I had the opportunity to sit in on a webinar on “The Creative Economy” that is considered to be the direction the future of business is headed in compared to the traditional business methods of the past. What is meant by the term “The Creative Economy?” It’s one where business revolves around the customer versus the past where the customer revolved around the business.
The Creative Economy also breaks from tradition in the sense that it means the goal of a company is no longer about making money for the stakeholders but about delighting customers. But, you ask, isn’t “maximizing shareholder value” the mantra of Wall Street? Good question. Listen to what these CEOs have to say about that mantra:
Jack Welch former CEO of GE: “the dumbest idea in the world”
Vinci Group Chairman/CEO Xavier Hulliard: “totally idiotic”
Paul Polman, CEO of Unilever: (has denounced) “the cult of shareholder value”
Marc Benioff, CEO of Salesforce declared this still-pervasive business theory “wrong”
I guess it’s quickly losing favor with those who should know.
The Internet and “The Cloud” are enabling “The Creative Economy.”
Which brings me back to my initial question, “What if…”. What if radio stations were supposed to be small operations? What if the radio industry wasn’t meant to scale?
When I entered the radio business, companies were limited in the total number of radio stations they could own; in the entire USA. It was known as the 7-7-7 rule. A single company could own not more than 7 AM, 7 FM and 7 TV stations in all of America.
What this created was competition between owners of radio stations in a market. Each station was a team of people working as hard as they could to win the audience in that market. The focus was all about the listener or the viewer. Win the most listeners/viewers and advertisers would soon follow to showcase their wares on that radio or TV station’s airwaves.
Hearing “The Creative Economy” described on this webinar was like radio déjà vu.
In 1996, President William Jefferson Clinton signed the Telcom Act of 1996 into law. That was the moment that the “land rush” for broadcast properties began and Wall Street became heavily invested in the radio industry. Wall Street would bring its “maximize shareholder value” mantra to broadcasting.
This point was really brought home to me in 1999 when my stations were sold to a large radio consolidator. The head of this “big box” radio operator told us that we needed to “sell, sell, sell” that it was all about making money for the company and “maximizing shareholder value.”
This “pump up the troops” speech left me cold. I was brought up in a radio world that was about operating “in the public interest, convenience and/or necessity.” I was brought up in a world where if we treated the members of our team well, our team focused on delighting the listener, the advertisers would flock to our station and the owners would be rewarded for doing everything right. That view of life served me well my entire radio career.
Needless to say, I opted not to remain with this new company.
However, I would find myself playing “musical chairs” going forward as it was getting impossible to not be working for a company that hadn’t adopted this modus operandi.
Steve Denning, who writes for Forbes, lead this webinar and pointed out that economics was driving the change for companies worldwide. He told us that no company is doing it all right. Companies like Apple, Amazon, Google and Salesforce are moving in the right direction. In fact, Tim Cook is better at navigating the change to this style of management than Steve Jobs ever was and it no doubt is contributing to Apple being the most valuable company in the world. To give you an example of what it means to focus on the customer first, consider Tim Cook telling an investor in Apple this:
“If you want me to do things only for ROI reasons, you should get out of this stock.”
That was kind of radio world I grew up in. We always tried to do the right thing for our employees, our listeners, our advertisers and the money would follow.
I’m encouraged that radio people who sold out when Wall Street was buying, are now getting back into the radio business with that same ethic, spirit and sense of innovation that seduced me into a four decade long radio career. They understand the concept of “The Creative Economy” because that’s how they built their radio companies the first time around. They also understand that today, radio is more of a concept of operation than a method of delivery.
I’m excited to be working with the next generation of radio broadcasters at my university knowing that radio’s future has never been brighter.
7 responses to “What if…”
This all starts with good leadership. I’ve worked for iHeartRadio now for 12 years and I’ve seen my share of leaders within this company. However one has me excited and that’s Bob Pittman. The quote I’m hearing in my office “It’s about providing the best customer experience.” -YES!
Yes, iHeartRadio is the “big box” radio group however when you have a leader like Bob Pittman focused on the right message it could really change the whole industry in a positive way! That’s what gets me excited.
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Dick, your comments are trenchant and astute as ever. The Comm Act of ’96 was truly a watershed to the destruction of the “public interest, convenience and necessity,” I will agree; but, remember that the rot set in with the early ’80s de-regulation that hit the industry, and created a climate for lessened news, public affairs and all sorts of creative radio programming. De-reg created a highly averse situation for not only talent but critical tech people who maintained the quality of what came over the air. ’96 was key, but for those of us active in the industry from the ’60s onward who were not only talent but true aficionados well-versed in the fine legal and tech points under which we were mandated to live, it was truly a shot over the bow that encouraged the shoddiest aspects of broadcast management, vis-a-vis talent, creativity and value-added programming. Today’s missing creativity has found its way to on-line radio via the internet, where we get to be “legal” pirates and create 21st century radio unfettered.
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Dick, I agree with Rich your comments are spot on. I graduated from WKU in 1978 and saw first hand how the ‘rot’ started in the 80s de-reg when ‘anybody and his brother’ could buy a radio station and ‘make money.’
A lot of folks did and made money, cut budgets for news, programming and any thing that required ‘people.’
While I got out of the business in the late 90s, I have seen small market operators (generally absentee owners) use every trick in the book to make money except what we know works, operating in the “public interest, convenience and necessity,”
Another example is Microsoft. I’m amazed at their shift in focus from “shareholder value” to “customer first”. As someone who works in both broadcasting and high tech its easy to spot where the focus is – and quickly.
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I love a good story as much as anyone, but I also know the history of radio, and I know that radio was invented to maximize shareholder value. When you read the writings of Marconi and Sarnoff, it was all about profit. When you read how RCA duped shareholders into buying their stock during the Great Depression, you realize that what we see today is nothing new. When you read the Congressional testimony that led to the Public Broadcasting Act of 1967, you realize that radio was never the idyllic place you may remember. Radio was already focused on maximizing value in the 60s. That’s why Congress voted to create a form of radio that wasn’t built on profit or ratings. There at Western Kentucky University, you have a non-commercial, public radio station that was built on that heritage. The “land grab” that you say took place in 1996 actually began in the early 80s with Docket 80-90, and the creation of thousands of new commercial radio stations, that made the kind of competition you talk about impossible. The 96 Act was an attempt by the FCC to correct the problems it created in the 80s. The biggest legacy of the 96 Act was the recreation of AT&T, a company that had been broken up in the 70s. The real “land grab” has to do with the buying of spectrum, something broadcasters can’t do, but telecom companies can. If you want to focus on something that’s bad for the public interest, that’s a good place to start. But the history of radio is filled with stories of big corporations, such Westinghouse, RCA, GE, as well as a bunch of big insurance companies whose primary purpose in owning radio was for an investment. All that happened long before 1996.
TheBigA makes some good points, but Dick, I get your other point – the point, when I got into radio was to DO GOOD RADIO and the listeners, the ratings and the ad dollars would follow. Nowadays, serving the listener is an afterthought – and THAT’S what’s wrong with radio today.
Yes, I agree with you Jerry. Peter Drucker said the purpose of a business was to “create a customer.” In radio that went double. First you had to create a listener. Then the talented folks in the sales department could create a customer who wanted to expose his/her product or service to that audience to build their business. The customer must always come first.