BUSINESS BLOGS
BUSINESS BLOGS
category: business
01 Dec 2008

“What do you do when your competitor is drowning? Get a live hose - and stick it in his mouth.”

Doug Ivester, Coca Cola Company.

I always hesitate to use that quote from former CFO and CEO of Coca Cola Doug Ivester because as the former, he was a brilliant numbers guy who managed to spruce up the company’s performance during its bull run, but as the latter, he lasted but a couple of years after replacing his legendary predecessor Roberto Goizueta.  Goizueta goes down in history as one of the most successful CEOs ever, who grew the bottler’s market cap from $4B in 1981 to $150B in 1997 and made it the world’s #1 beverage company.  Goizueta was largely seen as a diplomat and statesman.  In other words, while he might have agreed with Mr. Ivester’s quote above, he would not have said it on the record.

Surviving in Bad Times, Thriving in Good Ones

Nowadays, strategy and competition boil down to survival.  Survival can mean many things in business.  In downturns there is talk of surviving, in boom times, it’s about thriving. Even the definition of thriving is relative.

Another legendary CEO, Jack Welch of GE would say that unless you could be #1 or 2 in your space, you could not thrive, and as such, you should get out of a given industry.  In other words, you need to know where you stand vis-a-vis your competition.  Connecting all of the dots, I’ve always stated that the #1 or #2 rhetoric makes sense in mature segments, but not online because the market is growing fast enough and is volatile enough that so long as you are in the thick of things, you can always find an opening to gain traction.

Who Are Your Competitors?

There is another reason why I feel that way.  The web space remains very embryonic so it’s hard to even know who your competitors are.  I’ll be honest, I am not sure who our competitors are.

- Are WatchMojo.com’s competitors other video content producers like Revision3 or Next New Networks?  Not sure.  I see them as potential partners.

- Are WatchMojo.com’s competitors print companies that also offer content, albeit of a different nature, online?  I definitely don’t see print as competition, I see them as partners, mainly because, with all due respect, when it comes to traditional media and online video: those who can won’t and those who want can’t.  Print falls under those who want, in case you’re keeping track.

Under those who can, but won’t, I put TV companies.

- Are WatchMojo.com’s competitors TV companies with libraries of content who hesitate to trade offline dollars for online pennies?  Again, not sure.  I see them as potential partners too, because they’ll need made-for-web content for their online audiences as viewers flock to the Web and they try to defend their traditional revenue streams.  Sure, some will start producing their own content specifically for the Web, but those efforts won’t pan out for many reasons.

One reason why defining your competition is challenging for me is the nature of our industry.  It is a bit different in technology which usually represent zero-sum games (you either license my software or my competitors, but probably not both); with content, media consumption begets more consumption.

In any industry, your competitor can be your partner.  Online, I won’t lie, your so-called competitor may also prove to be your acquirer.

Today I read Glenn Kelman, the CEO of online real estate broker Redfin offer a guide to first time CEOs to survive the downturn.  There are some good tips, but the best tip, frankly, was the least emphasized.

8. Go on the Attack

Your competitors are hurting too. Be the aggressor, not the victim.

That’s it?  One sentence only?

Either way, that little nugget of wisdom captures the theme I want to drive home to all managers and entrepreneurs: don’t follow the crowd.  Everything I read these days is negative, downbeat news.  If I had a ledge, I’d be sitting on it (well, not quite, but you know what I mean).

When you get your tech news off TechMeme, you live in a bubble, or as some would put it, an echo chamber.  But the truth is, if you run a startup, your audience isn’t Silicon Valley, and there’s a very good chance Om Malik and Michael Arrington aren’t in your target market.

In fact, if you’re like, oh I’d say 99.9% of the people that seek business advice, there’s an even bigger chance that the startup you are running isn’t VC-backed or the company you are managing isn’t a publicly traded firm.

In other words, you don’t have to manage a growing company underneath the thumb of a VC board member and surely don’t have to massage earnings to please a fickle Wall Street, who these days is having its own set of worries anyway.

I personally think that if Sequoia rung the alarm bells and other VCs are now telling their portfolio firms to batten down the hatches, it has more to with their poor conceived investment strategy than with the economy, because a VC is supposed to look ahead 5-10 years anyway.  But that is for a separate post, oh look, here.

Don’t Follow the Crowd

As a result, these days, your best bet is to understand that the market is facing some challenges but so long as you are running a new media company, your best bet is to avoid following the crowd.  My advice is don’t follow the crowd in good times and don’t listen to the experts in bad times.  Seeing how we live in a consumption-driven society, in good times, many of the firms under pressure today raised a bit too much money and spent it a bit too quickly.  Naturally in bad times, they have to scale back.  In my experience, these two wrongs won’t make a right.

Case Studies in Panic Management

After the first bubble burst, print companies scaled back what little online strategy they had.  The result was that by 2003-04 when online came back with a vengeance, they were too slow to get back into the game.  This is a major reason why print companies are being mauled right and left.

In the magazine space, just last year, Maxim magazine was generating $28M in EBITDA and sold for some $250M.  Today it is generating $8M in EBITDA. But did you know that in the February 2001 issue of Maxim then editor Keith Blanchard penned a letter from the editor called “The Internet Bites.”  Seriously.  Well, if the Internet bites, what to say about print?

Newspapers are faring even worse.  From CrossCut, via SAI, I read how one newspaper company saw over 90% of its value evaporate in four years!

In 2004, newspaper broker Dirks, Van Essen & Murray put the value of the company at $900 million. Two years later McClatchy purchased a 49.5% share of the paper from Knight Ridder, which valued the paper at $240 million. McClatchy has regularly written down the value of the company since and in a federal filing dated Nov. 7, it valued its 49.5% stake in the company at $7.9 million.

Of course, from my vantage point, television media firms are of great interest to me… but they are probably going to go through even larger challenges than print is today.

For example, NBC is having a hard time selling Super Bowl ads.  The Super Bowl people!  As networks are forced to do more with less resources, the first to go is new business opportunities, so no wonder TV networks are shelving their made-for-Web production plans even though they need it most:

- GigaOM reported that ABC doesn’t actually distribute its own online video shows.

- Last month, it was announced that CBS was discontinuing Moblogic, a spinoff of Wallstrip, which is acquired last year for $4M.

- NBC seems to be a bit more progressive these days, but that is not saying much, frankly.

To conclude, the souring economy will only expose weak ideas and weaker execution.  But most importantly, it will force companies to think short-term, which allows you to develop a longer outlook for your company’s growth and objectives.

Regardless, you should never try to attack a market where your only chances of being successful entail you from being #1 or #2 within a short time period because there is no such thing as an overnight success and you definitely don’t want to have the rug pulled from underneath you because “others are panicking”.

For this reason, it’s best to start a business that can be successful regardless of whether it has to be #1 or #2… and then once you gain traction, you start attacking and partnering with your competitors to become #1.

So in other words, when you see anyone even resembling a competitor drowning, actually think about throwing them a life preserver.