment had changed significantly. The ad market, which had been worth less than $100 million dollars in 2000, was now quickly approaching a billion dollars. Strong multinational publishers like Hearst, Hachette and Rodale had begun investing heavily into Ukrainian versions of top international titles like Cosmopolitan, Elle and Men’s Health.

What we had to accept was that Afisha, although still popular with readers, was no longer a dominant brand. At the same time, the free distribution model which it had once depended on to quickly achieve wide readership was now seen as a liability among advertisers. That diminished our ability to command top ad rates while, at the same time, the booming media market sent our editorial costs through the roof.

None of this happened all at once, so it was easy to believe that Afisha was just going through a temporary downturn. It was only when we were able to acknowledge that our once-successful model had become fundamentally broken that we were able to start moving forward.

Assembling A Broad-Based Team

Once we had acknowledged the problem we assembled a meeting to come up with a strategy to move forward. This included the publisher and editor-in-chief of Afisha, several of the key staff, our company founder, me (as CEO) as well as several company leaders outside of Afisha who had specific knowledge and skills and who were widely respected.

The composition of the meeting was important. Clearly, the Afisha team had to be deeply involved in the process. Having the company founder and me there made it clear that the business had the full backing of the executive leadership. However, in many ways, it was those outside the core Afisha team who had critical impacts.

For the Afisha team and the executive leadership, the business model was so familiar it seemed almost like second-hand. Bringing in other leaders from around the company helped us look at the business in new ways. They asked questions that challenged us, made observations that we hadn’t seen and suggested things that wouldn’t have occurred to us.

Identifying Issues And Developing Options

As the working group met and got down to business, we began to identify problems. First, as noted above, the competitive landscape had shifted dramatically and, although Afisha remained a beloved brand, international titles had taken away significant market share. Second, the free distribution model was no longer financially viable.

As we discussed options, we were able to quickly build consensus on two actions. We would redesign the magazine and the website to beef up the editorial content and better compete with the international titles. We would also look for partners to license Afisha to other cities in Ukraine and create a more national brand.

We also came up with a third option that was considerably more speculative. For years, we had been giving paid subscribers Afisha cards to receive discounts at local merchants. We thought that we could add value to the card by creating an event calendar that was exclusive to Afisha card holders.

Our reasoning was that if we could increase subscribers through upgrading the Afisha card, we could reduce our reliance on free distribution and improve the economics of the business. It seemed like a longshot, but it was also low risk. All we had to do was sign up some partners for events and publish an event calendar in the magazine and on the website.

Finding The Unexpected

The editorial and licensing strategies, which seemed like no brainers, were, at best, mildly successful. Readers seemed to like the new design and expanded editorial content, but then again they liked the old Afisha too. We were able to set up licenses for five major Ukrainian cities, giving up close to national coverage, but the licensees struggled to earn a profit.

The Afisha card strategy, on the other hand, was an unexpected hit. We had hoped to be able to do one event a week, but were soon so deluged with partners that we had to limit events to one per day. From happy hours and shopping nights to club openings and movie festivals, it seemed like everybody wanted to work with us.

Before we knew it, we were able to upgrade events from a promotional activity to a seriously profitable business. We organized a nationwide Frisbee contest for a beer launch, a French movie festival for an upscale coffee brand and organized party trips with sponsors. To our amazement, the business just grew and grew.

What we learned from the experience is that you can’t plan your way out of a crisis. If we were able to plan effectively, we wouldn’t have been in the crisis in the first place. Our success wasn’t the product of our own brilliance, but our willingness to experiment. That’s how we came across the “happy accident” that led to the events business.

The truth is that it takes some bad luck to get into a crisis and it takes some good luck to get out of one. Sound management can help stem the bleeding, but if you are ever going to rebuild a successful business, you have to experiment and allow for the unexpected.

— Article courtesy of the Digital Tonto blog
— Image credit: Pixabay

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Why Change Failure Occurs

Why Change Failure Occurs

GUEST POST from Greg Satell

Never has the need for transformation been so dire or so clear. Still, that’s no guarantee that we will muster the wisdom to make the changes we need to. After all, President Bush warned us about the risks of a global pandemic way back in 2005 and, in the end, we were left wholly vulnerable and exposed.

It’s not like pandemics are the only thing to worry about either. A 2018 climate assessment warns of major economic impacts unless we make some serious shifts. Public debt, already high before the current crisis, is now exploding upwards. Our electricity grid is insecure and vulnerable to cyberattack. The list goes on.

All too often, we assume that mere necessity can drive change forward, yet history has shown that not to be the case. There’s a reason why nations fail and businesses go bankrupt. The truth is that if a change is important, some people won’t like it and they will work to undermine it in underhanded and insidious ways. That’s what we need to overcome.

A Short History Of Change

For most of history, until the industrial revolution, people existed as they had for millennia and could live their entire lives without seeing much change. They farmed or herded for a living, used animals for power and rarely travelled far from home. Even in the 20th century, most people worked in an industry that changed little during their career.

In the 1980s, management consultants began to notice that industries were beginning to evolve more rapidly and firms that didn’t adapt would lose out in the marketplace. One famous case study showed how Burroughs moved aggressively into electronic computing and prospered while its competitor NCR lagged and faded into obscurity.

In 1983, McKinsey consultant Julien Phillips published a paper in the journal, Human Resource Management, that described an “adoption penalty” for firms that didn’t adapt to changes in the marketplace quickly enough. His ideas became McKinsey’s first change management model that it sold to clients.

Yet consider that research shows in 1975, during the period Phillips studied, 83% of the average US corporation’s assets were tangible, such as plant, machinery and buildings, while by 2015, 84% of corporate assets were intangible, such as licenses, patents and human capital. In other words, change today involves mostly people, their knowledge and behaviors than it does strategic assets.

Clearly, that changes the game entirely.

What Change Looks Like Today

Think about how America was transformed after World War II. We created the Interstate Highway System to tie our nation together. We established a new scientific infrastructure that made us a technological superpower. We built airports, shopping malls and department stores. We even sent a man to the moon.

Despite the enormous impact of these accomplishments, none of those things demanded that people had to dramatically change their behavior. Nobody had to drive on an Interstate highway, work in a lab, travel in space or move to the suburbs. Many chose to do those things, but others did not and paid little or no penalty for their failure to change with the times.

Today the story is vastly different. A crisis like Covid-19 required us to significantly alter our behavior and, not surprisingly, some people didn’t like it and resisted. We could, as individuals, choose to wear a mask, but if others didn’t follow suit the danger remained. We can, as a society, invest billions in a vaccine, but if a significant portion don’t take it, the virus will continue to mutate at a rapid rate, undermining the effectiveness of the entire enterprise.

Organizations face similar challenges. Sure they invest in tangible assets, such as plant and equipment, but any significant change will involve changing people’s beliefs and behaviors and that is a different matter altogether. Today, even technological transformations have a significant human component.

Making Room For Identity And Dignity

In the early 19th century, a movement of textile workers known as the Luddites smashed machines to protest the new, automated mode of work. As skilled workers, they saw their way of life being destroyed in the name of progress because the new technology could make fabrics faster and cheaper with less workers of lower skill.

Today, “Luddite” has become a pejorative term to describe people who are unable or unwilling to accept technological change. Many observers point out that the rise of industry created new and different jobs and increased overall prosperity. Yet that largely misses the point. Weavers were skilled artisans who worked for years to hone their craft. What they did wasn’t just a job, it was who they were and what they took pride in.

One of the great misconceptions of our modern age is that people make decisions based on rational calculations of utility and that, by engineering the right incentives, we can control behavior. Yet people are far more than economic entities, They crave dignity and recognition, to be valued, in other words, as ends in themselves rather than as merely means to an end.

That’s why changing behaviors can be such a tricky thing. While some may see being told to wear a mask or socially distance as simply doing what “science says,” for others it is an imposition on their identity and dignity from outside their community. Perhaps not surprisingly, they rebel and demand to have their right to choose be recognized.

Building Change On Common Ground

The biggest misconception about change is that once people understand it, they will embrace and so the best way to drive change forward is to explain the need for change in a very convincing and persuasive way. Change, in this view, is essentially a communication exercise and the right combination of words and images is all that is required.

Yet as should be clear by now that is clearly not true. People will often oppose change because it asks them to alter their identity. The Luddites didn’t just oppose textile machinery on economic grounds, but because it failed to recognize their skills as weavers. People don’t necessarily oppose wearing masks because they are “anti-science,” but because they resent having their behavior mandated from outside their community.

In other words, change is always, at some level, about what people value. That’s why to bring change about you need to identify shared values that reaffirm, rather than undermine, people’s sense of identity. Recognition is often a more powerful incentive than even financial rewards. In the final analysis, lasting change always needs to be built on common ground.

Over the next decade, we will undergo some of the most profound shifts in history, encompassing technology, resources, migration patterns and demography and, if we are to compete, we will need to achieve enormous transformation in business and society. Whether we are able to do that or not depends less on economics or “science” than it does on our ability to trust each other again.

— Article courtesy of the Digital Tonto blog
— Image credit: Pexels

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Building Virtual Diplomacy

Building Virtual DiplomacyThe Setup

Lets look at Innovation, Crowdsourcing, and the United States Government for a minute…

The world continues to move faster than ever and diplomatic responses from the United States are required that are both increasingly more complex and more urgent, and the required solutions must address the inherent situational challenges while also protecting the interests of the United States and its allies. To deal with this diplomatic reality, the United States State Department is embracing the principles of crowdsourcing, eGovernment, and open innovation and partnering with America’s best universities to help solve the World’s biggest challenges as part of a new initiative called Diplomacy Lab. I found the following after meandering through a bread crumb trail of tweets from @AlecJRoss (Hillary Clinton’s former Chief Innovation Officer):

Diplomacy Lab is designed to address two priorities: first, Secretary Kerry’s determination to engage the American people in the work of diplomacy. And second, the imperative to broaden the State Department’s research base in response to a proliferation of complex global challenges. The initiative enables the State Department to “course-source” research and innovation related to foreign policy by harnessing the efforts of students and faculty experts at universities across the country. Students participating in Diplomacy Lab explore real-world challenges identified by the Department and work under the guidance of faculty members who are authorities in their fields. This initiative allows students to contribute directly to the policymaking process while helping the State Department tap into an underutilized reservoir of intellectual capital. Teams that develop exceptional results and ideas are recognized for their work and may be invited to brief senior State Department officials on their findings.

This then led to me to information about another digital diplomacy program.

US State Department Harnesses Interns Around the Globe to Address Digital Needs

During Hillary Clinton’s tenure, the United States State Department introduced an eIntern program, as detailed on the State Department web site:

Virtual Student Foreign ServiceThe Virtual Student Foreign Service (VSFS) is part of a growing effort by the State Department to harness technology and a commitment to global service among young people to facilitate new forms of diplomatic engagement. Working from college and university campuses in the United States and throughout the world, eInterns (American students working virtually) are partnered with our U.S. diplomatic posts overseas and State Department, U.S. Agency for International Development (USAID), the U.S. Department of Agriculture (USDA), the Broadcasting Board of Governors (BBG) and the U.S. Commercial Service domestic offices to conduct digital diplomacy that reflects the realities of our networked world. This introductory video provides an overview of the VSFS program.

VSFS eIntern duties and responsibilities will vary according to the location and needs of the VSFS projects identified at the sponsoring domestic or overseas diplomatic office. VSFS projects may be research based, contributing to reports on issues such as human rights, economics or the environment. They may also be more technology oriented, such as working on web pages, or helping produce electronic journals. Selected students are expected to work virtually on an average of 5-10 hours per week on VSFS eInternship projects. Students apply in the summer and if selected, begin the eInternship that fall lasting through spring. Most work and projects are internet-based and some have language requirements. Past projects asked students to:

  • Develop and implement a public relations campaign using social media sites like Facebook, Twitter, MySpace, YouTube, etc. to communicate and reach out to youth
  • Conduct research on the economic situation, prepare graphic representations of economic data, and prepare informational material for the U.S. Embassy website
  • Create a system to gather and analyze media coverage on a set of topics including environment, health, and trade
  • Develop a series of professional instructional video clips to be published by the U.S. Embassy
  • Survey social media efforts of U.S. diplomatic posts, NGOs, and private companies around the world to help establish best practices in a U.S. Embassy’s social media outreach business plan.

The Conclusion

It is fascinating to see the world changing before our eyes and to see the children and young people of today engaged in commerce and government and entrepreneurship in ways that weren’t available to previous generations of young people. This only helps to accelerate the pace of change. But, the reality is that when an organization sits at the fork in the road and is making the decision of whether or not to actively engage people outside their four walls in their strategic efforts, the choice really is to either ride the crest of the wave by embracing and engaging talent outside your organization or choosing instead to get tumbled and drowned by this wave of progress by doing nothing.

What choice is your government or your organization making?

If you’re not sure how your government or your organization needs to change to adapt to these changing realities, check out my previous article:

What is the Role of Personal Branding in Achieving Innovation Success?

Build a common language of innovation on your team

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