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July 2004

In each issue, you will find an interview conducted by Innovate with a senior executive known for innovation, transforming their organization, or leading breakthroughs in their company.

Interview with Bob Danzig

Bob Danzig, formerly head of Hearst Newspaper Group, is known for taking the newspaper group from losses year after year to the biggest cash generator in all of the Hearst Corporation. His leadership exemplifies the best of breakthrough thinking. We are pleased and excited to share with you his insights, thinking, and game plan for creating a new future for Hearst Publishing. Interview conducted by Doug Berger, Managing Partner of Innovate LLC.
Doug: The focus for this interview is Breakthrough Innovation - where executives are taking their companies outside the traditions of the company, outside the performance levels, and in new directions. Sometimes they are changing the very nature of the enterprise, their leadership actions, and behaviors that support it.

Bob:

Quantum Leap thinking.

D:

Let's focus the conversation in that area of your experience at the Hearst Newspapers. If you could take a moment and reflect on a time when you were out to produce a quantum leap accomplishment at Hearst.

B:

My own view is that this breakthrough thinking, this quantum leap redirection, often implies that you have to do something different from your core business. While that may be one way to go about it, in my experience, there is a quantum leap redirection of the business you are in that is often available. This comes out in the way you objectively assess the reality of the business.

The best way for me to start is with my own experience. When I was publisher of the Hearst newspaper in upstate NY, I was the publisher of the most successful Hearst newspaper. [At Hearst Publishing] if we had made one dollar, we would have been most successful. We had losing newspapers all over the country. Big city after big city, we had highly unionized newspapers -- no strategic direction. They drifted along existing on whatever talent they had, and by benign neglect, fed off the profits of Hearst magazines and television stations. When I was asked to come to NY and take over, my view was that it would be uninteresting to administer a group of lost wastes.

We had to become the destiny architects of the quantum leap thinking that you are describing. We did not discard what we had, but rediscovered what we had. The number one thing was to find the very best talent, those who could be destiny architects. They might be in your own organization. Step number 1-- is to identify, assess and engage the very best talent.

The second is to become strategic rather than operational. There is a certain comfort in operating. There is a corridor of cushioning that comes with knowing how to operate a given business. When you become strategic, it implies you are willing to embrace that which is discomforting, that which is uncomfortable. Essential in redirecting the destiny of these very large newspapers around the country, was to have our individual new talent teams sit down and develop strategic objectives, as contrasted with operational comforts. Strategic does not mean a guaranteed success. It means a game plan for how you are going to conduct yourself. The game plan can include the termination of a business, if it isn't going to satisfy the minimal requirements you put in place.

The second thing we did was to sit back and talk about how we grow this enterprise; how we grow these core businesses that are welfare victims -- so we can breathe new life into them. We had not acquired a property in 50 years. No one thought of Hearst when thinking of selling a newspaper property, because we were never in the game. We developed a list of the 50 most attractive targets in the country for acquisition. We built a shadow silhouette of every one of those operations, without ever going near them. We assessed their probable market position, probable revenues, and probable cost of acquisition. We had a complete library that represented a brand new destiny for our company - a brand new breakthrough thinking. Indeed, when the first of those properties became available, we went after it like we were visiting our sister-in-law. We knew everything about it. We acquired that first property, and then we acquired $3 billion in additional properties.

We had a complete inventory of every property we may go after, before it ever got on the radar screen. That could have been a waste of time; we didn't think so. We thought it was exciting for our people to be part of destiny architecture. That is my view of how you go about reframing a business whether through external acquisition or internal rediscovery.

Meanwhile, our strategic imperative for existing properties included discarding some that we couldn't make work. I give you those as an example that breakthrough thinking can be layered upon existing businesses. To make a long story short, we went from being on corporate welfare, unable to meet our own capital needs, drinking off the successful magazines and television stations, to become the #1 cash generator in the entire corporation. What we did was take a quantum leap from where we were to where we could be. That took architecture; that took talent; it took strategy; it took determined focus on acquisitions; it took a completely new breadth going in.

Along the way, we worked at creating a whole new spirit among our folks. I am a great believer that spirited places excel. Well-managed places function well, but spirited places excel because of talents. We put a lot of energy into creating a climate of celebration and applause that would have our great talent excel. The excellence is what produced the ultimate result of being the #1 cash generator in the corporation.

Whether you are talking about breakthrough thinking that leads to brand new additives, or the rediscovery of business potential in the businesses you already have, there are the same key elements.

  • A dispassionate assessment of the talent quotient.
  • A commitment to discover or incent the best talent.
  • A commitment to find ways to develop strategic imperatives contrasted with the comfort of current operations.
  • The courage to go out and waste time to build cases for things that may never occur.
D:

When establishing the strategic imperatives, were you establishing objectives in conventional newspaper terms or did you establish different objectives that were qualitatively different from the way the business had been run?

B:

Strength of Franchise was what we were investing in. What were the trust, credibility and market savvy of this enterprise? Many newspapers simply function in a community as a branch of a national bank. Strength of franchise built a compelling case for the acquisition. The paper is simply today's currency; it may not be the future.

D:

What was your thinking about leverage points for building further strength? Were you buying something that was already strong, yet you saw you could add or create value that the current owners didn't?

B:

You are going to find my answer squishy, but it happens to be the criteria. We looked for the spirit quotient of the organization. Could we take the talent of an existing organization; could we enrich the spirit of that place? It was a silent invitation for the talent to ratchet up to a new level.

I'll give you an example. We acquired a major newspaper in the southwest, for $416 million. It was a powerhouse of a franchise. It was occupied by a group of competitive warriors. They got up, went to work everyday against their competition. They were splendid in focusing on the competitive advantage in the marketplace, on market share, on all those indices they determined in their history were the key criteria of excellence. That combative warrior-like attribute, which was very powerful and important to their success, tended to be brutal, blunt, and unforgiving within their walls. They also made no money. They were owned by a charitable foundation. They measured themselves totally by the warrior-like achievements of their competitive market share. After paying $416 million for them, [our challenge] was to coax them into understanding the corridor of market dominance that would permit them profitability.

I went there every Tuesday for weeks - just focusing on their corridor of market dominance. We guided them to define it. In that process, we found ways to celebrate their people just by how we conducted ourselves. If we could find a way to balance this warrior-like quality with a greater sense of nurturing the spirit of the place, we could reach whole new levels. In fact, the very first month they made $1 million, and I sent yellow roses to every spouse of those executives - just congratulating them on the good news.

We worked to create a spirit of celebration and applause. As we did that, they did it within their walls. Slowly, they moved from a brutal, brunt unforgiving type of personality to a nurturing, caring, uplifting kind of personality. They made $163 million last year. Once you got them going and the spirit was created, it invited the talent to optimize what they did.

D:

In my language, to accomplish what you are talking about, a mindset shift needs to take place.

B:

No question. It is what I call one of the softer values of success. Think about it. The first softer value of success is mindset. It is the way we picture institutional possibilities. If we picture ourselves as functioning then we just function. If we picture ourselves as destiny architects, we may not have quite the right formula yet, but we are committed everyday to putting that pickaxe to the mountain, and finding new ways to lift ourselves higher.

D:

What was your thinking, what questions, what principles guided how you interacted with people to actually shift their mindset?

B:

My #1 role was not to be the budget approver, not the capital approver, not the recruitment source of senior executives. My #1 role was to be the source of possibility thinking for our folks. How do we set our sights? How do I participate in the process that encourages sights that we define as excellence? You never do that by imposition, by managing processes. You do that by invoking noble purpose. You have to inspire people to join you in the journey of noble purpose. I think that is role of a senior executive.

D:

What else did you do to inspire people or to create for them this choice of mindset?

B:

I sought ways to celebrate and applaud our people. I'll give you an example. I traveled all over the nation. When I was in NY for the day, my assistant sent out an email saying Bob is here today. All my operations around the country knew that by 4:00 pm they were to have a name, personal achievement, the name of the spouse and personal address of someone from their operation. On the train ride, I wrote thank you notes on personal stationery. I would thank them for what they did. If there was something extraordinary, I put an "F" after their name. If something won a regional prize, I put a "T" next to their names. I gave the list and notes to my assistant. The "F"'s had flowers sent to the spouse. The "T" meant that a Tiffany bracelet was sent, or a Tiffany key ring, if a male spouse. This was so simple. It took a train ride coming home. It was a way to celebrate our people and to incent these different businesses all over the country.

There was a rhythm. Anybody who got a note from Bob Danzig would tell 50 other people. I used to say that in the course of a year, we spent maybe $35,000 on flowers and we spent $50,000 at Tiffany's. We pay a truck driver in San Francisco, $75,000 a year. It is a matter of how we look at it. I looked for ways to do the same thing with all our senior people around the country. I looked for ways to celebrate and applaud them. A lot of our people got flowers.

D:

Your practices - this way of celebrating people - how did you stimulate that practice to become the practice of other executives at Hearst?

B:

The only ones that I was concerned about were the people who worked with me. In fact, my successor sat next to me for 5 years. When I was getting ready to move onto this chapter, George and I were talking about the things he would continue. He said, "I'll tell you one thing I am going to continue - writing notes to our people. I saved every note you ever sent me." What I cared about was cultivating him.

Every month when the executives got together for a meeting, I would talk about these kinds of things. I only talked about them in the context of 'why we were achieving what we were achieving,' and being 'a model of excellence.' Many of our people throughout the company picked up those attributes.

D:

Were there particular conversations, particular questions or lines of discussion that you found fruitful over the years in stimulating the thinking and actions you wanted?

B:

The #1 question for me whenever I talked to the folks was: "How are the troops?" They knew what I meant by that. What were we doing to create the atmosphere? What were we doing to create celebration and applause? That is the first question, rather than 'explain your expenses or tell me about your revenue plan.' 'Tell me about the troops.' People make that part of their mental culture, their mindset.

D:

What other questions did you ask?

B:

When we sat down to go over quarterly budgets and other matters, my question was beyond the numerics. What are the strategic imperatives? What are the strategies that we have in mind that are embraced by these numbers? So, you have to redirect yourself to those things that are about your destiny, not about your operation. It takes extra initiative to lift yourself, not out of, but beyond the comfort of the operation into a strategic imperative and to cultivate that mentality in your people.

D:

Rather than the quantitative, those are more directional conversations.

B:

The quantitative is there. But, if that is all you do, you may only be doing that quarter's work. You may not be doing anything to influence your ultimate destiny as an organization.

D:

During this journey of yours at Hearst, what did you do when you ran across a significant breakdown where a strategic imperative was way off course?

B:

I would just say to folks - we are going to have a two-step dance. First, you have to "tamp down the fire." Solve the issue. That is not the end of the dance. If you just handle the debacle, then all you have done is handle the debacle. My greater responsibility was root cause. How do we step back, dispassionately from the situation and better understand the root cause? Is there something we can take away from this situation that will better guide us in the future when something like this comes up? We are going to talk it through and organize the case for how we take instruction from this situation.

D:

What was your role in resolving the breakdowns?

B:

First, to be advised of it. Second, make a judgement whether the two-step dance could be handled at the local level. If yes, there is no need for me to give my energy.

D:

A lot of companies in recent years have embraced formal methodologies for business improvement. Did you consider those initiatives? Did you embrace any methodologies?

B:

I call these tools on the pathways of excellence. You make a judgement and evaluate the efficacy. I'll give you an example. In 1990-1 when the Gulf War occurred, concurrent with that was a great economic reversal for our country. All of our advertising collapsed and went into severe decline. The war ended and the decline did not. Hearst Corporation made a commitment to achieve a certain level of performance for that year. We saw we were going to have a calamity on our hands. We went into a mode of thinking of how to constrain our costs, because our revenues would be so limited that year. Out came the machetes.

If I went out and issued the machete order, we would cut our costs very quickly. I took the position that we worked so hard to build a culture of talent we can't tamper with the spirit. I asked for time to think about it. They said 'Okay, but don't take forever to think about it.'

Shortly after, I met the head of productivity initiatives for General Motors and got invited to their productivity conference. We saw the difference between productivity and cost cutting. We saw productivity could be a positive objective. You could enlist your people. It could be a positive objective. It is more painstaking; it is more elaborate; it is more complex. You have to analyze turnover, analyze retirements, what jobs are leaving where you can retrain somebody else - Very complex.

I decided we could embrace a productivity program, which would require much more deliberation, more patience than cutting costs with a machete. We saved $60 million a year. It took us longer to get there. We never tampered with our culture. We incented no insecurity, no sense of fear. We had productivity councils going on all over the country. We changed the cost structure without ever changing the culture.

D:

If you reflect on the way that you lead to impart your key values to people close to you, how did you work?

B:

You picked people around you who were already sympathetic to your viewpoint. You celebrate and applaud them. When you are celebrating and applauding them, it becomes a much stronger affirmation and it becomes a stronger affirmation of what to do throughout the organization.

I happen to believe that informality breeds comfort. When you have a highly structured - Mr. this or Ms. That, and you have to make a formal date, that invites discomfort. We had a very informal atmosphere. Humor - I was playful. I would hide the administrative assistant's shoes during lunch, for example. I did all that kind of whacky stuff.

D:

Who most influenced your character as a leader?

B:

Countless numbers of people I encountered that let me drink at the fountain of their insight and wisdom. Two were most compelling. A social worker when I was 11 years old told me "you are worthwhile." My first woman boss, when I was 16, took an interest in me. She sat me down after I had been working for 4 months and said, "I want you to know I have been observing you and I think you are full of promise. It was magical. They turned me on to possibilities.

D:

What do you consider to be some of the problems, truly worth solving in business today?

B:

The first is self-evident. That is a refreshed commitment to integrity. If we have corrosion in the basic belief in the free enterprise system and in the quality of our leadership, it contaminates our nation. The number one thing business must do is find disciplined, organized ways to focus on the integrity, trust, credibility, and the commitment to do the right thing. The second thing is to find ways to encourage elasticity of thinking, to be destiny pursuers rather than operational comfort seekers. Those are easy words and hard challenges. I guide our corporation's Hearst Management Institute. Our whole focus is on this.

We encourage our folks on a more comprehensive basis to be more comfortable with risk. Daring to seek out things that may be related to our core competencies not necessarily in our businesses. How do we broaden the capacity for curiosity? How do you take an already creative enterprise and enhance its creativity?

D:

One of the differentiators between a manager and a leader is that leaders create futures.

B:

I am often asked to talk about the difference between managing and leading. My first comment is management is about today, leading is about tomorrow. Management is about process, leadership is about purpose. Management is about feeding the body of a place; leadership is about nurturing the spirit of a place. Both have to be in place. I think that constipated companies are those that don't embrace enough leadership.

D:

Is there anything else?

B:

The final observation comes to mind when people are being hard on themselves. I tell them that this is not about perfection; this is about progress. You need not seek to have a perfect mindset; you need to seek making progress towards a mindset you think is desirable. The idea is - it is not perfection, it is progress. That is my final thought.

 

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