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How to Overcome the Crisis: Survival of the Fittest  Turnaround Transformation of Segodnya Multimedia CJSC from  Value Des...
Ukraine <ul><li>Area: 603,700 sq km, (France – 547, 000 sq km) </li></ul><ul><li>Population: of 47 million </li></ul><ul><...
Daily Newspaper Audience-TNS
Growth GDP UAH-USD Consumer Price Index Key Macroeconomic Indicators
<ul><li>2006 The Internal Crisis </li></ul><ul><li>2007 – 2008 Turnaround Actions </li></ul><ul><li>End of 2008 The Extern...
The Internal Crisis 2006
<ul><li>No clear corporate strategy, mission, vision, nor values </li></ul><ul><li>Yellow tabloid, no clear differentiatio...
<ul><li>Low cost pricing strategy because no differentiation in content, 15% to 30% less  cover price than competitors </l...
EBITDA 2006
<ul><li>No training programs </li></ul><ul><li>HR function did not exist, because insufficient importance assigned to HR i...
<ul><li>Lack of understanding of customers and preferences, no market surveys </li></ul><ul><li>No comprehensive Advertisi...
<ul><li>Dilapidated office building with 1/3 of space not used and 3 different newsrooms </li></ul><ul><li>Enormous techni...
<ul><li>Lack of confidence of investors in parent company regarding Segodnya </li></ul>The Internal Crisis 2006
Turnaround Actions 2007-2008
<ul><li>Implementation  started  to  convert Segodnya  from  “yellow”  tabloid  to mid  market,  quality,  family oriented...
We defined Mission and Values that differentiates us from our competitors
Turnaround Actions 2007-2008
Turnaround Actions 2007-2008
<ul><li>Holding company was established to harbor affiliated companies, and to provide strategic management, and control <...
Turnaround Actions 2007-2008
Our MBA Team E ditor-in-Chief Circulation Director Financial  D irector Director  of  Printing Plan Advertising  D irector...
<ul><li>Conferences, Exhibitions </li></ul><ul><li>Newsroom </li></ul><ul><li>Design </li></ul><ul><li>Marketing </li></ul...
<ul><li>Training programs were implemented in Printing Plant  </li></ul><ul><li>Retrofit of control system  </li></ul><ul>...
Average Newsprint Waste Kiev Edition Manufacture 50%
Newsprint Productivity Revenue per ton of Newsprint
<ul><li>Productivity of staff  increased  by  12%  in  between  2008 – 2009  </li></ul>Turnaround Actions 2009-2010 Produc...
Turnaround Actions 2007-2008
Paid Pages of Advertising per Issue 2005-2010 (on the average)
<ul><li>Segodnya </li></ul>Share by Income 2006-2009,  (%) Komsomolskaya pravda Facty Source: Adex monitoring 25 43 32 200...
<ul><li>Distribution channels were revised, and “street sellers” hired to improve number of points of sale. These now comp...
Daily Subscription September 2010 (copies)
TV Subscription September 2010 (copies)
Turnaround Actions 2007-2008 Market Share of Sold Circulation in Principal Cities of Ukraine 2006  – May 2010 Segodnya Kom...
Turnaround Actions 2007-2008
<ul><li>Cutting edge technology for Editorial Content Management System was acquired from Atex and implemented </li></ul>T...
<ul><li>As a result of all these measures our total income increased by 153% in between 2006 and 2008 </li></ul><ul><li>Ad...
The External Crisis – End of 2008
<ul><li>In the month of October 2008, when advertising revenue was at its peak, we decided to restructure the company, in ...
<ul><li>The world financial crisis hit Ukraine in 2009, and GDP fell by 15,1 </li></ul><ul><li>The only other country affe...
<ul><li>The  real  economy  of  the country was  hit  with  lightning  force </li></ul><ul><li>Unemployment  rose  sharply...
<ul><li>The crisis had a devastating effect on the printed advertising market, on average it dropped 36% </li></ul><ul><li...
<ul><li>In October 2008 the Segodnya team designed a “Survival Scenario” </li></ul><ul><li>Survival Scenario had objective...
Turnaround Actions 2009-2010 <ul><li>Cost cutting </li></ul><ul><ul><li>Pagination was decreased by 25% </li></ul></ul><ul...
<ul><ul><li>We cut practically all marketing costs </li></ul></ul><ul><ul><li>Training costs were minimized by eliminating...
<ul><li>As a result of these actions, in between 2008 and 2009: </li></ul>Turnaround Actions 2009-2010 <ul><ul><li>Total r...
Turnaround Actions 2009-2010 <ul><li>Circulation revenue is up by 12% </li></ul><ul><li>Advertising – by 10% </li></ul><ul...
<ul><li>Segodnya was able to change in time to survive the Internal Crisis, and be flexible to adapt to the External Crisi...
Crisis Produced by Technology 2006-2011
Crisis Produced by Technology 2006-2011 <ul><li>In April 2007  www.segodnya.ua  was launched </li></ul><ul><li>Our ambitio...
Crisis Produced by Technology 2006-2011 <ul><li>We have complied with our objective of becoming market leader in news site...
Crisis Produced by Technology 2006-2011 <ul><li>We have increases of over 100% in the first 8 months of this year in compa...
Sharing Ideas. Inspiring Change
Sharing Ideas. Inspiring Change – Peter Drucker INMA Conferences are about Sharing Ideas and Inspiring Change I thought ma...
Sharing Ideas. Inspiring Change – Peter Drucker <ul><li>Leadership is doing the right things and Management is doing thing...
Sharing Ideas. Inspiring Change – Peter Drucker <ul><li>Management   is about  human beings .   Its  task  is  to  make pe...
Sharing Ideas. Inspiring Change – Peter Drucker <ul><li>Results depend on the customer who decides whether  the  efforts o...
Sharing Ideas. Inspiring Change – Peter Drucker <ul><li>Profits are rewards for making a unique or distinct contribution i...
Sharing Ideas. Inspiring Change – Peter Drucker <ul><li>The CEO has to live  the purpose, values and principles of the org...
A Land of Opportunities For Print and Digital Media Ukraine
Segodnya’s Management Team
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Presentation Krakow G.Schmitt 01.10.2010

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Transcript of "Presentation Krakow G.Schmitt 01.10.2010"

  1. 1. How to Overcome the Crisis: Survival of the Fittest Turnaround Transformation of Segodnya Multimedia CJSC from Value Destruction to Value Creation Guillermo Schmitt CEO – Editor-in-Chief – Publisher Krakow, October 1, 2010
  2. 2. Ukraine <ul><li>Area: 603,700 sq km, (France – 547, 000 sq km) </li></ul><ul><li>Population: of 47 million </li></ul><ul><li>Capital: Kyiv, 3,5 million inhabitants </li></ul><ul><li>5 cities with population over 5 million people </li></ul><ul><li>Average temperature: in winter -20°C and in summer 35°C </li></ul><ul><li>Average monthly salary in Ukraine: $ 310 </li></ul><ul><li>Circulation per thousand 17, Russia 24, Hungary 171, Czech 175 </li></ul>A Land Of Opportunities
  3. 3. Daily Newspaper Audience-TNS
  4. 4. Growth GDP UAH-USD Consumer Price Index Key Macroeconomic Indicators
  5. 5. <ul><li>2006 The Internal Crisis </li></ul><ul><li>2007 – 2008 Turnaround Actions </li></ul><ul><li>End of 2008 The External Crisis </li></ul><ul><li>2009 – 2010 Turnaround Actions </li></ul><ul><li>2006-2011 Crisis Produced by Technology </li></ul><ul><li>Sharing Ideas. Inspiring Change </li></ul>Which Crisis?
  6. 6. The Internal Crisis 2006
  7. 7. <ul><li>No clear corporate strategy, mission, vision, nor values </li></ul><ul><li>Yellow tabloid, no clear differentiation with competitors except for full color </li></ul><ul><li>No edition on the Internet </li></ul><ul><li>Only one product, no local news in regions </li></ul>The Internal Crisis 2006 In this year Segodnya, a young 12 year old newspaper, presented a series of internal situations that together were destroying value and putting at risk its survival:
  8. 8. <ul><li>Low cost pricing strategy because no differentiation in content, 15% to 30% less cover price than competitors </li></ul><ul><li>Disperse organization of affiliated companies with no central direction and control </li></ul><ul><li>Negative profitability. EBITDA of - 57% over sales, clear indication of value destruction </li></ul>The Internal Crisis 2006
  9. 9. EBITDA 2006
  10. 10. <ul><li>No training programs </li></ul><ul><li>HR function did not exist, because insufficient importance assigned to HR in management process </li></ul>The Internal Crisis 2006 <ul><li>Autocratic, and inexperienced leadership </li></ul><ul><li>Lack of adequate management in key positions, and top heavy structure </li></ul><ul><li>No management team </li></ul><ul><li>Low salaries, unlinked to performance </li></ul><ul><li>No management by objectives (MBA) </li></ul><ul><li>Generalized de-motivation </li></ul><ul><li>Widespread use of alcohol during working hours </li></ul>
  11. 11. <ul><li>Lack of understanding of customers and preferences, no market surveys </li></ul><ul><li>No comprehensive Advertising policy nor tools for selling advertising </li></ul><ul><li>Scant amount of advertising, 1 page per edition, most of it in black and white </li></ul><ul><li>No marketing activities </li></ul><ul><li>Insufficient points of sale in principal cities for distribution </li></ul><ul><li>Insufficient subscription for daily and TV supplement editions </li></ul>The Internal Crisis 2006
  12. 12. <ul><li>Dilapidated office building with 1/3 of space not used and 3 different newsrooms </li></ul><ul><li>Enormous technical problems in start up of second hand KBA Commander due to destruction of key control systems, and lack of skilled staff </li></ul><ul><li>In house development of IT Content Management System which was not effective nor efficient </li></ul><ul><li>Poor internal control and lack of Management Reports with dynamics of key performance indicators </li></ul>The Internal Crisis 2006 REPLACE IT!!!!!!!
  13. 13. <ul><li>Lack of confidence of investors in parent company regarding Segodnya </li></ul>The Internal Crisis 2006
  14. 14. Turnaround Actions 2007-2008
  15. 15. <ul><li>Implementation started to convert Segodnya from “yellow” tabloid to mid market, quality, family oriented newspaper </li></ul><ul><li>Newsroom team enhanced Sports, Politics, and “how to” section. Also included subjects related to CSR </li></ul><ul><li>We started to become a market driven company </li></ul>Turnaround Actions 2007-2008 <ul><li>Team produced first strategic plan 2006 – 2010 which was approved by Supervisory Board </li></ul><ul><li>Hired Innovation Consulting to help: </li></ul><ul><ul><li>- Eliminate yellow heritage </li></ul></ul><ul><ul><li>- Adapt content to readers needs </li></ul></ul><ul><ul><li>- Differentiate from competitors </li></ul></ul>
  16. 16. We defined Mission and Values that differentiates us from our competitors
  17. 17. Turnaround Actions 2007-2008
  18. 18. Turnaround Actions 2007-2008
  19. 19. <ul><li>Holding company was established to harbor affiliated companies, and to provide strategic management, and control </li></ul>Turnaround Actions 2007-2008
  20. 20. Turnaround Actions 2007-2008
  21. 21. Our MBA Team E ditor-in-Chief Circulation Director Financial D irector Director of Printing Plan Advertising D irector Business D evelopment D irector P urchasing and T enders Manager E ditor-in-Chief in New Media Director of New Media Deputy E ditor-in-Chief Marketing Director
  22. 22. <ul><li>Conferences, Exhibitions </li></ul><ul><li>Newsroom </li></ul><ul><li>Design </li></ul><ul><li>Marketing </li></ul><ul><li>HRM </li></ul><ul><li>Workshops on Soft Use </li></ul><ul><li>Sales of Circulation </li></ul><ul><li>Sales of Advertising </li></ul><ul><li>Languages (English) </li></ul><ul><li>Manager Skills and Leadership </li></ul><ul><li>MBA </li></ul>Educational Programs 2007-2010, (person/hours) Total (’07-’10) 46.525 MBA 14.112 Local progr. 29.627 Conferences 2.756
  23. 23. <ul><li>Training programs were implemented in Printing Plant </li></ul><ul><li>Retrofit of control system </li></ul><ul><li>Printing Plant Team was formed </li></ul><ul><li>Third party printing was implemented </li></ul><ul><li>Special program to reduce newsprint waste was implemented </li></ul><ul><li>Newsprint and staff productivity increased significantly </li></ul>Turnaround Actions 2007-2008
  24. 24. Average Newsprint Waste Kiev Edition Manufacture 50%
  25. 25. Newsprint Productivity Revenue per ton of Newsprint
  26. 26. <ul><li>Productivity of staff increased by 12% in between 2008 – 2009 </li></ul>Turnaround Actions 2009-2010 Productivity of Personnel 2006-2010
  27. 27. Turnaround Actions 2007-2008
  28. 28. Paid Pages of Advertising per Issue 2005-2010 (on the average)
  29. 29. <ul><li>Segodnya </li></ul>Share by Income 2006-2009, (%) Komsomolskaya pravda Facty Source: Adex monitoring 25 43 32 2006 2007 36 38 26 2008 42 35 23 2009 51 28 21
  30. 30. <ul><li>Distribution channels were revised, and “street sellers” hired to improve number of points of sale. These now comprise 7% of our circulation </li></ul><ul><li>Important improvements in logistics originated a reduction in unreturned copies from 13% in 2007 to 8% in 2009 </li></ul><ul><li>Circulation Team designed new aggressive subscription campaign which increased circulation significantly </li></ul>Turnaround Actions 2007-2008
  31. 31. Daily Subscription September 2010 (copies)
  32. 32. TV Subscription September 2010 (copies)
  33. 33. Turnaround Actions 2007-2008 Market Share of Sold Circulation in Principal Cities of Ukraine 2006 – May 2010 Segodnya Komsomolskaya pravda Facty 40,5 36,5 23,0 2006 54,8 21,9 23,3 May 2010
  34. 34. Turnaround Actions 2007-2008
  35. 35. <ul><li>Cutting edge technology for Editorial Content Management System was acquired from Atex and implemented </li></ul>Turnaround Actions 2007-2008
  36. 36. <ul><li>As a result of all these measures our total income increased by 153% in between 2006 and 2008 </li></ul><ul><li>Advertising – 160% </li></ul><ul><li>Printing – 1.133% </li></ul><ul><li>Newspaper sales – 58% </li></ul>Turnaround Actions 2007-2008 Comparison Of Income 2006-2009 Newspaper Sales Printing Services Advertising Other
  37. 37. The External Crisis – End of 2008
  38. 38. <ul><li>In the month of October 2008, when advertising revenue was at its peak, we decided to restructure the company, in anticipation of the consequences of the crisis </li></ul>The External Crisis – End of 2008 Advertising Revenue 2006-2009
  39. 39. <ul><li>The world financial crisis hit Ukraine in 2009, and GDP fell by 15,1 </li></ul><ul><li>The only other country affected more was Latvia with 18% </li></ul>The External Crisis – End of 2008 Latvia -18.0 Ukraine -15.1 Lithania -15.0 Armenia -14.4 Estonia -14.1 Russia -7.9 Romania -7.1 Hungary -6.3 United Kingdom -4.9 Slovac Republic -4.7 Austria -3.6 Belgium -3.0 United States -2.4 France -2.2 Poland 1.7 Real GDP Growth 2009 (Annual percent change) Source: IMF
  40. 40. <ul><li>The real economy of the country was hit with lightning force </li></ul><ul><li>Unemployment rose sharply </li></ul><ul><li>Construction from 10 .496 .000 sq.mts to 6 .400. 000 in 2009, 37% decrease </li></ul><ul><li>Auto production from 400 .000 units to 65. 000, down 84% </li></ul><ul><li>Auto sales from 654.000 units to 175.000, a 68% drop </li></ul><ul><li>Retail turnover dropped 17% </li></ul>The External Crisis – End of 2008
  41. 41. <ul><li>The crisis had a devastating effect on the printed advertising market, on average it dropped 36% </li></ul><ul><li>Circulation of all printed media dropped by 45% </li></ul><ul><li>Numerous publications were unable to survive crisis and closed, including Telegraph Media Group and other foreign publications </li></ul>The External Crisis – End of 2008 DROP Car editions -63% Analytical editions -52% Business editions -15.0 Woman’s editions -14.4 Daily and weekly national editions -23% TV guides -15% Sport editions -13% Average -36% Advertising Market in the Period of Recession 2009 Source: Adex monitoring
  42. 42. <ul><li>In October 2008 the Segodnya team designed a “Survival Scenario” </li></ul><ul><li>Survival Scenario had objective of minimizing cash drain and had 3 components: </li></ul><ul><ul><li>Revenue increases </li></ul></ul><ul><ul><li>Cost cuts </li></ul></ul><ul><ul><li>Investment cuts </li></ul></ul><ul><li>Revenue increases included </li></ul><ul><ul><li>Increasing copy prices by 75% </li></ul></ul><ul><ul><li>Increasing advertising prices by 10% </li></ul></ul><ul><ul><li>Defining a vigorous plan of attracting New Clients, which in 2009 accounted for 23% of advertising income </li></ul></ul>Turnaround Actions 2009-2010
  43. 43. Turnaround Actions 2009-2010 <ul><li>Cost cutting </li></ul><ul><ul><li>Pagination was decreased by 25% </li></ul></ul><ul><ul><li>We downsized our staff by 35% </li></ul></ul><ul><ul><li>Branches were downsized and smaller offices rented </li></ul></ul><ul><ul><li>We closed Vechercom and Yours </li></ul></ul><ul><ul><li>We changed formats from broad sheet to tabloid in one of our affiliated companies </li></ul></ul><ul><ul><li>New suppliers were developed for newsprint </li></ul></ul><ul><ul><li>We started to use newsprint of 42 grams in a proportion of 50%, which reduced our costs </li></ul></ul>
  44. 44. <ul><ul><li>We cut practically all marketing costs </li></ul></ul><ul><ul><li>Training costs were minimized by eliminating outside trainers and replacing them by members of our own staff </li></ul></ul><ul><ul><li>We rationalized our distribution costs </li></ul></ul><ul><ul><li>We reduced circulation in unprofitable regions </li></ul></ul><ul><li>Investment cuts </li></ul><ul><ul><li>Cancelled US%16 Million project of installing a new KBA printing plant </li></ul></ul>Turnaround Actions 2009-2010
  45. 45. <ul><li>As a result of these actions, in between 2008 and 2009: </li></ul>Turnaround Actions 2009-2010 <ul><ul><li>Total revenue decreased only by 6% </li></ul></ul><ul><ul><ul><li>Advertising…. -21% </li></ul></ul></ul><ul><ul><ul><li>Printing……… -29% </li></ul></ul></ul><ul><ul><ul><li>Paper sales… +17% </li></ul></ul></ul><ul><ul><li>Total costs decreased by 36% </li></ul></ul><ul><ul><ul><ul><ul><li>Direct . . . . . . . 31% </li></ul></ul></ul></ul></ul><ul><ul><ul><li>Staff . . . . . . . . 20% </li></ul></ul></ul><ul><ul><ul><li>Marketing . . . . 93% </li></ul></ul></ul><ul><ul><ul><li>Other .. . . . . . . 37% </li></ul></ul></ul>
  46. 46. Turnaround Actions 2009-2010 <ul><li>Circulation revenue is up by 12% </li></ul><ul><li>Advertising – by 10% </li></ul><ul><li>Printing – by 10% </li></ul><ul><li>We continued to control and reduce some minor costs </li></ul><ul><li>We will break even by the end of year 2010 in our paper operations </li></ul><ul><li>We continued to invest in our digital operations </li></ul><ul><li>During 2010 there has been a weak recovery: </li></ul>
  47. 47. <ul><li>Segodnya was able to change in time to survive the Internal Crisis, and be flexible to adapt to the External Crisis, coming out of them creating value </li></ul><ul><li>On paper from -57% EBITDA, to about +10 in 2011 </li></ul>Turnaround Actions 2009-2010 EBITDTA 2006-VALUE DESTRUCTION EBITDA 2011-VALUE CREATION
  48. 48. Crisis Produced by Technology 2006-2011
  49. 49. Crisis Produced by Technology 2006-2011 <ul><li>In April 2007 www.segodnya.ua was launched </li></ul><ul><li>Our ambitions were modest then: “We had to have an Internet edition” </li></ul><ul><li>First Internet news site had been launched 9 years earlier, www.korrespondent.net, which formed part of a portal Bigmir </li></ul><ul><li>Late 2008 we studied market seriously – our competitors, market, and ourselves in order to have a New Media Strategy, which was adopted </li></ul><ul><li>Our objective now was to “beat www.korrespondent.net in 3 years and become market leader” </li></ul><ul><li>An integrated Newsroom was implemented, journalists who work both for print and digital version, we assigned new Management to the site, and we outsourced our Advertising </li></ul>
  50. 50. Crisis Produced by Technology 2006-2011 <ul><li>We have complied with our objective of becoming market leader in news sites 18 months before expected </li></ul><ul><li>According to independent market research agency, Gemius, in the month of May we became the Number 1 news site of Ukraine </li></ul>Ranking of Unique Users, Gemius. January – July 2010 Segodnya.ua Korrespondent.net Gazeta.ua Podrobnosti.ua
  51. 51. Crisis Produced by Technology 2006-2011 <ul><li>We have increases of over 100% in the first 8 months of this year in comparison to 2009 (Google Analytics), superior to those of www.korrespondent.net </li></ul>Number of Users Number of Visits Page view
  52. 52. Sharing Ideas. Inspiring Change
  53. 53. Sharing Ideas. Inspiring Change – Peter Drucker INMA Conferences are about Sharing Ideas and Inspiring Change I thought maybe a bit presumptuous that you could have learned something up to this point of my talk I decided that Peter Drucker had more of a chance of inspiring you than me So in this final part of my talk I will try to tell you what ideas I took from him
  54. 54. Sharing Ideas. Inspiring Change – Peter Drucker <ul><li>Leadership is doing the right things and Management is doing things right </li></ul><ul><li>A Mission statement should fit on a T-shirt and be inspiring </li></ul>
  55. 55. Sharing Ideas. Inspiring Change – Peter Drucker <ul><li>Management is about human beings . Its task is to make people capable of joint performance , to make their strengths effective and weaknesses irrelevant </li></ul><ul><li>People will respond to a set of values and proven ideas and principles to produce unbelievable results </li></ul><ul><li>What differentiates organizations is whether they can make common people perform uncommon things </li></ul>
  56. 56. Sharing Ideas. Inspiring Change – Peter Drucker <ul><li>Results depend on the customer who decides whether the efforts of the business become economic results or waste </li></ul>
  57. 57. Sharing Ideas. Inspiring Change – Peter Drucker <ul><li>Profits are rewards for making a unique or distinct contribution in a meaningful area </li></ul><ul><li>Economic results are earned by leadership not merely competence </li></ul>EBITDA 2011
  58. 58. Sharing Ideas. Inspiring Change – Peter Drucker <ul><li>The CEO has to live the purpose, values and principles of the organization </li></ul><ul><li>The CEO nurtures and forms the organization’s personality </li></ul><ul><li>The CEO must do 3 things: </li></ul><ul><ul><ul><li>1. Make the present business effective </li></ul></ul></ul><ul><ul><ul><li>2. Identify and realize it’s potential, and </li></ul></ul></ul><ul><ul><ul><li>3. Make it into a different business for a different future </li></ul></ul></ul>
  59. 59. A Land of Opportunities For Print and Digital Media Ukraine
  60. 60. Segodnya’s Management Team

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