How Formerly Mighty Publishers Fall, But Sometimes Recover

By Michael Foy, President of Publishing Search Solutions


As many of you know I’m a big fan of Jim Collins and his studies of how good companies become great, how some can choose greatness, how others weather the test of time etc… I’ve written articles on how these findings apply to Publishing Companies where I distill the lessons down to actionable strategies for our industry in times of change and disruption.

I recently read ‘How the Mighty Fall; And Why Some Companies Never Give In. After collecting and analyzing data over the course of years, a common pattern of decline revealed itself. This pattern can be broken down into five stages but overall the study showed that if a great company grows its revenues faster than it puts the right people in the right seats to sustain that growth it will fall.

For the sake of this article let’s picture a hypothetical Publisher that has experienced the pinnacle of their particular market. With historic and consistent success such a Publisher is vulnerable to the first stage of decline. And that stage is Hubris.

Not too many Publishers would be guilty of Hubris after dealing with recent digital headwinds in their markets. Conversely, those publishers that have dealt successfully with those or other difficulties may be even more vulnerable to this first stage. Hubris is apparent when the feeling that success will be automatic infects the decision makers. They take short cuts without adhering to the principles that allowed the organization to thrive in the first place. This leads directly to the second stage or Overreaching.

Overreaching entails growth into new areas that a Publisher cannot deliver with excellence. It’s described in Jim’s book as the Undisciplined Pursuit of More. It can take the form of an unwise acquisition or risking too much of the company reserves to expand too quickly. Not all acquisitions or expansions are bad, however. It’s just that a Publisher shouldn’t divert so much capital, particularly human capital, from the core business that one damages the original driver of success. Even if that success is being challenged by disruptive technologies one shouldn’t completely abandon the business’ core. Modify it? Yes. But don’t discard it. When Publishers change to meet the demands of the times and they dilute their human capital assets with the wrong agents of change they may feel the need for more discipline, more beauratic procedures. The right people who didn’t require rigid rules to support the Publisher’s goals before then tend to leave. See my article on ‘Do Publishers Have the Right People On The Bus’ for more of who the right people for our industry are.

The third stage is Denial. This occurs once one has started down the road of overreaching and returns on investment prove unpromising. Often due to unsupported faith that everything will work out, a Publisher will put itself at risk by continuing to support a losing venture. Evidence of this stage is when good news is amplified and the negative is discounted. Inevitably, the Publisher’s market share erodes. A typical reaction is to reorganize to no productive purpose.

Grasping for Salvation is the fourth stage. In many ways it’s very similar to stage two. The difference is that by this time in a Publisher’s decline it has realized its missteps. Oftentimes it tries to correct by repeating the overreach mistake with new ill advised ventures as opposed to rational and measured action plans.

The final stage is Capitulation to Irrelevance or Death. Going bankrupt or being bought out are the typical outcomes when poor decisions have depleted cash reserves enough so that an organization’s options have narrowed to an inevitable death.

All very gloomy but the good news is that stage five can be replaced by Recovery and Renewal. It can happen if the decline is recognized in stage one, two or three and even some times in stage four if one still retains enough resources to break the cycle of grasping and instead rebuild one step at a time. As recoveries go, a remarkable one occurred with the giant company Xerox which was losing hundreds of millions of dollars annually. Anne Mulcahy took on the top post when it was deeply mired in stage four. By making hard but sound decisions backed by empirical evidence, instead of grasping at straws, Anne turned the loss of over 350 million dollars in 2000 and 2001 into profits of 1 billion dollars by 2006. And she did it by reinstituting the original Xerox culture and employee model in spite of some very loud voices to blow it up and declare Chapter 11.

Talk about putting the right person in the right seat in the nick of time. But if you’ll recall the Jim Collins’ conclusions in the second paragraph of this article, all of the stages of decline can be avoided if one puts the right people in the right seats to support growth. For any organization, hoping to sustain a successful business model during growth, the process for finding the right people has to be a priority.

Are you familiar with a Publisher that started a decline but turned things around?