Tag Archives: Technology Obsolescence

NY Times vs. USA Today: Who’s #1?

F. Scott Fitzgerald, author of “The Great Gatsby,” once observed that “there are no second acts in American lives.” He was referring to the eternal cycle of American culture, a cycle that briefly lifts anonymous citizens to fame and fortune and then destroys them, only to move on to its next hero / victim.

Many other icons have observed this same tendency. Pop art pioneer Andy Warhol, for instance, once remarked that all Americans “will be world-famous for fifteen minutes.” And in the business world, entrepreneurs like Groupon founder Andrew Mason can plunge from the pinnacle of success to the unemployment line in the blink of an eye.

But there are times when fading business icons are able to turn the tables on their successors and reassume positions of leadership, thereby launching the very types of “second acts” that Fitzgerald deemed impossible. Indeed, there are times when their successors actually enable them to do so by failing to rejuvenate themselves.

All The News That’s Fit To Print

The most recent newspaper circulation data, for instance, revealed that the venerable New York Times has supplanted the USA Today as the #1 general interest newspaper in the United States. Although the Times still trails the business focused Wall Street Journal in total circulation, it is the only publication among the Big Three to cover “all the news that’s fit to print” on a seven-day-a-week production schedule.

The Times, of course, has been publishing newspapers since 1851, and has been awarded more Pulitzer Prizes for journalism than any other news organization. But as recently as two years ago, its very existence appeared to be threatened by the emergence of various internet based rivals.

That’s when its publisher “bet the business” on the introduction of a pay wall that covered most of its internet content, gambling that any gain in online subscription revenue would more than offset the loss of advertising revenue from declines in non-subscriber web traffic. Its bold leap into web based e-commerce succeeded; it has returned the Times to its traditional position of industry leader.

But what of its largest general news competitor, the USA Today?

America’s Newspaper

Former Gannett chairman Al Neuharth launched the USA Today in 1982, at a time when no general interest newspaper was pursuing a national circulation strategy. The commercial internet did not exist at that time; thus, it was considered impossible for any newspaper to deliver paper based products on a daily basis across the nation.

Neuharth met that challenge by implementing an innovative business model, one that features the distribution of free newspapers to business travelers through national hotel chains. These travelers have no personal interest in the local news stories of the cities they visit, and yet they are considered attractive targets for national advertising campaigns.

Although critics disparagingly refer to the USA Today as a “Mc Paper” for its brief articles and glossy format, it has grown into a true national newspaper. For thirty years, it has been known as a prominent resource of American media and culture.

USA Today … Today

So what is the condition of the USA Today … today? It once soared past the New York Times on the strength of an innovative business model, only to fall back recently. Is it hoping to repeat its historical success soon?

Ironically, the very business strategy that permitted it to succeed during a time of paper news products is now hindering its growth in the internet era. Today, business travelers can access a wide array of news stories via the world wide web. Thus, they are no longer reliant on a “McPaper” when they are traveling for business purposes.

At the moment, the USA Today does have a web site that presents its contemporary and archived news stories. But it is hardly ever mentioned as a credible competitor among the leading online news portals; indeed, it only ranked tenth in a Nielsen survey last year.

Ready For A Backlash?

Of course, it’s quite possible that the Gannett publication may yet invent a new business model that enables it to win its battle for relevance in the media market. In fact, a number of prominent newspapers have recently experienced a backlash against their new web based strategies, and have begun to issue paper based products again.

The New Orleans Times Picayune, for instance, recently launched a streamlined newspaper on the three weekdays when it had previously terminated paper deliveries. And the initially web-only political news service Politico has launched a daily newspaper in the Washington DC and New York City markets.

None of these “retro” newspaper success stories, of course, imply that the American news market will be turning away from the internet any time soon. Nevertheless, such successes may give organizations like the USA Today hope that they – like the New York Times – will be able to design new strategies for survival.

The Apple Dividend: End Of An Era?

Last week, Apple declared that it would pay its shareholders a dividend for the first time since 1995.

The market’s reaction? It paused for a moment. Then it yawned. It might have even groaned a bit. The value of Apple’s stock barely budged, beginning and ending the week trading at $599 per share.

Huh? Why did a successful company’s announcement of a new dividend payment policy generate so little enthusiasm? And why might Apple’s declaration mark the end of an era in the internet technology sector?

The Best Alternative Use

The convention wisdom states that dividend payments represent financial gratuities that companies pay shareholders to thank them for their loyalties. That’s why US Airways decided to name its frequent flyer program Dividend Miles, in order to convey the optimistic message that its “dividend” point awards are expressions of appreciation for its customers.

But dividend payment decisions may convey relatively pessimistic messages as well, signals that tend to worry equity investors in high growth firms. Namely, dividend payments may be perceived as desperation measures, payments that are authorized when firms have run out of attractive growth opportunities in which to invest their funds.

Tobacco companies, for instance, often make sizable and stable dividend payments to their investors. Why? Because they tend to earn significant cash profits, but are unable to find investment opportunities that are more attractive to their shareholders than the prospect of simply receiving payments. For instance, Philip Morris (of Marlboro fame) once tried diversifying into the food business by purchasing Kraft, and RJ Reynolds (for its Winston brand) once dabbled in the development of a smokeless cigarette. But neither firm was able to turn those opportunities into enduring successes.

So, based on the stock market’s reaction last week, it appears that investors may have interpreted Apple’s dividend decision as a pessimistic message regarding its future growth prospects. And interestingly, the lingering memory of Steve Jobs may have influenced their opinions.

Bracketing An Era

It’s no coincidence that Apple’s most recent dividend payment (prior to last week’s corporate announcement) occurred in 1995, one year before Steve Jobs returned from exile with Apple’s purchase of NeXT to turn around the company’s fortunes. The newly announced dividend will be paid later this year, approximately one full year after Jobs passed the mantle of leadership to his successor Tim Cook.

Indeed, these two dividend transactions serve to bracket the transformational era of Steve Jobs’ second stint at Apple’s helm. Although the firm first decided to suspend its dividend payments in the 1990s because of extreme financial difficulties, very few investors ever pressured it to pay dividends during the early years of the 21st century. And that made perfect sense; after all, why would investors ask a company to pay dividends to its shareholders while it needed the cash to invent and introduce iPods and iPhones and iPads to millions of new customers around the world?

At the time of his death, Jobs was rumored to be focusing intensively on television as Apple’s next great development opportunity. And at the time, in characteristic fashion, Jobs was refusing to consider any plan to authorize dividend payments. But under Tim Cook, the firm has struggled to find a path to break into the television industry, and the firm’s hoard of unspent cash has climbed to $100 billion. Thus, with no preferable alternative use of the cash readily available for investment purposes, Cook decided to pull the proverbial trigger and authorize the dividend payment.

The Microsoft Analogy

When was the last time a high flying technology firm faced a similar decision? On January 16, 2003, Microsoft decided to declare a dividend in order to deal with its own $40 billion hoard of unspent cash. But just one year later, on February 4, 2004, Harvard University student Mark Zuckerberg launched thefacebook.com from his dormitory room, and Microsoft has been scrambling to compete in the social media era ever since.

Would Microsoft have been better served keeping the funds that it decided to pay out as dividends, and developing or acquiring its own social media network to compete with Facebook? Arguably, it has attempted to execute similar strategies in a couple of industry sectors, by developing the search engine Bing to challenge Google, and by purchasing the communication service Skype to compete with various voice and text messaging firms. But these competitive strategies have failed to restore Microsoft to its former position of industry dominance.

Indeed, in retrospect, Microsoft’s 2003 announcement appears to have marked the end of an era that was dominated by desktop computers and their independent software programs, and the beginning of an era of mobile devices and their cloud-connected service systems. With newly emerging firms like zynga and foursquare grabbing the attention of today’s technology investors, it’s possible that we’ll eventually look back at this week’s Apple announcement as the end of an era as well.

Steve Jobs: Contrarian

Much praise has been lavished — and deservedly so — on the life and legacy of Steve Jobs in the days following his untimely demise at the age of 56. Although comparisons to historic figures like Thomas Edison and Henry Ford may be a bit strained, we can all certainly agree that Jobs’ emphasis on product design and quality helped transform the consumer technology industry.

Absent from the initial wave of obituaries, though, was a focus on the contrarian approach that Jobs repeatedly employed throughout his storied career. Time and again, Job made decisions that left the pundits scratching their heads in confusion, decisions that nevertheless led to eventual success.

Some of those decisions represented conscious choices to repudiate fundamental principles of modern business theory. Others represented the implementation of highly risky tactics that are seldom successful in the contemporary economy, but that Jobs nevertheless managed to implement effectively.

Repudiating The Academics

Several years ago, Apple hired Dean Joel Podolny away from the Yale School of Management to manage Apple University, the firm’s internal training function. Dean Podolny was also assigned the task of creating a series of written case studies, for use in Apple’s training programs, that captured the essential principles and theories that Jobs employed during his tenure.

The cases themselves might be difficult to integrate into a traditional university curriculum, given Apple’s propensity to repudiate various fundamental tenets of traditional MBA lesson plans. Consider the principle of product obsolescence, for instance; firms are generally advised to extend the life cycles of their products, and not to consciously speed their obsolescence.

But Jobs continually developed new products that cannibalized existing Apple lines. Sales of iPod music players, for example, plummeted once Apple incorporated their core functions into the iPhone. And the iPad didn’t simply take business away from other laptop and netbook computer manufacturers; it apparently drained sales from the MacBook line as well.

Some professors might protest that Apple was simply combining complementary functions in new packages, in the manner that consumer product manufacturers sell soap and shampoo in toiletry travel packages, or spoons and forks in cutlery sets. But at the time that Apple combined its mobile music player with its new telephone, for instance, the pair of functions resided in entirely different industries.

Sony had not originally contemplated the placement of a telephone in its Walkman; likewise, Motorola had never attempted to play music through its Razr. The integration of music by the iPhone, and its resulting cannibalization of the iPod line, was thus a truly groundbreaking decision.

Rolling The Dice

Other decisions authorized by Jobs were not necessarily repudiations of classic business theories per se, and yet they represented highly uncertain “rolls of the dice” that paid off for Apple. Indeed, they were reflections of a corporate culture that embraced entrepreneurial risk-taking at the highest level.

Apple’s decision to rehire Jobs in 1996 after firing him in 1985, for example, represented an astonishing about-face by the firm’s Board of Directors. Although it is not unprecedented for corporate founders to return to the helms of their organizations after having retired or resigned to pursue other endeavors, the rehiring of a fired CEO was undoubtedly a risky choice for the firm.

Then, shortly after his return to the CEO position, Jobs reached out to Microsoft and secured a direct $150 million capital infusion. Such equity investments are likewise not unprecedented in nature, but the manner in which Jobs introduced and then defended the transaction startled the public. At the 1997 Macworld Expo, Bill Gates himself unexpectedly appeared “live” on an immense view screen, looming over the audience in a manner that reminded some viewers of Big Brother’s presence in Apple’s seminal 1984 Super Bowl ad.

Furthermore, throughout his tenure at Apple, Jobs repeatedly took the risk of striving for product simplicity in an industry that continued (and still continues) to grow increasingly complex over time. Although some simple designs, such as the minimalist Mac Cube, failed in the market place, others — such as the single button iPod, iPhone, and iPad — succeeded wildly. That’s why, for instance, many psychologists now recommend giving iPads to individuals with autism because of their ability to master its simple commands.

The Test Of Time

Ultimately, though, the most impressive accomplishment of Steve Jobs’ career may be his success in maintaining Apple’s position at the forefront of technological innovation for an astounding 35 years. During that time, numerous competitors have risen and fallen, including Xerox, Wang, Compaq, and Yahoo. None was able to maintain a tradition of creative leadership that stretched from the mainframe focused year of 1976 to the cloud computing era of 2011.

Indeed, the sheer longevity of Apple’s reign may represent the greatest legacy of a man in an industry where life cycles are measured in months and years, not decades. And now the attention of the technology community will turn to Tim Cook, Jobs’ successor, to observe whether he will be able to maintain Apple’s track record of accomplishment.