Tag Archives: business strategy

CBC: A Case Study in what happens when the Lawyers take over

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Like many other people, I’ve been following the virtual meltdown at the CBC over its new (i)copyright rules. For a great summary of the back and forth I strongly encourage you to check out Jesse Brown’s blog. In short the terms of use of the CBC seemed to suggest that no one was allowed to report/reprint excerpts of CBC pieces without the CBC express permission. This, as Cameron McMaster noted, actually runs counter to Canadian copyright law.

And yes, the CBC has been moving quickly and relatively transparently to address this matter and hopefully clearer rules – that are consistent with Canadian law – will emerge. That said, even as they try, the organization will still have a lot of work to do to persuade its readers it isn’t from Mars when it comes to understanding the internet. Consider this devastating line from the CBC’s spokeperson in response to the outcry.

You’ll also still be able to post links to CBC.ca content on blogs, Facebook pages, Twitter or other online media at no charge and will continue to offer free RSS stories for websites (found here).

Really? I’m still allowed to link to the CBC? How is this even under discussion? Who charges people to link to their site? How is that even possible?

Well, if you think that that is weird, it gets weirder. Dig a little deeper and you’ll find what what appears to have so far gone unnoticed in the current debate over the CBC’s bizarre terms of use. On the CBC’s Reuse and Permissions FAQ page the second question and answer reads as follows:

Can we link to your site?
We encourage people to link to us. However, we ask that you read our Terms of Use, which outline the conditions by which external sites may link to ours.

So what are the CBC’s terms of use to linking to their site? Well this is when the Lawyers really take over:

While CBC/Radio Canada encourages links to the Web site, it does not wish to be linked to or from any third-party web site which (i) contains, posts or transmits any unlawful, threatening, abusive, libellous, defamatory, obscene, vulgar, pornographic, profane or indecent information of any kind, including, without limitation, any content constituting or encouraging conduct that would constitute a criminal offense, give rise to civil liability or otherwise violate any local, state, provincial, national or international law, regulation which may be damaging or detrimental to the activities, operations, credibility or integrity of CBC/Radio Canada or which contains, posts or transmits any material or information of any kind which promotes racism, bigotry, hatred or physical harm of any kind against any group or individual, could be harmful to minors, harasses or advocates harassment of another person, provides material that exploits people under the age of 18 in a sexual or violent manner, provides instructional information about illegal activities, including, without limitation, the making or buying of illegal weapons; or (ii) contains, posts or transmits any information, software or other material which violates or infringes upon the rights of others, including material which is an invasion of privacy or publicity rights, or which is protected by copyright, trademark or other proprietary rights. CBC/Radio Canada reserves the right to prohibit or refuse to accept any link to the Web site, including, without limitation, any link which contains or makes available any content or information of the foregoing nature, at any time. You agree to remove any link you may have to the Web site upon the request of CBC/Radio Canada.

This sounds all legal and proper. And hey, I don’t want bigots or child molesters linking to my site either. But that doesn’t mean I can legally prevent them.

The CBC’s terms of use uses language that suggests they have the right to prevent you, or anyone from linking to their website. But from a practical, business strategy and legal perspective it is completely baffling.

In my mind, this is akin to the CBC claiming that it can prevent you from telling people their address or giving them directions to their buildings. Or, the CBC is claiming dominion over every website in the world and that they may dictate whether or not it can link to their site.

I have my suspicions that there is nothing in Canadian law to support the CBC’s position. If anyone knows of a law or decision that would support the CBC’s terms of use please do send me a note or comment below.

Otherwise, I hope the CBC will also edit this part of its Terms of Use and its Reuse and Permissions FAQ page. We need the organization to be in the 21st century.

Negotiating – how not to manage tension

Last week Rob Cottingham pointed me to ReadWriteStart piece entitled Learn to Negotiate and Close. It’s filled with some good – if unfortunately titled – advice particularly around focusing on listening and not derailing a deal by talking too much (“Two Ears, One Mouth”) as well as speaking to your client/prospective partner’s interests (“Wait Until You Hear Them Scream”). One section, however entitled “Using Tension to your Advantage” felt problematic and tweaked the negotiation consultant in me.

For example, in that section they advocate:

Donald Trump (the real-estate developer), in his book “The Art of the Deal,” talks about guiding the other side to the point that they really want the deal and think it is in the bag. Then he backs off and demands major concessions. Smart buyers everywhere have learned some variation of this tactic.

This is when you get a knot in your stomach and may witness table-banging and raised voices. All of this unpleasant stuff is good news. Experienced deal closers recognize these as signs that a deal is closing. The absence of these signs is actually a cause for concern!

One thread running through all good negotiations is some sign of real pain from the buyer that leaves you confident you are not leaving too much money on the table. Of course, the buyer knows you will be looking for this and will send signals that you have reached their limit. The skill comes in differentiating between fake pain, as in “This is well above our budget, and my boss will kill me if I agree,” and the real thing. The buyer will also be looking for the same signs from you.

From my experience negotiating, this statement is fraught with problems – and can be downright dangerous as advice. Here are a few reasons why:

Shifting Goals

First, unless you are a deeply skilled mind reader, “reading the signs” isn’t an executable strategy. Indeed, the real risk with this strategy is that by adopting it, you shift your goal. You cease to be focused on creating a deal that you would find acceptable and start trying to identify the deal you think your counterpart will be willing to accept. You metric for success moves from what you want (or need), to what you think you think they will accept.

The fact is, you will never know the limit of what you counterpart is willing to accept until they are walking away – and even then, maybe it’s all part of an act? This belief that a good negotiator can tell the difference is simply untrue. Maybe you can read when they are bluffing and when they are not… but I’m willing to bet that however good you think you are, you can’t read them that well. Indeed, you probably have no idea what is going on in their head (just like they probably don’t know what’s going on in your head).

Promotes poor communication

This is the other part of this approach that is problematic. It promotes poor communication, and to be blunt, lying. If I think you are looking for signals that I’ve reached my limit – I’m going to send you those signals, whether you’ve reached my limit or not. In essence, I’m going to lie to you. And if I’m lying about that… what else might I be lying about? This is the dynamic that this approach helps reinforce. Rather than a negotiation that allows us to brainstorm creative solutions or identify what is really important we spend our time dancing around the issues and pour our energy in to focusing on “what signals we are sending?” and trying to “read” them.

The fact is once you tell me something is a deal breaker, and then you compromise on it – I learn that dealbreakers for you aren’t really dealbreakers, they are just efforts to manipulate me. Do that more than once and my trust in anything you say will quickly erode… which will inevitably lead to me to ask myself: why am I doing business with you?

Break down trust

The fact that poor communication breaks down trust isn’t academic. Good negotiations can only occur if there is some basic degree of trust. My willingness to share information, to brainstorm, to see the problem from your perspective are all made easier if I believe I can trust you. Breakdown trust, and you breakdown the very environment needed to create wealth and good outcomes.

If Trump tried to pull that last minute deal changing arrangement on me I’d consider walking away or throwing a bunch of my own last minute demands into the mix. Indeed, I’ve had this happen to clients before and I advise them to say: “Wow, it sounds like you’d like to change the terms of the agreement I thought we’d already agreed upon. If you aren’t happy with those terms I’m willing to reopen the negotiation over them, but have a bunch of terms I’d like to see renegotiated as well. If those issues back to the table, I think I’ll bring forward a number of my own as well.” This usually shuts this strategy down – while they may want to renegotiate pieces of the deal they aren’t thrilled with, they probably aren’t willing to do so at the risk of also renegotiating the parts of the deal they are thrilled with. There is a reason you’ve both come this far – you both believe the deal is mutually acceptable.

The real danger with the Trump strategy however (and the reason I’d seriously consider walking away) is that it underestimates the risks of exploiting the tension.  While some people might cave to Trump, I’d be asking myself the question: do I want to do business with someone who is going to constantly try to exploit me rather than work with me? Maybe Trump’s deals are always purely transactional and he’s never going to work with his counterpart on an ongoing basis. But many deals I work on don’t complete the relationship between the two parties, they start the relationship. Do you want a business partner you can trust, or one that is always seeking not to create wealth, but hive it off for themselves? Worst still – what I am teaching Trump? Every time he adds last minute changes, even if I only cave on one or two of them, I’m teaching him to make last minute demands. I’m helping make this problem worse in the future not better. All this to say that if you don’t have some basic level of trust in the person you are going to work with, are you going to share critical information? Are they going to share it with you? What is the likelihood of your business taking off in that environment? Not that good, I suspect.

Stay focus on your interests and goals

For me, exploiting the tension runs real risk of derailing the negotiation or worse, the relationship with your counterpart (nothing is more toxic than an agreement between two parties in which they hate each other/don’t trust each other, it’s pretty much guaranteed everybody will lose money in that situation). Obviously I have lots of advice around negotiating, but two things I like to keep front and centre are:

First, identify what will make you happy. In short, know your goal – what you need and why. Money is important, but so are other things: stability, duration, trust, good process, the capacity to withstand surprises. All of these (and countless others) might be important to you – figure out what really matters. In addition identify external benchmarks – outcomes from other similar deals – that you can use as reference points. Few deals are genuinely new, most deals are structured around what has occurred before. These are powerful reference points that can be persuasive to the other side (and to your own sense of fairness)

Second, create conditions for a good negotiation. The how you negotiation is as important as the what you negotiate. What irks me about the above advice is that is advocates for a how that promotes poor communication and erodes trust. You and your counterpart can set the rules for how you are going to work together – make sure you do. And remember, you are constantly modelling behaviour regarding how you expect your counterpart to act. Ultimately, some negotiations are going to get nasty – but they don’t all have to be that way and it starts by not assuming they have to be nasty.

Ultimately you can spend your time trying to “read” your counterparts or your can create an environment where you can just ask them. My preference is to focus on the later. In doing so you’re more likely to develop creative outcomes and grow the value of the deal.

sell big-ticket deals, you don’t need that many to reach your revenue targets. If you are getting venture capital to power your dreams, you may need to close only one deal for your venture to succeed. But these deals take a long time to close, almost never less than three months and often twelve months or more. By the time you enter the “closing zone,” you and your teammates have expended a lot of time and energy, your company is relying on you to close the deal, and you are starting to think about what you will do once the deal closes.

This is an exhilarating, scary, dangerous time. Exhilarating because you are so close to a big “high five” success. Scary because if you lose now when you can almost taste success, the disappointment will be bitter. Dangerous because a smart buyer could easily exploit your intense desire to close the deal and force major concessions out of you.

Donald Trump (the real-estate developer), in his book “The Art of the Deal,” talks about guiding the other side to the point that they really want the deal and think it is in the bag. Then he backs off and demands major concessions. Smart buyers everywhere have learned some variation of this tactic.

This is when you get a knot in your stomach and may witness table-banging and raised voices. All of this unpleasant stuff is good news. Experienced deal closers recognize these as signs that a deal is closing. The absence of these signs is actually a cause for concern!

One thread running through all good negotiations is some sign of real pain from the buyer that leaves you confident you are not leaving too much money on the table. Of course, the buyer knows you will be looking for this and will send signals that you have reached their limit. The skill comes in differentiating between fake pain, as in “This is well above our budget, and my boss will kill me if I agree,” and the real thing. The buyer will also be looking for the same signs from you.

Losing your temper is usually not good. It implies a lack of control and usually signals fear and weakness rather than strength. However, sometimes it can be very effective. Negotiators use many tactics to simulate table-banging without killing the deal. You can use the old good cop/bad cop routine, or the “My intransigent boss will never agree to this” line, or you could use a stalking horse to lay down a negotiating line.

Your tactic will depend on the specifics of the sale, but the one constant is that when your stomach gets in a knot, you have probably entered the closing zone, and that is good. We were engineered for fight or flight for a reason!

How the Mighty Fall vs. The Black Swan

blackswanI’ve almost finished listening to Nassim Nicholas Taleb’s The Black Swan, a book about how large-impact, hard-to-predict, and rare event beyond the realm of normal expectations. At the same time, Tim O’Reilly caused me to stumble upon this article previewing Jim Collins‘ (author of Good to Great and Built to Last) new book “How the Mighty Fall.”

In some way the two authors’ could not be more different. Taleb writes in a harsh, sarcastic, cutting tone that heaps scorn on many of the worlds finest minds as well as, one senses, the books readers. His harshest barbs are reserved for academics, who if often sees as being to interested in theory to help with real world problems. I’ve never seen Taleb in person or on video, but after listening to The Black Swan I can’t help but see him as an lethal and angry intellectual street fighter, mad at a world that didn’t notice his brilliance earlier.

How the Might FallCollins, in contrast, reads like a classic business academic writer who has gone mainstream. He never offends, and his tone is never harsh – he seems like the archtype westcoast Business school Professor – smart, driven and direct, but slightly geeky in that friendly way and not overly intense (hence westcoast).

But while their styles (and I hypothesize, personalities) are dramatically different, they overlap in some curious and interesting ways. Both are concerned with business issues and both are writing about outliers. Taleb is concerned with the outlying events that can completely alter one’s world. Collins in concerned with outlier companies – those that experience impressive and continuous success. And while I’m sure there are lots of areas where the two will disagree, it is interesting to focus on where the two almost completely overlap.

The first appears where Collins talks about the first symptom of a company going into decline: Hubris Born of Success:

“The best leaders we’ve studied never presume they’ve reached ultimate understanding of all the factors that brought them success. For one thing, they retain a somewhat irrational fear that perhaps their success stems in large part from fortuitous circumstance. Suppose you discount your own success (“We might have been just really lucky/were in the right place at the right time/have been living off momentum/have been operating without serious competition”) and thereby worry incessantly about how to make yourself stronger and better-positioned for the day your good luck runs out. What’s the downside if you’re wrong? Minimal: If you’re wrong, you’ll just be that much stronger by virtue of your disciplined approach. But suppose instead you succumb to hubris and attribute success to your own superior qualities (“We deserve success because we’re so good/so smart/so innovative/so amazing”). What’s the downside if you’re wrong? Significant. You just might find yourself surprised and unprepared when you wake up to discover your vulnerabilities too late.”

This whole paragraph sounds like a friendly version of Taleb. Praising leaders who don’t claim to understand the full complexity of their world, their business or even their own success? Classic Taleb.

More interesting however, is the emphasis on luck. Taleb regularly argues that luck is (at a minimum) underestimated and more often ignored outright, as a factor in a businesses success. No CEO wants to stand up and say, yes, we become $10B dollar company not just because we were good, but because we were lucky – it doesn’t exactly send a positive message to share holders (or does it justify their enormous bonus). But Collins not only agrees that luck is a factor, he argues that good companies admit to themselves that luck was a factor.

In hockey you hear people say you’ve got to be good to be lucky and lucky to be good. The point is, if you work hard, bounces will eventually come your way and you’ve got to be good enough to pounce on them and make those opportunities count. Begin to think you don’t need luck, you stop seeing the opportunities and also begin to believe you are inherently better than anyone. Fact is, you’re not. You’ve got to work. Hard. And hope for some luck. Even then, you probably never become Google.

The second interesting place of overlap is in Collins discussion about how companies begin to deny that they are at risk or in peril.

“Bill Gore, founder of W.L. Gore & Associates, articulated a helpful concept for decision-making and risk-taking, what he called the “waterline” principle. Think of being on a ship, and imagine that any decision gone bad will blow a hole in the side of the ship. If you blow a hole above the waterline (where the ship won’t take on water and possibly sink), you can patch the hole, learn from the experience, and sail on. But if you blow a hole below the waterline, you can find yourself facing gushers of water pouring in, pulling you toward the ocean floor. And if it’s a big enough hole, you might go down really fast, just like some of the financial firm catastrophes of 2008. To be clear, great enterprises do make big bets, but they avoid big bets that could blow holes below the waterline.”

In The Black Swan, Taleb has an entire piece on assessing risk which parallels this quote. He notes that too often business people and – in particular – financial types, focus on predicting the likelihood of an event – even when a prediction model is deeply flawed or essentially meaningless. Since often assessing the likelihood of an event is often impossible Taleb argues it becomes much more important to ascertain the likely magnitude of it’s impact. So avoid doing things or exposing yourself to risks that, if they go wrong, will blow out your hull. Indeed, the Black Swan is essentially a 250 page book on this paragraph.

Print Media: Nostalgia is not a growth model (or, on why being online is better than than paper)

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Two years ago Taylor and I wrote a piece for the Columbia Journalism Review (which they opted not to publish) critical of Kuttner and the CJR’s faith in the print-hybrid model for media.

After having it sit on our hard drives all this time we are putting it up for reading and commenting. It is, sadly, more or less as relevant today as it was when we wrote it. Here is a link to the full version of Missing the Link: Why Old Media Still Doesn’t Get the Internet.

And here’s another of my favourite passages, (written before the arrival of the kindle!):

Print Media: Nostalgia is not a growth model

Mostly, it is baby boomers who are nostalgic for newsprint, and they are not a growth industry. Sure, there are some, younger, holdouts. But these are generally students of the Columbia Journalism School, not those they hope to write for. Yes, the texture of a newspaper is nice – but the newspapers can’t afford to print and distribute them and, so far, you’ve been unwilling to pay a premium for it.

More seriously, media traditionalists often cite two examples— incidental reading and ideological objectivity—to explain why physical newspapers will and should remain the main distribution channel for print media. However, the purported value of physical newsprint simply doesn’t hold up to scrutiny.

Scanning the pages of a newspaper is indeed a virtue. It exposes readers to articles they might not seek out, broadening their range of news and opinion. However, this process is no different from what happens online. Links, aggregators and email steer readers to a far broader range of articles than they could conceivably imagine by simply flipping through a newspaper. Indeed, the internet enables this incidental reading better than newspapers. Take the BBC website, where any given article has links to related pieces both across the internet and in different sections of the site. A political article might cause a reader to click on a link to a related piece in the Science/Nature or Africa sections. Once there, they are confronted with an array of ‘incidental’ headlines. The tunnel syndrome argument simply doesn’t hold weight.

The other oft-cited example of the value of newspapers is that they prevent readers from falling into self-selected ideological silos. The argument follows that, when left to their own devices, innocent readers will gravitate towards the poles of their ideological bias. What they need, and should pay for, is a physical entity that provides them with a limited, but ‘healthy’, range of information.

This argument ignores the fact that many newspapers operate as ideological poles themselves. The New York Times clearly favors the left whereas the Wall Street Journal appeals to the right. More importantly the internet, unlike print media, provides tools to overcome these silos. Not all content delivered through an aggregator will be consistent with a reader’s perspective (indeed, one can imagine a customized aggregator that specifically targets news pieces that challenge its readers). More importantly, the internet gives readers the freedom (and safety) to select content from a broader range of perspectives. Most liberals wouldn’t be caught dead with an issue of the National Review in their hands, and when was the last time you saw a pinstriped Wall Streeter reading the Nation? But thousands of liberals read the Corner (the group blog of the National Review). This is because the ease, speed and anonymity of the web stimulates exploration that the physical world prohibits. In addition, many posts are written in response to other pieces, to whom they inevitably link (imagine the Nation sending readers to National Review!). Neither traditional nor New Media can single handedly mediate or resolve political difference, but at least New Media links the poles to one another, rather then creating isolated playgrounds where pundits can safely take shots at one another.

While sometimes seen as nostalgia, these arguments are simply a proxy for a deeper set of concerns felt by elites who fear the day the unkempt masses are finally freed to choose and read what they will. Controlling your customer has a never proven to be a sustainable business strategy, and for a business deeply concerned with freedom, it is disturbingly anti-democratic.

This piece is pulled from a longer piece we wrote called Missing The Link: Why Old Media still doesn’t get the Internet.

Microsoft: A case study in mismanaging a business ecosystem

mslogoA lot of fuss has been made about Microsoft’s inability to compete in the online space and the web specifically.  Indeed, it is widely acknowledged that Microsoft was slow to understand the web’s implications and adjust its product lines accordingly. How did the largest, most successful software company in the world fail to predict or even, once the future became clear, effectively adapt to the rise of the internet? More importantly, why hasn’t it been able to acquire its way out of trouble?

Numerous articles have been written on this, many focusing on Microsoft’s strategy and the fact that it likely faced a disruptive innovation problem. I’d like to supplement that analysis by focusing on the predatorial way Microsoft managed and engaged its business ecosystem in the 1990s. I’ve not seen this analysis before so I thought I would throw it out there.

The 1990’s were a good time for Microsoft. It experienced tremendous growth and its operating system was by far the dominant choice in the market place. It had tremendous leverage over everyone in its business ecosystem, including its competitors, customers and complementors. While this was seen as a source of strength (and profit) it also laid the foundation for many of its problems. The story of Microsoft’s competitors in its traditional marketplace – especially those that have adopted an open source space model such as Linux, Mozilla and Apache – is well documented and forms the core of the traditional disruptive innovation thesis. But I think Microsoft’s inability to counter these threats, as well as its inability to compete in new spaces – such as against Yahoo! or Google – isn’t just a result of the fact that it crushed its traditional competitors but also due to the mismanagement of its relationship with its complementors and partners. More importantly, the disruptive innovation thesis fails, on its own, to explain why Microsoft hasn’t been able to acquire itself out of its problems.

I’ve been told that one of Microsoft’s great strengths is that it has fantastic tools for developers (I’m not a coder so I can’t comment myself). However, in the 1990s and early 2000s, Microsoft lacked a sophisticated or long-term strategy for engaging the software products and companies those developers created. Given that Microsoft was sitting atop the  computer software ecosystem the company had one goal – staying there. This lead it to view anyone as a potential competitor – or if not a competitor than at least someone eating into profits that it could otherwise capture. Rather than balancing the growth of the value network with trying to capture its fair share, Microsoft prioritized the latter over the former. Consequently, many companies that produced products within the Microsoft ecosystem – particularly for Windows – were often not seen as complementors, but as rivals. Microsoft was aggressive in dealing with them – it was gracious in that it would usually offer to buy them out – on its terms – but always looming in the background was the threat that if you didn’t sell to them they would copy what you did. Consequently, many little companies that designed applications that enhanced Windows were forced to sell – or were put out of business after Microsoft copied their products and integrated them into the operating system.

A business ecosystem is like a natural one. It doesn’t matter how nutrient rich the environment (like say, one with excellent development tools) if emerging lifeforms are consistently snuffed out, pretty soon they will elect to grow and evolve elsewhere – even in places where the nutrients are weaker. This is precisely what I suspect started to happen. Likely, fewer and fewer developers wanted to approach the Microsoft ecosystem with a 10-foot pole because they would either be bought out on unfavorable terms or at an early stage (before they were too valuable) or worse, Mircosoft would simply crush them by using its enormous resources to replicate them and eat into their business.

The repercussion of this is that Microsoft saw fewer and fewer new and innovative products being created for its platforms. Programmers and developers shifted to other platforms, or created whole new platforms where they would be free to grow ideas. This, I believe, prevented Microsoft from understanding how the web would change its business. Not only did its current profits create a disincentive to altering its business strategy but it snuffed out one of the few groups of people that could warn it, educate it and challenge it, about the impending changes – its complementors and partners. Equally important is that it diminished the pool of potential acquisition targets whose culture, technology and processes might have helped Microsoft adapt. There were simply not that many mid-sized mammals in the ecosystem: Microsoft had prevented them from evolving.

Today – based on conversations I’ve had with some people in Microsoft – I get the sense that they are trying to become a better partner (or at at least, they may be aware of the problem). Perhaps Microsoft will succeed in becoming a better partner. It won’t however, be easy. Changes to how one treats complementors and partners often require rethinking the very culture of an organization. This is never an easy or quick process. In addition, it takes time to rebuild trust and attract new blood into the ecosystem… and any misstep will count dearly against you.

There are also almost certainly some interesting lessons in this for other dominant players – such as Google. Will Google behave differently? I don’t know. In many regards Microsoft behaviour was rational. It was seeking to preserve its position and maximize its share of the pie. This was made all the tougher because its market was evolving and the future was unclear. No one knew which pieces of the value network would be critical (and therefor most profitable)  and so Microsoft was simply trying to stake out as many of them as possible. It is easy to imagine Google behaving in a similar manner. But I suspect that if it does, it may also find it hard to escape Microsoft’s fate.

Big thank you to David H. for pointing out some typos and errors.