At the Magazine Innovation Center’s ACT 7 Experience in Oxford, MS in April, 2017, John French delivered one of the best speeches I have ever heard on publishing industry issues. John is the former CEO of Cygnus Business, former CEO of Penton and former President of Business Magazines, PRIMEDIA. The title of his talk was “Life Lessons in Adding Value.” He now shares his experience as an advisor to publishing executives and investors. I encourage you to learn more at johnfrench.com.
JIM: So John, I was very moved by your speech at ACT 7. It was an inspirational overview of the business and how to properly run a business. You’re in a unique position because you’re really a turnaround expert. You come in where there are problems. You have to be an expert on business—period—because you know how to spot a business that’s really headed into trouble.
JIM: What do you do to turn around a publishing company that’s in trouble? What steps do you take?
JOHN: Yeah, it’s interesting. Often, I’ll be talking to a CEO about a possible engagement and I’ll say to the CEO first, “What’s wrong with your company?” and they kind of get a little bit defensive and they say, “Why do you assume there’s something wrong with my company?” And I say well I wouldn’t be here [if there wasn’t something wrong] so somebody invited me in, whether it be your management, your ownership, your private equity sponsor or you. There’s something that needs to be improved.
So, the first thing you [determine] is what’s the mission? Why are we here? Is it because you want to improve the operating margin? Do you want to improve the performance of the company? Do you want to transform the management team away from the old ways of publishing and to more data and digital? Do you want to package it and, frankly, dress it up to sell it? Let’s establish what the goal is and then the plan falls from there. If it is acquisition, then act and behave and run your company for acquisition. If it’s because you own this company, and I’ve dealt with several owner/operators [there are different issues]; they don’t want to sell, but they want to make more money and they want to increase the value of what they’re building.
So that’s the goal. Then you drop in the operating goals; the first thing you do is assess your portfolio. You can’t control all these portfolios or assets, so [you must] take what you got and make it work.
In the case of the last turnaround, Cygnus, I was blessed to have a strong team come with me; however, we couldn’t buy anything. So we said okay, this is the card deck we’re dealt. We’re not going to have a big tradeshow but let’s get the most that we can out of those tradeshows [we do have]—really maximize their value and, frankly, their profitability.
Print was still a big part of our portfolio so rather than hide from print, we actually started to redesign all the print properties—make them more attractive. And, boy, you know the scratching of heads about that! [People thought] “These guy are insane”—but the print actually held on and some places increased because the magazines looked better.
Digital was our breakout strategy. We knew if we were going to survive, we were going to do it on digital growth and we were going to do it on new data products. So like I said, if we couldn’t do it on the tradeshow side and we could [only] marginally increase the value of the print, we had to pick our spot. And that’s something I think clients don’t always understand. They say, “Well, you know your portfolio is your problem; you’re too print heavy; you need this and you need that, so let’s go buy something and add on.” It’s okay if you have the money and the capital to do that, but a lot of smaller publishers don’t so that’s not an option. Make do with what you have and make it better. And that’s hard. It’s hard to do that. That’s purely organic growth.
JIM: So what I think I hear you say, is you’re only as good as the sum of your individual parts.
JOHN: [Yes,] if the opportunity to buy other add-ons, properties and things like that are not available. If you do have the ability to go out and make acquisitions, then we have a whole other set of advice, sort of a whole other road. The problem is when they do have an appetite or capital to buy, but they buy the shiny object next to it. You know, they fall in love. I have friends of mine who are in real estate and they say you see it in real estate. People fall in love with a house. They gotta have this house and they behave stupidly to get this house, not stepping back and realizing that it’s a beautiful house but there are three more down the road.
We give advice a lot and I tend to be the person saying “Whoa, slow down.” I know you are excited about this business, but don’t send those signals to the seller. Let’s really understand how this is going to improve your portfolio. How does it fit into your strategic plan? How is the integration going to go? How long will the integration go? And bring up all the challenges. And that’s the proper way to go with M&A but people jump at properties because, “You know, I’m in the publishing industry and I need to get into marketing animation. And I’m not going to be able to do it myself; however, I have the cash to go out and buy something. And those guys are really good at marketing animation. Let’s go buy it.” Maybe—let’s go to the internal diligence first and see if that is really what we want to buy.
JIM: Two takeaways that I’ve just had from this: First, make sure you understand the job to be done. Second, when you were talking about print, was if you’re going to continue to print a magazine, invest in it. Make it look good. Don’t just start cutting expenses, switching to crummy paper and all the rest. And I also get that same feeling about digital. Make sure you know exactly what you’re doing in digital and make sure you make it the best.
JOHN: Yes, I recently ran a seminar for Connectiv (the Revenue Roundtable) with 8 CROs, and one of their common problems is that they’re still suffering from banner ad sales; digital and run-of-site sales have been declining. And my feeling was, it’s old—it’s old technology. So someone said, “Well what do you think of programmatic?”—and most of the table hates programmatic—but it’s an income source. One participant said, “Well, what we do is, we have the remnant space on our site, and we’re not going to sell it, so we’ll put it in the programmatic web channel—you know, the trading desk. And what I said to him is that it’s okay; however, you have to back up a little bit.
The first question is not whether I accept programmatic advertising. The first question is, “Why do I have unsold inventory?” And if you have many months’ old inventory and you’re running content that people are not reading and that advertisers are not supporting, then let’s have a discussion about that before you run to programmatic. That’s what I see a lot on the digital side of the business. People are chasing rainbows here rather than taking a look at that fundamental core digital business and then growing it smartly from there.
JIM: So, let me ask, what is your approach to assessing and improving publishing management teams?
JOHN: It’s a difficult task to assess management because it gets emotional; especially if you have to make really tough choices with really nice people. I struggled with that early in my career. Fortunately, I was taught by Sal Marino, the CEO of Penton Media, who was really good; he was kind of a mentor to me. He said, “You know, this is going to sound harsh, but if you have to throw a couple people out of the lifeboat to save everybody else in the lifeboat, that’s what we pay you to do.”
So, we do now what we did then. We establish a list of people on the management team. There are two columns: people that you know add value and people who are currently not adding value to the enterprise and the growth and the turnaround. And the people not adding value presently, you show them how to do it, you help them, you support them, and if they still don’t get it, get rid of them. That’s the only way.
And that’s why the approach I take when I come into a new company. If I come in to do a turnaround or advise on a turnaround, and I can’t make those emotionally tough decisions on people, then I’m doing a disservice to every employee because you will not fix that company. It will not improve. It will either go out of business or it will be sold to a much less supporting owner.
JIM: What are some steps that publishing executives can take to increase revenue?
JOHN: I think the first thing is to take the blinders off about where you think your revenue is going to come from. And what I mean by that is, if you have publishers here and you say, “You need to increase revenue by 15% next year, how are you going to do it?” [Often, you get] “Digital.” Well wait a minute. Maybe it’s just not digital. Maybe you’re doing okay on digital. The point is, treat all revenue the same; don’t run away from the print and certainly don’t run away from the other end of the spectrum which is data and data products.
It’s all one channel, it’s all one pipeline. So don’t dismiss what you consider or believe to be old line technology to increase revenue. There are smarter ways of doing print. There’s an opportunity for a much higher degree of personalization delivered to the reader through cover wraps and design and knowing what their behavior is online and websites and you could really do really cool things and, rather than being an albatross around your neck, print is actually increasing and making you money because we all know that print is still pretty highly profitable. So don’t throw that out.
The next thing is, don’t jump to what you think your boss wants to hear, which is, “I’m going to fix your revenue by selling more digital on my site.” Maybe your industry is not meant for that. Or is it meant for whitepapers? Is it meant for content that people have to pay for? Is it really that special? Just open to your mind.
And then the other part is if you want to replace revenue right away, go to your circulation file, your audience development file of your magazine, and make sure that you know, or can know, or should at some point know, everything about that subscriber. If I go to my file and I know Jim Elliott’s there, and I know Jim has been a magazine subscriber for 12 years, and he always renews, and he always puts the right things down on a Qual card, well, you know, electronically, that’s great. But what I really need to know—if I really want to increase revenue on the back of Jim Elliott and 29,999 Jim Elliott’s—is what Jim is doing offline and online. I know he’s reading the magazine. But is he going to my tradeshows? How about finding that out? I need to ask! Or do a match with attendees of my tradeshows. And, definitely track where he’s going on my websites and where he’s going from a social media standpoint.
Tools to find these things out are not as expensive as they used to be. Three or four years ago, it was very expensive to do that. Now, a good publisher knows what that subscriber is doing online and offline and then can put together a composite 360 picture that they then deliver back to the advertiser and say you know, three or four years ago, we knew this much about Jim. Today, we know THIS much about Jim. Of course you’re going to pay me more money because I’m delivering more value. The advertiser can tailor the selling message to Jim based on the characteristics that were described by the publisher. That’s tremendous.
By the way, I know, Jim, your audience includes a lot of association people who read and follow your advice. I’ve been told in the past, “Well, we’re an association, we’re not a media company. We’re not a Hearst or a Meredith or any of those.”
Frankly, I think the associations undersell themselves and their potential to do some of this stuff. I was the beneficiary of it, okay? Going back about 10 or 15 years ago, there was a period in time where the big behemoth tradeshows were run by and owned by the associations. And then those of us in competing tradeshows would launch against them and try to take them on, or try to take a sliver or niche or something like that.
And then, for some reason—and this is where I was definitely the beneficiary—it was like a ripple; they all woke up one day and said, “Wait a minute. I’m not in the tradeshow business. Why don’t I sell this thing?” So—and I can see it because you are smiling—you saw the same thing I saw. So they were like easy pickings. We’re sitting there, you want to sell your tradeshow? “Yeah!” Well, I’ll tell you what we’ll do. We’ll give you a check for $2 million and then we’ll give you an annuity, basically, over the next 15-20 years and we will guarantee that and you’re set. You don’t have to be in the tradeshow business because, as smart as you are, you shouldn’t be in the tradeshow business. That’s what we do. They thought they were getting tremendous value because they had a big up-front check, and they had the annuity going forward, and that was going to keep their association together.
I would tell that audience, whether it be tradeshows, or the digital business, don’t give up. Don’t undersell yourself. You must be a smart businessperson to begin with to run an association and what those of us on your side of the table don’t want to hear, but we know it, the very secret is that you actually have more reputation and credibility to the people we’re calling on because you ARE the association. At the end of the day, we’re still a third party vendor. So take advantage of those relationships and don’t give up the crown jewels.
JIM: John, you’re someone that does not follow the leader. I think you follow common sense. I know you’re a fan of Warren Buffett’s as am I. You’re talking about doing things that were not the trend at the moment. My question is really a tactical question. During your career, you’ve had to answer to people; often you’ve had to answer to equity boards. You’ve had to answer to maybe a president of a company at some time. And in the association world, you would have to answer to an executive director.
What are some tools that you have learned to manage those wild thoughts about, “Let’s go do the latest and greatest shiny thing?”
JOHN: Jim, I think that’s a great question It’s always been a struggle. It depends on who you’re reporting to. A couple lessons that I’ve learned in this time—again, a lot of things that we talked about are obvious, but we all forget—is you have to have absolute passion and belief in what you’re doing. And, again, these seem like simple things but when you’re talking to a board, or a private equity board, or you’re talking to a private ownership group, or whatever it may be, you actually have to carry that passion and you can’t waiver at all. You cannot show weakness. Now, you can listen. You can take criticism, which you should, and you can make changes, but if you really believe it, you have to be willing to put your neck on the line.
Good ownership, especially the private equity guys, can sniff weakness. They get good at it. You can smell when someone doesn’t have the great belief, so it’s passion, Number One.
Number Two, you need to be patient and you may come up with an idea three or four times and get shot down for the idea three or four times, but if you really believe it, stay true to it because most human nature will give someone an opportunity if the person never gives up. Even the toughest financial businessperson has a part of them that says, “Gee, Jim won’t let this go. What if he’s right?” And so it does take some time and passion.
And then the other thing is—and I have great empathy for those in your audience who are not there yet—you have to build up credibility. You have to have success. You have to do it once. And once you get one done, then it gets a lot easier and people say, “Well, you know…” and that’s why I say it’s a lot easier at this point in my career. I can go in and make recommendations as an advisor and even when I was running a company, I could come in and say, “You know what…” because literally in the case of one of the companies I was running, we were going down a bad road and I couldn’t figure it out. And I was in London on a business trip. I was in a beautiful hotel but I couldn’t sleep. I woke up and I wrote this whole thesis about what was wrong in our business and why we need to go in that direction. I flew back to New York and told my team. They took my ideas and vastly improved them. Made them real. Then on to the board and they approved and I asked them why. And they said, first of all, it made sense. And, secondly, you really believe this. And I said I do…..and then I said, if it takes my job being on the line, if it doesn’t work, you can fire me the day after, but I believe this. Bang! They went for it. And the team made it successful.
JIM: I was wondering, if you look at today’s CEO, COO or today’s Executive Director, or the head of a publishing operation or association, what do you see their role today being?
JOHN: I think the last three or four years have changed dramatically, and I will concentrate on the CEO and Executive Director of the top list. I think the biggest change I’ve seen is that it used to be easy to delegate a lot of things. You kind of set the course and steered your plan.
You still have to do all that. You have to have a vision. You have to have a belief and all that stuff. But let’s face it, you and I are running companies that are challenged by changes in technology. I used to feel comfortable saying I’m going to delegate that decision to my “tech person.” A CEO who is doing that today is making a serious mistake. I think a leader of a company or an association does not have to be a technology expert; they’re not going to be doing coding or things like that. But they have to be a half step ahead of their company on where the new technology is coming and how it’s going to change what we sell and how we sell and have a successful tech pipeline.
I did a video blog a couple weeks ago on this and it was very well-received. At first, some people who didn’t want to hear that message were saying, “Oh, come on. I’m not going to be better than my CTO when it comes to technology.” Well, I believe in some ways, you better strive to be better than your CTO because you’re the top person. You can see most of the horizon. And you don’t have to be a technologist so much but you better talk to a lot of people. You better go to seminars. You better start reading blogs and educate yourselves on what the next technology wave is.
I worry about that stuff. What did I miss in the last three months in technology so that one of my clients could come back to me and say—I’m making this up—“Hey, John. Did you hear about this new technology product? Should we use it or not?” And if I have to say I don’t know, let me research it, I’m not doing my job. I think it’s the same for a CEO or an Executive Director.
JIM: I’m going to get down and ask a question about sales. What have you learned about the tendency of publishing executives to accept the sales staff they have rather than the sales staff they want and/or they need?
JOHN: That’s kind of related to the analysis of who in the organization’s management team is adding value and who is not. And what I’ve seen, in most companies—judging the sales—people who are making those decisions become frozen and they can’t make the tough or correct decisions. I’ve probably had 50-55 people around [Connectiv] roundtables. At the beginning of the session, I always ask two questions: One is, how many salespeople do you have who report to you? And the number can be anywhere between three and fifty to two hundred depending upon the organization.
In case Jim says, “I have 100 salespeople,” I say okay Jim, you have 100 salespeople and I’ve got the proverbial magic wand. I can say to you, this afternoon, all of them are gone. Gone. But when you wake up tomorrow, you can hire back as many of them as you want. Same salaries. Same situation, just bring them back in the house. How many would you do that with? How many would you go and hire again of your own salesforce? Amazingly, the answer is usually no more than 30%—maybe 40%—but the average is about a third.
So I say, “So you’re telling me, you have two-thirds of your salesforce that you wouldn’t rehire tomorrow, but you still live with them.” That doesn’t compute. Why? And then they begin with excuses—and they are excuses—“It’s tough to hire new people…it’s tough to find new talent…if I do fire someone, the finance department is just going to tell me not to refill the job. Oh, Jim has a relationship that goes back 25 years with our advertisers so I don’t want that to go out the window.” And I say BUT, BUT, BUT…. Jim may be getting a good amount of advertisers from the people he’s known for 25 years, but does he have that same relationship with everybody in his territory and, more importantly, everyone that should be in his territory that he’s not talking to now. And the answer is always “No, of course not.”
I’ve seen so many territories where a salesperson is in the job too long and refuses to change. And, by the way, I’m all for change. If they change with us, if they jump on the train, and work with us, I’d love to keep salespeople. I’ve seen so many situations, whether it was something I was running or a company I’m advising, and I’d say, “You know, we’ve done a full analysis of Jim. And we’ve worked with him. And we tried, but he’s not going to turn the coin. So we need to get rid of him. We need to make a change. And this drives me absolutely crazy—they will come back and say, “I agree with you 100% but it’s account XYZ…that’s his account and if we lose that, it’s a half a million dollars and it changes our whole fiscal year.” I’ve never seen it when a salesperson leaves and the account says, “Well, that’s it. Jim’s gone. I’m going to pull our $500,000-$600,000 contract.” There was never any value to the contract to begin with if that were to happen.
I’ve seen that in Editorial and Content when they say look at this Editor who will not be on social media. They won’t have a Twitter account. They won’t do anything but write the magazine page. They’re tough to deal with. I tell them you have to make a change! “Oh no. He has a rolodex of all the CEOs in the industry and if he calls, they call back.” I say yeah, but they’re not calling back to advertise.
JIM: I’ve found, having taken over many magazines on the ad sales side, that every time I hear that, it’s not true. We had a situation recently where we were told that this seller had a great relationship with this advertising director at a big client, only to learn that the advertising director had died two years earlier!
JOHN: That’s a great story. May I use that?
JIM: Do you care if your sales staff is direct or outside independent?
JOHN: No, I don’t care. And it’s not just because it’s good for you Jim. I don’t care. I’m agnostic there. In fact, when I say this in companies, I get people a little nervous; in my career, when I was a publisher, sales manager, etc. I actually found it easier and more productive to manage outside sales reps than direct reps. And the reason being was, very simply, compensation. Unless someone is internally selling for you, and 100% of their income is tied to their revenue, they are going to behave slightly differently. They’re going to have a draw. They’re going to have a base salary. And, by the way, there’s nothing wrong with that. Some of the best salespeople I ever had had draws and base salaries, but they’re still knocking down walls. It’s just not always that way.
But if an independent rep doesn’t sell something, they go out of business. Regardless of whatever the rate is, usually 20%, what do I care? If my publications or my website is doing a million dollars in revenue, and I bring in a really hotshot independent rep, and they say, “I can increase this; I’ve seen this happen. Give me a chance. This is how I can demonstrate that I can bring in an extra $200,000 because of these steps. I do my own marketing. I’m in the field. I know people. You don’t have to worry about me. You don’t have to pay me benefits. Just give me 20% of everything I sell.” And I’ve actually had people sit there and say, “Well, we think that’s a little high. Maybe 15%.” That drives me crazy! This person just said, no base salary, no medical benefits, no other benefits, just give me 20% of whatever I sell. I’d sign the paper and say there’s the door. Call me in a month and tell me how you’re doing.
JIM: How involved do you think the Executive Director or CEO should be with audience development?
JOHN: I think they should be very involved. It used to be audience development and fulfillment; there wasn’t a need to be involved because it was either one or two vendors. There were a small amount of players. It was always based on price. They put your files together to where it could be audited by the BPA and that’s all they did. And they all did it basically the same, so the CEO was not involved in that discussion.
Now the world has changed. The complexity of files today—I was talking earlier about the 360 view of Jim and offline and online behavior—necessitates that the CEO be right in the middle of that discussion and that decision and not leave it to “audience development.” Not that they’re not capable but, frankly, what they concentrate most often on—no matter what they say, even the best of them—is their number one worry is to make that BPA Statement and they’ll do anything they can to get there. And they work hard to do it. But anything beyond that is not in their preserve; it’s the CEO who has to look at that and say, “Okay, getting the BPA Statement done from a fulfillment house should be like falling out of bed. It’s done. I know it’s tough sausage making—I don’t want to hear about it.”
But, more importantly, what about what’s now called data management? Who’s doing data management? Who’s taking all of that stuff once you get the file together and then putting it into a technology stack that you can then look at and say, “We want to know everything about Jim. We want to know everything we can. We want to build products for him. We want our advertisers to build products for him. We want to make this as highly personalized as possible.” And who’s going to do that?
So I tell CEOs I am advising now—and it’s just beginning to change—as soon as someone says to you that they want to hire a vendor to do either fulfillment or anything that touches those files, you’d better be in that meeting. You better know what that vendor’s vision is. Assume they can do fulfillment. But what else are they going to do? Are they going to get you to the point where you’re generating data products that are selling at a good margin to grow your top line? And the only one who is going to make that decision is you. If you have someone else do it, you’re not doing your job.
JIM: One of the things that I remembered from your talk at the Act 7 Experience, and am probably going to steal from you, was the sense of “hydrate your mind.” What I think I hear you say is, you have to have a fundamental understanding; you have to hydrate your mind now to be a decent CEO, and you have to stay on course—you can’t get distracted. Is that a good summary?
JOHN: Yes. I like to tell a quick story….One of the things you and I share in common is we both have a child in the military, in Army ROTC. One of the things I mentioned down in Oxford—and I’ve told the story since then—is that I learned a big lesson when I asked an Army Ranger for advice as our son was going into Ranger Training. It’s hard to get into Ranger’s School—extremely hard. In fact, it’s probably one of the most difficult things in the military. So I asked this young man, Jeff—who I got to know through some Wounded Warrior projects that I help work on and who knows our son, John, Jr.—“Jeff, what advice would you give John going to Ranger School?” And I expected a big discussion about you know, you gotta do this, and you gotta do that. But basically, what he said was, “Don’t listen to all of the other stuff.” He said, “This comes down to two things: one is to constantly hydrate and the second is to never give up. No matter what it is, never give up.”
At first I was a little bit disappointed and thought, “Wow, I thought I was going to get a lot deeper advice than that, some sage advice.” And then it turned out that Jeff was brilliant because I thought about it— he is right. All the rest of it, if I can say this, is BS. It’s noise. In the military you, literally, better drink as much water as you can because they’re going to do things to you that can knock you out if you’re not hydrated.
In the business world, hydrating concerns the thirst of the mind. Just go to as many—I don’t care, time management or whatever—go to as many seminars, as many educational things as you can, read as much as you can, whether it be technology or big data or whatever is out there, and hydrate your mind so that you REALLY understand, and you’ve got your finger on the pulse of what’s happening in your industry, not just your industry that you publish in, but what’s happening in technology, what’s happening in data, and just continue to do that.
What it comes down to, whether it be going through training or running companies as a CEO, or you’re trying to grow your career, or you’re an Executive Director of a tradeshow, don’t give up. Stay on course to your goal. Even if you fall short you are still more successful then 90% of most people.
JIM: Well, thank you very much.
JOHN: It’s been a pleasure.