Friday, July 31

Avoiding Business Traps: Harvard Business Publishing


The author of one cool site: blogging tips recently re-asked a question that many people have been asking: is mainstream media losing significance?

Under the current business model most traditional publications operate under, you bet. But it doesn't mean they'll go away. Publishers will eventually evolve and develop different business models. Long term, it is anyone's guess what these business models will look like, and chances are many of them will be different.

Some might evolve in networks like Michael Milken recently invested in. Milken is banking on the idea that Bizmore might be the better business model. The potential success of the site will likely hinge on how good the advice is. For example, one executive asked "How often should we change advertising campaigns?" And another executive answered "I'd recommend testing new/alternative campaigns continuously, via smaller campaigns in different magazines, geographies, outlets or via paid search online."

In that case, it's the wrong advice, prompted by the wrong question. And, unfortunately, this is the wrong post to cover it. Bum advice aside, the concept might be sound. It seems fewer executives are satisfied with the research culled by traditional publications these days; they need to know what it means and what to do with it.

Another emerging model (that some research firms have already adopted), which I offered up to Jay Ehret for his open letter to the Waco Tribune Herald, is to keep the summary information free and charge for the deeper research. The only burden that remains is proving content that has value.

To illustrate, I purchased an article on Harvard Business Review this morning. It's an older article (circa 1998), but meets the criteria: it's purchased content and provides some answers that newspaper people, who do not always operate as businessmen, might consider. (I skew my summaries for newspapers, but the traps apply to all business.)

The Hidden Traps In Decision Making

• Anchoring Traps. Business leaders have been struggling with this all the time. The most common problem is placing too much emphasis on past performance without considering other factors.

Newspapers certainly fell into this trap. As subscriptions shrank, they increased their direct mail programs and trial discount offers. It worked before, but now all it did was reduce the non-existent profit margin on subscriptions even more.

• The Status Quo Trap. The article points to newspapers as an example, as the majority of the “electronic newspapers” that first appeared on the Internet were modeled after their print precursors. They didn't need to be, but nobody really considered that they could be anything else.

Status quo suggested they be the same, as if people who looked for content online would be looking for the same content they found offline. Unfortunately, the status quo thinking trapped papers into offering virtually the same product for free.

• The Sunk-Cost Trap. The article uses the example of being given a stock or having a stock that we refuse to sell, even if it is for a loss, and thereby miss out on more attractive investments.

Fundamentally, this where many newspapers are now. They are desperately trying to "save" their old business model despite the fact that the business model no longer works.

• The Confirming-Evidence Trap. While the authors could have never guessed it at the time, the confirming evidence trap is trending up in popularity. In February, I called it validating opinion, but it's much the same.

Not only are publishers demonstrating an increasing propensity to validate reader opinions, but many are attempting to build future business models based on finding examples that may support their vision. Nowadays, it's easy to do.

• The Framing Trap. The framing trap refers to one of the most common mistakes made in business. People ask the wrong questions. In fact, it's the very reason the Q&A advice on Bizmore was flawed. It was the wrong question. It's also one I've answered before.

Some newspapers are asking the wrong questions too. They keep asking how many journalists do we need to let go because online advertising revenue is only a fraction of our print revenue? It's the wrong question. Instead, they might ask which assets have a demonstrated value that people might actually pay for or advertisers might want to be associated with.

• Estimating and Forecasting Traps. The article explains this trap as problematic because most of our minds are not calibrated for making estimates in the face of uncertainty. There seems to be some truth to that given the number of companies that inexplicably opted to try and wait out the economic downturn (as if).

The article breaks it down further into terms I learned from philosophy rather than business. People who get into accidents the most tend to be overly cautious or overly confident. For business, it's the same. The article goes a step further by suggesting even people in the middle are at risk if they always assume the past can accurately help us forecast the future. It cannot.

Of the above mentioned traps, I'm not sure if this one applies to newspapers as much as some of the new models that are being tested by people like Milken. Case in point: Milken's past success combined with the past success of similar Q&A networks that have seemed successful on Linkedin would convince some to conclude Bizmore will be successful. Nothing could be further from the truth.

Bizmore's success will be based on an entirely different equation that has little to do with Milken or similar formats.

Bizmore Q&A aside, they do seem to have some editorial content right for them. Shorter, punchier articles play well online, and today's daily download comes from Apple.

Currently, Bizmore's traffic appears to be about the same as a multi-author average blog, with significant distance to travel before catching up with Forbes or Businessweek. But, so far, it still represents a viable next step in how content providers might evolve.

Of course, there is one last point to touch on today. Of all the sources mentioned in this post, only Harvard Business Publishing generated revenue from me. They can from you too. You can purchase this classic article by Ralph L. Keeney, Howard Raiffa, and John S. Hammond right here. Have a nice weekend.

3 comments:

Jeffrey on 7/31/09, 5:21 PM said...

Hi Rich -
I'm the editor at Bizmore and following up to introduce myself. Intriguing post here. A couple followup thoughts:

1) I wouldn't judge too closely the the answers (or questions) that are popping up on the site in its first week of existence. Ultimately, the cream will rise to the top as users rate the quality of the content as they see fit.

2) You sound like someone who has a lot of business insight to share, as well as very timely and intriguing questions, especially about new/old. So dive in with a few and see what you think -- and feel free to link to or reference this blog with supporting material where it makes sense to do so. The Bizmore Q&A platform is an open one.

Thanks; hope to see you on the site.

Jeff Davis
Editor in chief, Bizmore

timethief on 8/1/09, 6:37 PM said...

Hello Rich,
Thanks so much for publishing this. I had no idea there were so many "traps" but as I read them over I recognized the significance of what you were saying, I think. ;)

Rich on 8/4/09, 6:48 AM said...

@Jeffrey

Thank you so much for taking the comment to leave the comment.

No judgements here. Personally, I'm glad to see someone moving forward. So far, Bizmore seems to a healthy division between editorial and community opinion and I look forward to seeing how it develops.

I do plan to 'dive in' at some point in near future, and will perhaps walk away with a more specific review. This time around, I was content to use it as an example that editorial will more forward.

@Timethief

Ah, I'm glad you get it. For a minute there, I was thinking that I may have weaved too many lessons inside a single post. :)

All my best,
Rich

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