Marc Gunther

Can Newspapers Reinvent Themselves?

The slumping, stodgy newspaper industry has turned for help to one of America’s most creative, tech-savvy business thinkers, Harvard Business School prof Clayton M. Christensen. Let’s hope Christensen, an evangelist for radical change and author of the best-selling book, The Innovator’s Dilemma, can help newspapers figure out how to reinvent themselves for a digital world.

I’ve got a bias here. I spent 20 years as a newspaper reporting, beginning at the now-defunct Paterson (N.J.) News and ending at the now-defunct Knight-Ridder chain. (See the pattern?) Three papers – The Washington Post, New York Times and Wall Street Journal -- land on my driveway each morning by about 6 a.m. Reading them is one of the pleasures of my day.

To be sure, it is neither effficient nor ‘green’ to chop down trees, produce rolls of newsprint, ship them across the country, print papers with multiple sections (many of which I don’t want) and then deliver them by automobile to my suburban home, particularly when more timely and personalized news and information can be found instantly by turning on my laptop. The thing is, it’s no fun to read a computer screen over breakfast. More to the point, there would be very little news on the Internet—or on television, or the radio, or in the blogosphere—were it not for the many thousands of reporters and editors employed by newspapers.

Alas, major metropolitan dailies are in trouble, largely because their readers and advertisers are defecting to the Internet. Newspapers could have invented Yahoo and eBay and Craigslist, but they did not, and they have been slow to react to the onslaught of digital media. “We’re an incredibly insular and arrogant industry,” says Drew Davis, president of The American Press Institute, an industry group. It was the API that raised $2.5 million to hire Christensen and his consulting firm, Innosight, to apply some shock therapy to the business, as part of a project called Newspaper Next.

I heard Christensen and his colleagues describe Newspaper Next this week at an API event at Gannett Corp.’s headquarters in McLean, Va. They’ve got some good ideas—not a laundry list of changes for papers to make, but an array of concepts and processes that could help the industry rethink its purpose and learn to change, quickly.

The goal is pretty simple—to move from the industry’s current focus on a core product, the newspaper, with a few spinoffs like a website or a free arts-and-entertainment weekly, to a portfolio model that delivers solutions to people’s many information-related needs with a variety of products, services and platforms. Some papers are moving this way already. In Washington, The Post has the daily, a free weekday tab called Express, a robust website, a radio station and a bunch of suburban papers. But Christensen and his people argue that an even more dramatic overhaul is necessary.

They argue, among other things, that papers should think in terms of helping readers and non-readers with “jobs to be done” – one of their catch phrases – which can range from being able to participate in a democracy or converse about current events, to finding a good restaurant, to hiring a reliable plumber, to meeting other people who share their interest, to avoiding boredom during commutes. This way of thinking changes the traditional measure of quality at a newspaper. If the “job to be done” is to avoid boredom on a bus or train, for example, an easy-to-read tabloid with a few puzzles is actually higher quality that a broadsheet filled with long analyses on Social Security reform. If the “job to be done” is finding the best running route when visiting a new city, the print daily is useless. “The quality of a product can only be expressed relative to the job to be done,” Christensen said. On the other hand, if the “job to be done” is pondering the state of the world on a lazy Sunday morning, The Times has no peer.

Newspaper Next is testing this approach at such dailies as The Boston Globe (which is reaching out to small businesses as advertisers), The Dallas Morning News (aiming to solve the problems of busy moms) and the Bergen Record (overhauling its website to be less newsy and more of a go-to source for all kinds of local information). Indications are that newspapers need to think about compiling databases (like Zagat’s) and about aggregating the collective wisdom of its readers so they can help one another (like Angie’s List.) They have to provide platforms for communities of all kinds, and learn to get comfortable with losing control over their “published” content on the Internet. What’s more, they need to do all this cheaply, quickly and fearlessly.

Traditionalists will recoil. They shouldn’t. This hide-bound industry badly need a cultural revolution, to find new revenues to support the traditional and important work of reporters and editors. Newspapers aren’t just another business (the record industry, travel agents, boxed software) being disrupted by the Internet, for better or worse. They’re a business that matters to all of us.

Kleenex--Wiping Out Forests?

In my CNNMoney.com column today, I look at the battle being waged by Greenpeace and the Natural Resources Defense Council against consumer products giant Kimberly-Clark. The environmentalists charge that K-C has failed to follow best practices in its sourcing of wood, and in particular uses wood pulp from ancient Canadian forests to make throwaway products like Kleenex and toilet tissue. The company's bigger problem may be that it misled the public and its shareholders about its practices. Here's how the column begins:

NEW YORK -- Question: When you wipe your nose with a Kleenex, are you helping wipe out ancient forests?

Answer: That depends entirely on who you ask.

The environmental groups Greenpeace and the Natural Resources Defense Council say that Kimberly-Clark, the world's largest tissue manufacturer, has failed to keep its promises to protect ancient forests in Canada. Kimberly-Clark calls itself an environmental leader. Be warned: digging through the competing claims in this controversy is not easy.

But one thing's evident: Kimberly-Clark's credibility has taken a hit, and that's a problem for the $16 billion a year consumer products firm whose brands include Kleenex, Huggies, Scott, Pull-Ups, Cottonelle, Viva, Kotex and Depend.

You can read the column here.

HP, Spies and Leaks

While there are many things not to like about Hewlett Packard’s investigation into leaks by its board of directors, I’m struck, above all, by the likelihood that the entire enterprise was utterly unnecessary. Among other things, it turns out that the so-called leaks that HP devoted time, money and management attention to were barely worth bothering with in the first place.

My belief, as I’ve written, is that the best way to avoid this kind of thing is to permit directors—and encourage lead directors or independent board chairs—to be more open with reporters. If directors are to be held accountable by shareholders, they need to be able to talk publicly about what they do. They shouldn’t talk about proprietary information, but neither do CEOs when they talk in public. Directors should be able to talk, in general terms, about how the company’s doing, how they approach their work, their oversight of the CEO, etc. Otherwise, they are being paid handsomely by owners who have no way to know whether they are doing a good job. Of course, if this were coupled with shareholder access to the proxy ballot, and competitive elections for director (i.e., true shareholder democracy), all the better.

As for HP. The article that apparently got CEO Mark Hurd and his team of snoops all lathered up ran on CNET in January. It’s pretty harmless. Reginald Brown, a lawyer at Wilmer Hale who represents George “Jay” Keyworth, the so-called leaker, sent me a copy of the CNET story along with about 30 pages of background material that demonstrates that just about everything that Keyworth told reporter Dawn Kawamoto was already on the public record. One quick example.

Kawamoto reported:

"Though HP’s direct sales technology is expected to undergo changes, one thing that’s not likely to happen is a merging of the HP and Compaq PC brands, the source said."

Here’s what Todd Bradley, an HP executive said a month earlier on a conference call with analysts, posted at HP’s website:

As far as, Andy, your question about Compaq and HP, we’ve done and are completing a lot of work to understand what those two brands stand for because they do stand for different things. I think, as we go forward.. you’ll see much better delineation between the two.

Then again, CNET’s Kawamoto did reveal the following about HP's January 2006 management retreat:

Those in attendance worked from early morning to late evening, with few breaks given beyond meals, said a source with the company. "By the time the lectures were done at 10 p.m., we were pooped and went to bed," the source said.

For this, HP spied on directors, reporters and its own employees. Makes you wonder not just about CEO Hurd's ethics, but about his judgment.

Corporate volunteering

In my coverage of corporate citizenship, I haven’t written much about voluntarism and philanthropy. Two reasons: It’s hard to write about them without sounding mushy, and typically they aren’t core to a company’s mission or impact.

But I had the opportunity to speak yesterday at an awards luncheon sponsored by the Metro Atlanta Corporate Volunteer Council, which encourages companies to make it easy for their workers to do volunteer work. To prepare for the speech, I did some research and thinking about corporate volunteering, and then I learned more at the event, which drew a crowd of more than 500 people from Atlanta's best companies. (The top award, FYI, went to a law firm called Kilpatrick Stockton.)I’ve come away thinking that every company ought to have a program to help its people to volunteer—not just because it’s a nice thing to do, but because it makes business sense.

It’s amazing, once you dig a little, to see how much company-sponsored volunteering is going on, not just in Atlanta, where companies are famously civic-minded, but all around the country. IBM and Pfizer run great volunteer programs, focused on education and global health. In Atlanta, Home Depot will help connect more than 40,000 volunteers and 1,000 nonprofits during its current “corporate month of service.” Small companies like Georgia Natural Gas are active, too; more than two-thirds of its 65 employees regularly volunteer on company time. This is not a bad way to set your company apart, especially if you are selling a commodity like natural gas.

The business case for corporate-sponsored volunteering is straightforward. The opportunity to volunteer is an appealing benefit to employees. These efforts burnish a company's reputation in the eyes of customers. And they help over time to build strong communities, without which business cannot thrive.

Small Mart Revolution II

I recently wrote about Michael Shuman's thought-provoking new book, The Small Mart Revolution. He's asked me to post this reply. I will respond in a comment soon. Thanks so much, Michael...Here goes:

I’m grateful to Marc Gunther for sharing with all you some of the arguments I make in The Small-Mart Revolution. When we recently met for breakfast, we agreed that it might be interesting, constructive, and fun if we continued the discussion a bit on this blog.

So, my challenge to Marc is this: When price, quality, and convenience are roughly equal, why would you ever want to buy nonlocal? Here are ten reasons that persuade me – and a growing number of Americans – to localize spending.

(1) Higher Standards – The most fundamental difference between local and nonlocal businesses is that the former stick around while the latter entertain plans for moving to Mexico or Malaysia. Consequently, any community seeking sustainability through nonlocal businesses cannot, in the final analysis, possibly do so, because those businesses are continually fighting off tougher environmental standards. A good example of this is in my backyard, Maryland. Regulation of the chicken industry has been virtually impossible because the producers, Tyson and Perdue, and continually threatening to move to environmentally “loose” jurisdictions like Arkansas and Mississippi. This same problem also afflicts economic development that seeks higher wages through nonlocal industry. Yes, they often pay better, but they often leave and take those jobs with them.

(2) Greater Wealth – Because nonlocal businesses come and go while local businesses stick around for years, often for many generations, they are much more reliable generators of wealth, income, and jobs. Around the country, economic developers have been snookered into offering millions of dollars of incentives to attract or retain nonlocal business, and by and large these deals have been huge losers. Not because these industries didn’t have great performance on paper, including the promise of high wages. But because they stayed for a couple of years, took the incentives, and then vanished. There are some 300 empty Wal-Marts for example across the country – each continuing to cause nasty environmental problems – that stand as testaments to the short-sightedness of economic developers who thought they could lure the box stores for more than a heartbeat. The comings and goings of the supposedly high quality jobs turn out to be a very poor bargain for public expenditures on economic development. According to an investigative report about the cost effectiveness of tax abatements in Lane County, Oregon, the cost to the community in lost taxes was about $23,800 per job for nonlocal firms and $2,100 per job for the local firms. The nonlocal jobs were more than ten times more expensive, because the absentee-owned firms were so unreliable. On a net jobs basis (after the big departures), nonlocal jobs were 33 times more expensive.

(3) Greater Stability – The comings and goings of large, nonlocal business create enormous stresses, especially on small community’s economy. In the Katahdin Region of Maine, where I’ve been working over the past few years, the shutdown of a paper mill, so that it could move operations to a lower-wage area, created a regional unemployment rate of 40% over the next year. That kind of economic catastrophe is far less likely in a community economy built primarily around local businesses.

(4) Greater Multipliers – There’s a growing body of evidence that local businesses contribute more to local multipliers – the most fundamental basis for community income, wealth, and jobs. A Civic Economics study in Austin, Texas, for example, found that for every $100 spent at a Borders bookstore, $13 remained in the local economy. For every $100 spent at a local bookstore, $45 remained. Roughly speaking, then, the local expenditure contributed to three times the economic benefits as the nonlocal expenditure. A dozen similar studies have been done worldwide, and they all point in the same direction.

(5) Less Vulnerability – A local economy that is more self-reliant will be more immune to global surprises totally outside its control. The obvious example right now is importation of oil, which most observers link with terrorism and economic instability and which could be eliminated through smart, cost effective development of local energy efficiency and renewable resources over the next generation. Importing food leaves you vulnerable to imported pollution, micro-organisms, and pests from less responsible farmers elsewhere in the world.

(6) Smart Growth – Local small business is a natural promoter of “smart growth” or anti-sprawl policies. Smart growth means redesigning a community so that residents can walk or ride bikes from home to school, from work to the grocery store. It means scrapping old zoning laws and promoting multiple uses—residential, commercial, clean industrial, educational, civic—in existing spaces, because it’s better to fully use the town center than to build subdivisions on green spaces on the periphery. Because local businesses tend to be small, they can fit more easily inside homes or on the ground floor of residences. Because they focus primarily on local markets, local businesses place a high premium on being easily accessible by local residents.

(7) Greater Identity – Part of what makes any community great is how well it preserves its unique culture, foods, ecology, architecture, history, music, and art. Local businesses celebrate these features, while nonlocals steamroll them with retail monocultures. Austin’s small business network employs the slogan “Keep Austin Weird.” Outsider-owned firms take what they can from local assets and move on. It’s the homegrown entrepreneurs whose time horizon extends even beyond their grandchildren and who truly care about preserving these assets. And it’s the local firms who are most inclined to serve local tastes with specific microbrews and clothing lines. “Weirdness” is what attracts tourists, engages locals in their culture, draws talented newcomers, and keeps young people hanging around.

(8) Greater Creativity – Richard Florida’s arguments about the importance of a “creative class” for economic success also tend to support locally owned businesses. Florida argues that among the key inducements for a creative class to move to and stay in a community are its civic culture, its intellectual bent, its diversity, and its sense of self—all attributes that are clearly enhanced in a local-business economy. A local-business economy seeks to celebrate its own culture, not import mass culture through boring chain restaurants and Cineplexes. It seeks to have more residents engaged as entrepreneurs and fewer as worker bees for a Honda plant. Myriad ideas and elements of a culture can best emerge through myriad homegrown enterprises.

(9) Greater Social Well Being – In 1946 two noted social scientists, C. Wright Mills and Melville Ulmer, compared communities dominated by at least one large manufacturer versus those with many small businesses. They found that small business communities “provided for their residents a considerably more balanced economic life than did big business cities” and that “the general level of civic welfare was appreciably higher.” Thomas Lyson, a professor of rural sociology at Cornell University, updated this study by looking at 226 manufacturing-dependent counties in the United States. He concluded that these communities are “vulnerable to greater inequality, lower levels of welfare, and increased rates of social disruption than localities where the economy is more diversified.”

(10) Greater Political Participation – Studies of voting behavior suggest that the longer residents live in a community, the more likely they are to vote, and that economically diverse communities have higher participation rates in local politics. Moreover, Harvard political scientist Robert Putnam has identified the long-term relationships in stable communities as facilitating the kinds of civic institutions—schools, churches, charities, fraternal leagues, business clubs—that are essential for economic success. As one group of scholars recently concluded after reviewing the social science literature: “[T]he degree to which the economic underpinnings of local communities can be stabilized—or not—will be inextricably linked with the quality of American democracy in the coming century.” An economy with many long-term homegrown businesses is more likely to contribute to such stability than the boom-and-bust economy created by place-hopping corporations.

Of course, things like price, quality, and convenience are not always equal. That’s why I embrace a philosophy of “local first,” not local at all costs. Sure, we’ll all still buy some things from chain stores – I too am drinking a Starbucks coffee right now at the Portland, Maine, airport (because of the absence of an equal local alternative here). But the experience of more than 60 communities that now have “local first” campaigns is striking. More information, more questions, more thinking almost always leads consumers to localize more of their spending. Nearly all the information we have about the supposedly great bargains of chain businesses is from their advertising, and better information about what’s available locally tends to highlight cost-effective ways to save money and go local.

As I argue in “The Small-Mart Revolution,” this is not an academic exercise. It goes to heart of preserving the communities we care about.

Best, Michael Shuman
[email protected]
www.smallmart.org

Corporate America's Gay Rights Revolution

What do gay rights, global warming and labor conditions in China have in common? They are all issues about which mainstream companies are taking a more progressive stance than the White House or Congress. In my CNN Money column today, I look at the corporate progress towards providing GLBT (gay, lesbian, bisexual and transgender) workers equality in the workplace. The column was sparked by a new report from the Human Rights Campaign, a gay rights group.

NEW YORK (Fortune) -- Most of America's best-known companies are reaching out to gay and lesbian workers, as well as gay consumers, despite the criticism they get from conservative Christian groups.

Consider: No Fortune 500 company offered health benefits to the domestic partners of gay and lesbian workers until Levi Strauss did so in 1992. Today, more than half of the Fortune 500 offer those benefits.

Beyond that, blue-chip companies recruit gay MBAs. They seek out suppliers owned by gay and lesbian business people. And they advertise in gay media such as Logo, the cable TV network launched last year by Viacom.

Read the rest of the column here.

What Disclosure Won't Do

The Carbon Disclosure Project yesterday released its 4th annual mega-report at a well-attended event at Merrill Lynch's HQ in downtown Manhatta. Lots & lots of data, about more than 900 companies' carbon emissions, energy usage and practices regarding climate change. Al Gore gave a good talk and Sir Adair Turner, a British environmentalist, delivered a long speech that won't inspire a feature documentary.

But all the talk and the reams of information don't add up to much in the way of real change, as I wrote in my column at CNN Money.

Transparency at Timberland

Last winter, I wrote a column about Timberland's plan to attach "nutritional labels" to its shoes. The company says that all of its shoeboxes now carry the label, "so you know exactly what went into making the shoes you put on your feet." The labels aren't perfect--it's hard, for example, to know how much energy should go into making a pair of shoes, but they are a laudable effort by the company to be more open about its business.

Revolution Foods

Childhood obesity's a serious problem. One in three children and adolescents in America are either obese or at serious risk of becoming obese, according to a new report from the Institute of Medicine. Like most big problems, this one creates a business opportunity. Which is where Revolution Foods comes in.

A northern California startup, Revolution Foods provides healthy food for school lunches and nutrition education to four charter schools serving poor children in Oakland, Ca. The business is the brainchild of Kristin Groos Richmond, a 31-year-old newly-minted MBA from Berkeley who spent her last year of business school writing a business plan, forging a strategic partnership with Whole Foods and running a 10-week pilot program at a local school. Kristin and co-founder Kirsten Tobey, another Berkeley MBA, secured startup funding from the Bay Area Equity Fund, a venture capital fund managed by J.P. Morgan, that "seeks to invest in companies that can deliver market-rate venture capital returns while enabling social and environmental improvement in the San Francisco Bay Area's low and moderate income neighborhoods."

Although Revolution Foods is just getting started, Kristin's excited by what she's seen. By email, she says, "We've had great results so far with parents, teachers, and kids writing in about the healthier, mostly organic foods we are offering each day. Everything is fresh and seasonal."

Interestingly, both Kristin and Kirsten worked for NGOs -- Kristin helped start a school in East Africa, Kirsten worked at Earthjustice and a UN hunger program -- before going to b-school and becoming social enterpreneurs. Now they're running a company with a powerful idea behind it. They're part of a new wave of socially conscious MBAs who, I believe, are going to rock the world of business in the years ahead.

Can fast food be 'good' food?

I've always enjoyed eating at Chipotle, but only after hearing a radio ad mentioning "sustainable agriculture" did I learn that this was a different kind of fast food chain. Turns out that founder and CEO Steve Ells is a classically-trained chef with big ambitions, not just for his business but for a revolution in American agriculture. So I wrote about Chipotle today in my CNNMoney column.

NEW YORK (Fortune) -- People have integrity. Good companies operate with integrity. But can food possess integrity?

Absolutely, says Steve Ells, the founder and chief executive of Chipotle Mexican Grill, the rapidly expanding fast-food chain.

"Food with integrity," Ells says, "is driving our growth and profitability."