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Bloomberg Terminal Scandal

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Bloomberg Terminal Scandal

  1. 1. Media Management Case Study MEJOS3 Katrin Ehnert Olga Javits Jaana Pasonen 2013 Scandal and Consequences
  2. 2. 1. The Bloomberg Company 2. Investigation of the Crisis 3. Organization configuration 4. Analysis results - 4 levels of management & markets 5. Conclusions Presentation Structure
  3. 3. Part 1 The Company and Its Business
  4. 4. • Bloomberg Terminal (“The Bloomberg”) is a core business and money-generating product The Company and Its Business
  5. 5. 1. Bloomberg’s media products and their role in the company business 2. Bloomberg News:  “News that move markets”.  Finance information 24/7  Employs more than 13 000 people in 185 locations globally  Services 174 countries  5000 original articles daily Source: Bloomberg.com
  6. 6. • Bloomberg is a growing company • Operating profits 2006 – annual revenue $1.5 billion 2011 - annual revenue $7 billion 2013 – about $8 billion annually 315,000 terminals sold worldwide (by the end of 2012) • 85 % from terminal sales • Terminal subscription $20000 per year Bloomberg’s Performance on Market Competition Source: Gustin (2013) TIME Business & Money
  7. 7. • Michael Bloomberg, MBA in Harvard University • 1981 - Innovative Market Systems (IMS) • 1986 - Bloomberg LP • 1988 - 5,000th terminal installed, a financial data industry leader • 1990 - Bloomberg Business News with a six-person team, based in New York, editor-in-chief Matthew Winkler • 2010 - 20th anniversary, 146 bureaus in 72 countries, > 2,300 journalists and multimedia professionals Milestones in History Sources: Funding Universe (1998), Business Insider (2013)
  8. 8. Part 2 Investigation of the Crisis
  9. 9. • Data breach scandal at Bloomberg L.P.'s news division: Bloomberg reporters had extended access to data about individual customers' terminal usage • Publicly revealed by the New York Post on May 10, 2013 The Crisis' Triggers
  10. 10. • Viewed customer information included:  what functions they used on the Terminals  who was logging in and at what time  what they asked the help desk for Source: Horowitz, 2013
  11. 11. Bloomberg's culture  Journalists considered to be representatives of the Terminals  Michael Bloomberg in 1997: “Most news organizations never connect reporters and commerce. At Bloomberg, they're as close to seamless as it can get” (as cited by Geller, Huffington Post, 2013) Bloomberg's goal  To be the most influential news service in the world  Innovative ways to recognize customer needs, wants and trends quickly Reasons for the Crisis' Emergence Source: Geller, Huffington Post, 2013
  12. 12. • Impacts on Bloomberg's business environment and partnerships  Breach of trust with customers  Several investigations against Bloomberg regarding possible misuse of other customer Terminal's confidential data  No significant Terminal subscription fallout: “[The Terminals] are prized as windows to information that can help brokers keep or lose fortunes” (Geller, 2013)  Company's transparency, reputation and business culture came into question • Reactions by Bloomberg's management  Public apologies  Immediate restriction of reporter's access to the confidential data  Initiation of 2 independent reviews on internal standards Major Consequences of the Crisis Source: Gustin, TIME, 2013; Bloomberg.com, 2013a
  13. 13. Several improvements according to the reviews' recommendations:  New positions at governance level: chief risk and compliance officer  Ongoing periodic independent reviews on internal compliance controls  No extended access for Bloomberg reporters  Enhanced training programme for employees  New positions at editorial level: Independent Senior Editor and Standards Editor Current Status of the Case Source: Bloomberg.com, 2013a; Bloomberg.com, 2013b
  14. 14. Part 3 Organization Configuration
  15. 15. • Bloomberg strives to have a flat organizational design with few levels of hierarchy: • No private offices or enclosed meeting rooms • All employees sit in long rows of identical, terminal-laden desks, including the Editor-In-Chief • Employees do not stay in any one position for too long and do not have official titles. • Managers are constantly rotated between different departments • Employees are evaluated entirely on their performance. This allows for them to move vertically, horizontally, and diagonally throughout the firm Bloomberg’s Organizational Structure Sources: Bothra et al., 2008, Round Table, 2008,
  16. 16. Organization Configuration 1980 1990 2000 2013 •Michael Bloomberg's role •Entrepreneurial organization •Years of rapid growth and expansion •New divisions and products •Moving towards more innovative organization •Over 15 000 employees •Michael Bloomberg no longer active in the company •No single type of organization configuration Source: Mintzberg et al., 1998
  17. 17. • Bloomberg's strategic apex and middle line work innovatively, avoids bureaucracy and hierarchies • Sales division, Speed desk at Bloomberg News - Machine organization • Independent divisions for products, independent goals and processes - elements of diversified organization • The Bloomberg LP is more of a LEGO than a jigsaw-puzzle configuration. • multiple configurations depending on division, department and time. A Jigsaw puzzle or a Lego organization? Despite an innovative culture and complex organizational structure , Bloomberg has a very clear strategy and all its parts work collectively to achieve the company's goals.
  18. 18. New Energy Finance Daniel L. Doctoroff CEO & President Executive Committee COO, Head of Financial Products & Services, Editor- In-Chief R&D News & Media Financial Products & Services Law Govern- ment Professional Service News Sports Enterprice Solutions Web &Mobile Magazines Business Week Television & Radio Terminal Markets/ Pursuits Peter Grauer Chairman of the Board Source: Bloomberg.com, 2013
  19. 19. Part 4 Analysis Results
  20. 20. Corporate Management and the Political Market Main role of corporate management is to legitimate and secure the role possibilities of the enterprise, effects influence mainly the political market Immediate reactions to the crisis were necessary: •Investigations from U.S. Federal Reserve & Treasury Department •Critique from European Central Bank and other big clients To reassure and to regain the trust of partners and influencers in the political market, the extensive actions were necessary -> When crisis' effects on the popular market might result in declining revenues, poor management on the corporate level after the crisis could lead to legislative and normative restrictions -> In worst case scenario might result in bankruptcy Source: Alm & Lowe, 2001, Gustin, TIME, 2013
  21. 21. Actions taken on Corporate Management level •Immediate damage control PR: Public apologies in public and in person •Independent reviews •Results and recommendation published •Enhancing the company's governance framework (Risk and compliance responsible) •Approval for continuous periodic reviews The Crisis' impact on Political Market The actions taken were considered sufficient, no significant penalties or further conflicts occurred Source: Bloomberg, 2013a
  22. 22. • Internal implications:  Decisions /actions are aligned to support Bloomberg's core business: Selling more Terminals  Reporter's access possibilities as intended strategic approach from the beginning • “The concept of reporters working hand-in-hand with the sales team served as a centerpiece to Mr. Bloomberg’s vision” (Chozick, New York Times, 2013)  Need for internal process innovation to regain customers' trust  New CEO and 100-day-strategy at Bloomberg Media Group Strategic Management and the Open Market
  23. 23. External implications:  Second strategic focus at Bloomberg: Innovative technology for its Terminals' systems  Increased pressures from competitors (Thomson Reuters, Dow Jones) with new Terminal replacement strategies  Dependence of open market on popular market highlighted Source: Alm & Lowe, 2001
  24. 24. Bloomberg's revealed strategic objectives:  Strategic decisions set a direction  Clear plan of actions to hold leading position  No real strategic turnover at Bloomberg after crisis  Weaknesses regarding approaches to Terminal sales and high investments in the media division  Bloomberg needs to find a clear direction in innovation Source: Mintzberg et al., 1998
  25. 25. Two aspects of product and business management  The Terminal - main product  All the media products: Magazines, TV, radio, Mobile etc. Two approaches to Popular market:  Terminal subscribers - main target group, most of the profit  All the subscribers and consumers of the Bloomberg media products Business Management and the Popular Market Source: Alm & Lowe, 2001
  26. 26. The public apologies and other damage control actions were needed  to regain trust of Terminal subscribers  to convince the readers, viewers and listeners of the produced content and its reliability. First priority was to minimize the terminal subscription fallout, however...  Customers consider Terminal use vital for their business  Customers locked in long term contracts  Barriers of exit, excellence of the product No big changes needed, once "the dust settles", main product remains the same Source: Geller, Huffington Post, 2013
  27. 27. • Media products facing heavy competition, losing credibility might be fatal • BusinessWeek - Forbes, Fortune • CNBC and Fox Business winning Bloomberg TV • Financial Newspapers - Wall Street Journal, Financial Times • The unique strategy of Bloomberg effects the business management and the popular market: The main focus at Bloomberg is to sell the Terminals, and as long as the Terminal subscriptions are not declining, the effect on the media product level might stay small, the audience of media products are a secondary target group Crisis Impact on the Popular Market Source: Porter, 2004
  28. 28. • Main impacts on the internal level:  New positions created, e.g. Chief Risk and Compliance Officer  Rotations:  previously Special Adviser to the CEO, Editor-at-Large at Bloomberg News Clark Hoyt  Independent Senior Editor  previously Executive Editor for Bloomberg News in Europe, the Middle East and Africa Tim Quinson  Standards Editor  Relations between journalists and commercial departments changed  Managerial skills exercised: communicational organizational • Why changes have been made? Operational Management and the Professional Market Source: Bloomberg press release (2013), Lowe (2013)
  29. 29. • Lost access to the client private data = lost influence on the professional market • New strategy of making news? Impacts on Professional Market
  30. 30. Conclusions
  31. 31. No “real” crisis for Bloomberg in the short- term Reasons: 1. Core business is Terminal sales: uniqueness of the Terminal service 2. Fast and active response to the crisis by Bloomberg's management 3. Barriers of exit for the Terminal's customers Long-term impact: – Loss of time advantage in news gathering ↔ Competitive advantage – Questionable “final” cut of connections between reporters and sales department Source: Mintzberg et al., 1998
  32. 32. • Alm, Ari, & Lowe, Gregory F. (2001). Managing Transformation in the Public Polymedia Enterprise: Amalgamation and Synergy in Finnish Public Broadcasting. Journal of Broadcasting & Electronic Media, 45(3), pp.367-390. • Bloomberg.com (2013a, August 21). Bloomberg Releases Report Following Client Data Review. Press release. Retrieved October 20, 2013, from http://www.bloomberg.com/now/press-releases/bloomberg- releases-report-following-client-data-review/ • Bloomberg.com. (2013c). Bloomberg Facts. Retrieved November 9, 2013, from http://www.bloomberg.com/now/bloomberg-facts/ • Bothra, Aditya, Gandhi, Vishal, Profeta, Mike, Rewari, Rajeev, Tripathi, Shankar (2008, February 22). Organizational Analysis: Bloomberg LP. The Round Table. Retrieved November 2, 2013, from http://roundtable.typepad.com/round_table_blog/2008/02/organizational.html • Geller, Adam (2013, May 16). In Bloomberg Uproar, Ethics Flags For New Media. Huffington Post. Retrieved. October, 18, 2013, from http://www.huffingtonpost.com/2013/05/16/in-bloomberg-uproar- ethi_n_3284025.html • Gustin, Sam (2013, May 14). What Bloomberg’s Snooping Scandal Says About Wall Street’s Culture. TIME Business & Money. Retrieved October 20, 2013, from http://business.time.com/2013/05/14/what- bloombergs-snooping-scandal-says-about-wall-streets-culture/ Sources:
  33. 33. • Funding Universe (1998). Bloomberg L.P. History. From: International Directory of Company Histories, Vol. 21. St. James Press. Retrieved November 2, 2013, from http://www.fundinguniverse.com/company-histories/bloomberg-lp-history/ • Horowitz, Alana (2013, May 11). Bloomberg Terminal Spying Targeted Ben Bernanke, Tim Geithner: CNBC. Fox News (vía Huffington Post). Watched September, 20, 2013 at http://www.huffingtonpost.com/2013/05/11/bloomberg-terminal-spying-bernanke- geithner_n_3260559.html • Lowe, Gregory F. (2013). Lecture on Strategic Management and the Open Market, University of Tampere. • Lowe, Gregory F. (2013) Lecture on Corporate Management and Political Market, University of Tampere. • Lowe, Gregory F. (2013). Lecture on Operational Management and Professional Market, University of Tampere. • Mintzberg, Henry (1989) Mintzberg on Management: Inside Our Strange World of Organizations. NY: Hungry Minds Inc. • Porter, Michael (2004) Competitive Advantage. NY: Free Press. Sources:

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