What's New, What's Not

Michael Lynton

Chairman and CEO
The Penguin Group
New York, New York

People in the Internet business tend to be particularly evangelical about what they call the "frictionless economy." But my job is to provide friction. In this case, "friction" means an editorial point of view. In the age of total access, standing for something is going to become more important than ever.

At the same time, the emergence of various online technologies is making possible an entirely new relationship with customers. Traditionally, we've known very little about book consumers. Now we can communicate with them -- directly and on a one-to-one basis.

That changes the dynamic of the business radically. One person, thinking differently, can turn conventional wisdom on its head. Here's an example: For years, the industry has considered the travel-guide business to be completely flat. Then along came a company called Rough Guides (in which Penguin now has a majority ownership stake). The Rough Guides grew out of a simple idea for a series aimed at 30- to 40-year-olds who were interested in roughing it a bit. The company quickly established an incredible brand, and it's growing at the rate of nearly 20% a year. The big established companies, including Penguin, were simply unable to look a little to the left or to the right to identify that market.

Michael Lynton began his media career at the helm of Disney's publishing business. it didn't take long for Michael Eisner to call on him to rescue then-failing Hollywood Pictures. In three years, Lynton put the studio back on the map with a string of hits, including "The Rock," "Crimson Tide," and "Mr. Holland's Opus." In 1996, he moved from Malibu to New York to run Penguin's global book business.

Orit Gadiesh

Chairman
Bain & Co.
Boston, Massachusetts

Everybody talks about the speed at which things are changing. We hear a lot about the emergence of new technologies that render entire markets obsolete overnight; about the increased speed of communication, which allows shock to travel instantaneously across the planet; and about the shifting of boundaries between industries and the emergence of new competitors. As real as those changes are, my response is "Well, the pace of change has been accelerating since the beginning of the 20th century." From the point of view of business leadership, what matters is understanding how people react in such times of uncertainty, when they have less ability to manage their external environment.

Uncertainty has always been a fundamental reason for developing a strategy. Yet, with the level of uncertainty that we see today, more and more people are asking, How can you develop a strategy in a world that keeps changing so fast? They're afraid that articulating a set of rigid principles will hinder their ability to react quickly. I would argue that it is precisely at such times that you need a strategy. Think about what strategy is: It's the process of making trade-offs and choices about how to allocate scarce resources. A company that has infinite resources doesn't need a strategy. Do you know of any company that has infinite resources?

In the current environment, companies can't afford not to have a set of guiding principles -- a system of core values that communicates "true north" to the entire organization. These days, many of the operational decisions that enact the strategy are being made in the field, near the customers, rather than at the top. But with a clear set of strategic principles in place, it's actually easier for people in the field to make quick, confident decisions that are consistent with overall strategy. And, in the end, that arrangement allows for greater freedom, flexibility, and experimentation.

Orit Gadiesh has advised business leaders on strategy since 1977. Before joining Bain & Co., she served in the office of the Deputy Chief of Staff of the Israeli Army. As chairman of Bain -- one of the world's top global-strategy consulting firms, with 2,000 employees in 25 offices in 18 countries -- Gadiesh works with CEOs and senior executives at many of the world's top global companies.