Inevitable Surprises: Gray Lady Down…

from Dealbreaker.com, November, 06
The New York Times Company closed today at $5.72

Moody’s has made it official:  The New York Times Company’s debt is junk.

And this, after the company took a dare-one-call-it-usurious loan from billionaire Carlos Slim, and announced plans to unload its share of the Boston Red Sox and off-load real estate…  estimates are that, in the face of a $400 million note due in 2009, all of this carries the company comfortably into…  2010.

Compared to the brief, flaming transit of Sam Zell at Tribune, The Times Co. looks positively stately.  But the important difference between the two is less flattering.  Zell had a plan: not good nor well executed, and one that crashed on the shoals of the credit crunch, but a plan.  If the Times Co. has a plan, it’s a very well-kept secret– one that investors and analysts alike are anxious for the company to divulge.

Because it seemed clear, even before Moody’s made the Times Co.’s debt (even) more expensive, that peripheral asset sales weren’t going to fix what’s ailing The Gray Lady.

Why doesn’t the Times Co. have a plan?  I’m certainly not privy to their exec com conversations, but I have what I’ll bet is a good hypothesis:

My friend and GBN partner Peter Schwartz once wrote a wonderful book entitled Inevitable Surprises– a meditation on a phenomenon that we often encountered as we talked about the future with companies.  We would raise trends for discussion, trends that we thought could have a major impact on the business in question– demographic (e.g., generational or immigration issues), technological (e.g., the web or biotech), political (e.g., global unrest or changing legislation/regulation), social (e.g., concern with the environment or social nets), environmental (e.g., concern with climate change or water), economic dynamics (e.g., bubbles that might burst).

Our hope was to stimulate a consideration of effective strategic responses.  But all too often, the executives with whom we dealt would simply respond “oh, we know that.”  Indeed, in the cases of some media companies, “oh, yeah, we cover that.”  The closer we got to the core of a company’s business, the likelier the dismissive “we already know” response.

And of course they did know.  The problem is that knowing is only the ante.  If that knowledge isn’t wrestled into understanding– understanding of the implications– and then into an effective plan for responding, better yet capitalizing, the knowledge is useless.  Indeed, it’s worse than useless, as it can promote a false sense that awareness somehow implies readiness.  This is painfully hard work, because it strikes at the heart of the company’s historic advantages– and at the soul of manager’s sense of himself/herself.  Great companies find the strength and do it; most companies don’t.  To wit, the reality that in times of tremendous change, most legacy companies don’t (in the words of Geoffrey Moore) cross the chasm– don’t succeed in the reinvention necessary to survive and prosper in a new environment.

And so the title of Peter’s book:  Inevitable Surprises– managers caught off-guard, companies hobbled by developments they knew were on the way.

The Times Co. seems to me a sad example of a legacy company confronting an inevitable surprise.  Its writers have been leading chroniclers of the technological, economic, and social upheavals that are now eating away at its franchise.  But to all appearances, the company hasn’t found the strength to act on that insight, to make the changes that it’s going to take to survive, much less to succeed.

Of course, the Times Co. is just one player in a spectacle that’s playing out broadly across the economic landscape.  From other media companies through auto manufacturers to retailers, the managers of legacy companies are facing their own sets of inevitable surprises. The bursting of the credit bubble simply amplified  these issues, called them into stark relief.

But the economic crisis may have been a godsend.  Its very extremity may, for some anyway, break the hypnotic hold of the past, may punch through that extraordinary capacity that all of us humans have for denial– it may be the spur that it takes to move managers to meaningful action. In any case, it certainly provides “cover.”

Scenario planning, the craft that Peter and I ply, is one technique for breaking through to effective strategies, and it works.  But not every company needs it.  What every company does need is the strength of vision to look past the biases of history, and the strength of will to act on what they see.

And so it may not be too late for (at least many of) these companies; it may not be too late for the Times…  I certainly hope that it isn’t.  I would miss the crossword puzzle.