I always believe that Condé Nast does not belong only to the Newhouse family. It also belongs to the entire media industry.
Because this industry does not need another media company, it just needs a company like Condé Nast - a media company that embraces ideals and passion, holds the utmost appreciation for beauty, insists on uncompromising quality, and respects talents. It needs to be a company that demands perfection in all details with writings that deeply astonishes people’s souls, and images as exquisite as artworks in the museums.
To all the people who work in the media industry, Condé Nast is the epitome of their dreams. Because it achieves the impossibles that the average people and companies do not even dare to expect, it earned the admiration, respect, and longing from all. That’s why all the readers are mesmerized. That’s why the clients are willing to pay the highest premium pricing to work with Condé Nast.
Most people, including friends in the industry, Condé Nast itself, and clients, may believe that the value of the premium pricing derives from the accumulation of over 100 years of history and legacy, particularly in the Vogue brand.
But I disagree.
I believe the reasons that Condé Nast is privileged to charge the highest premium pricing, is from its relentless insistence of ideals and its unprecedented pursuit of passion. These two forces continually motivate Condé Nast to innovate to new heights. The clients weren’t just paying the premium merely for a few fashion pictures with the Vogue logo, but the excitement to participate in the creation of such excellence.
Therefore; whether Condé Nast remains deserving and entitled to charge such premium pricing, is solely dependent upon whether the top leader of this company could adhere to the authentic and uncorrupted ideals and passion from the very beginning.
Without this key foundation, all illusions will collapse, one by one they will tumble, there will be a loss of control, and nothing will ever hold.
This is the Condé Nast today.
The most critical point was the merger of Condé Nast International and Condé Nast US, announced at the end of November 2018.
Prior to this point, Condé Nast’s global operation was divided into two parts. Condé Nast US was operating itself independently. The rest of the world, including subsidiaries and brand licensing businesses, were directed and managed by Condé Nast International. These two reporting systems were totally separate and did not interfere with each other. Mr. Jonathan Newhouse, who I was reporting to for my first 18 years, served as the chairman since the inception of Condé Nast International in London.
Jonathan is a very self-disciplined person. He starts each day with his morning run. In recent years, his routine changed to swimming. He is not very tall, but the sharpness of his gaze and mind creates a commanding presence everywhere he goes. Often people are afraid of meeting his eyes directly. In all the meetings he joins, everyone knows clearly that he really knows everyone and everything. From the strategic direction to the sales updates to the decision makers of all major clients, and the financial reports’ figures and explanation that I submitted, he never misses anything.
In the beginning of my career, I would be particularly nervous when he was present. Sometimes, it was to a point that my hands would literally be shaking and I would even stutter. Involuntarily, I was inspired to make every effort to win the recognition by this powerful and rigorous commander.
I can imagine that many of my colleagues may find this unbelievable. It can be difficult for them to imagine that I, a person who always keeps them on their toes, would even have moments like this too.
When I was finally able to communicate with him confidently in exchanging ideas and having robust discussions, I knew that I had achieved another milestone in my executive capability and personal growth. I respect Jonathan deeply. It is not because he is one of the most influential persons in the global fashion industry, nor because he is the person who could determine my salary and bonus. He earns my esteem because of who he is.
Over the years, he always inspires me to become a true leader by walking the walk. Under his leadership, I clearly understand the difference between a LEADER and a MANAGER. A leader is strongly principled in his ideals, and can attract others to follow and endeavor to achieve his vision together. On the other hand, a manager is simply a position appointed by the company or superiors with authority, so he is entitled to manage others. But the day one loses this position, one becomes a nobody.
My dear readers, have you ever considered the difference between a LEADER and a MANAGER? If it were up to you, which one would you pursue?
Every June, the Managing Directors of all international markets would fly to London for an annual meeting lasting two to three days. Jonathan would always personally conduct the opening and conclusion. His presentation would always be the most concise and so well presented. The key strategies and operational direction might be different each year, but Jonathan would always end with the slide of Our Core Values, and highlight these four:
● Local Autonomy
● Passion
● Trust, and
● Loyalty
He repeatedly stated that he entrusted the authority of each market to each of us. He believed each one of us would hire the best talent, produce the best product, and achieve the best result for our company. He was committed to be loyal to us, and was certain that he and the company had earned the loyalty from us.
After the conclusion of the meeting, he would take all of us to a restaurant of his choice, and everyone would dine and drink together all night, just like a family.
Then, as if we were all hypnotized, each of us would return to our office ready to fight to achieve the best for this company with all our heart and soul.
Since Condé Nast entered the China market in 2005, the share of Asia region continually increased, coupled with nonstop establishment of subsidiaries in various emerging markets and active development of international licensing business, the performance of the Condé Nast International continued to sprint to new heights like a rocket.
This was the corporate culture of Condé Nast International under the leadership of Jonathan by the end of 2018. It was the most advanced visionary global management system in my mind.
I have always believed that “corporate culture” is often over-explained. As if it was crucially necessary to show a few newly invented terminologies to make it a decent one. But in fact, the essence of corporate culture is the creation of a corporate atmosphere. It is the subjective recognition of everyone within. The focus is not the glorious slogans being said, but the action and conduct of the top leader on a day-to-day basis.
“Culture eats strategy for breakfast.” (Peter Drucker) The corporate culture can easily overturn any company strategy, goal, or plan. The most fit corporate culture can be clearly defined and established by a great leader. Unfortunately, when the leader is not the right one, the entire company can be completely destabilized from its roots, and nothing else can be right.
I’m not sure exactly when the Condé Nast US started to run into deficits and eventually deteriorated into a material loss. I assume it was during the years 2015 to 2017.
On November 27, 2018, Jonathan Newhouse and Steve Newhouse jointly sent out an email to all employees of Condé Nast in the world. It announced the merger of Condé Nast International and Condé Nast US. Since then, the global business operation of Condé Nast was officially integrated into one system.
There were only a few sentences announcement, but in retrospect, this decision specifically created the following profound impacts:
1. After the global integration, Condé Nast US became the largest single market with greater than 50% share in terms of revenue and number of employees. As such, its performance would dramatically and directly impact all the other markets.
2. The representative appointed by the shareholder Newhouse family to manage Condé Nast was changed. Jonathan was relieved from the day-to-day operation, and Steve became the person in charge.
Let me briefly explain a little background. The Newhouse family holds 100% of ownership in Condé Nast. In 2020, Forbes’ estimate of the net worth of the Newhouse family is $30 Billion US Dollars, equivalent to RMB 192 Billion. It’s an astronomical amount beyond the comprehension of ordinary people.
In terms of relations, Jonathan is a cousin of Steve’s father. Both of them are members of the Newhouse family. One might imagine the merger took place in 2018 may involve the power struggle within the family.
3. Even though now Steve is in control, he is not directly involved in the operation of Condé Nast. After nearly four months of search, he designated Roger Lynch as the first global CEO of Condé Nast, who officially took office in April of 2019.
After Roger took office, he decided to change the management reporting system, from LOCAL AUTONOMY to GLOBAL CENTRALIZATION. Before all markets were independently operating with the Managing Director being held accountable for the final result, and now all function managers in each market directly reporting to New York which are making most of the decisions. For this adjustment, he established the Executive Leadership Team in New York headquarters. The team consisted of ten executives with each managing a different function in the global operation.
Anna Wintour, the character in "The Devil Who Wears Prada", who everyone is familiar with, is in this central leadership team and serves as the global Chief Content Officer. In other words, Anna makes the final decision concerning all content-related strategic and personnel decisions for all media brands of Condé Nast worldwide, including Vogue China.
This entire organizational adjustment seems to be nothing more than merging Condé Nast International with Condé Nast US, and a simple change in reporting structure. How much impact can it have?
The following are my observations and views on this whole incident from the perspective as the former president of Condé Nast China.
1. From the perspective of the management structure:
The media industry is a content industry based on cultural heritage. It is not a retailing or manufacturing industry that can be easily standardized. Today's readers have the richest variety of content offerings ever. Media companies, KOL influencers, and brand advertisers are all fighting to please the readers, competing for readers’ attention and preference. It’s definitely an industry dictated by the readers’ interest – simply a pure buyer’s market.
As an international media company, you can integrate all the other functions globally, whether into New York or even Alaska, it doesn't matter. However, the content function is a big exception. It is the only function that cannot be integrated ever. Because such integration would immediately sever your connection from your readers.
As far as I know, the latest policy requires Vogue magazines around the world to allocate 70% to the headquarters’ content, and the goal of GQ is as high as 90%. This policy structures all Vogue and GQ magazines in the world to be consistently similar to the US Vogue and GQ magazines. Will such unified and standardized content really be appealing to the readers of those non-US markets?
Are American editors really qualified to determine the readers’ preference worldwide? I don’t know the answer for other markets, but I’m very certain that the readers in China will express their standpoints through actions without hesitation.
2. From the perspective of commercial business:
Yes this organizational adjustment covers the whole global market, not just for China. However, the focus of the headquarters' attention is indeed on the China market. Why?
Because the world's most important two markets, in view of all major international advertisers, especially luxury brands, are China and the United States. Before the merger of Condé Nast International and Condé Nast US, the operation and management of these two markets were totally independent from each other. With a tough president in Condé Nast China and an editor-in-chief who has dominated the fashion industry in China for 15 years, New York headquarters have not been able to directly control or interfere with China company’s operation. However, with the newly on-board obedient editor-in-chief and managing director of China company, combined with the new management reporting structure, the New York headquarters is now the commanding center, and the centralized operation can be extremely smooth.
Those of us who are familiar with the fashion media industry know that whoever controls the content will also control the commercial opportunity to work with advertisers. Through the above-mentioned settings, all major international clients could bundle their needs on both big markets to negotiate with Condé Nast US. Conde Nast US gains a greater voice and power in negotiations, and is able to charge higher advertising fees for both US and China markets. Those increased income can be kept in the US, very efficiently and conveniently to make up for the significant losses of the Condé Nast US operation.
At the conclusion of my post last Wednesday, I listed three prerequisites for anyone who might successfully rescue Condé Nast from its current predicament. The first is that he/she must be "extremely familiar with the nature of the industry and the rules of the game." Looking around the whole world, no one can beat Anna Wintour except Anna Wintour. When the US operation is facing such a severe crisis, only Anna is able to help Roger to jointly conceive of such a "great plan" to improve the material losses of the US operation. As a CEO coming from the financial background, I have to truly admire such a smart scheme.
When the Condé Nast US is strong enough with healthy profits, the centralized management system will definitely support all other markets and produce positive synergies. But now the situation is reversed. All markets, especially China, could be sacrificed anytime for the US company's benefit. All decisions are arranged around the purpose of "optimizing the US company", and what would be the best for the China market, is completely out of the considerations of the New York headquarters.
They simply don’t care.
3. From the perspective of people:
Shortly after Roger took office, I had a very strong feeling that he didn't behave like the top leader determined to turn around this international media company. On the contrary, he seems to be more like a professional salesman with top priority as preparing the company ready for sale.
Why?
In his first 8 months, he spent most of his time flying to offices around the world to hold town hall meetings, and watching shows with Anna on the first row. In June 2019, I met him for the very first time in the London office. It was a strange conversation. To begin with, he was not familiar with the dramatic changes that took place in the China company in the past two years, nor the current business situation, nor the long-term relationship between me and this company, nor any of the future development plans. I tried to bring the focus back to the business aspects, but he seemed to be only fulfilling an obligation, just wanting to casually chat and finish it.
A very interesting episode occurred in the meantime: shortly after Roger was on board, Wolfgang (For those friends who are reading my post for the very first time, please read my previous posts for the vivid and detailed introduction of Wolfgang.) once asked me, if it were up to me, would I prefer to report to Roger or Wolfgang? This seems to be a tricky question for office politics. But I still believe even now that Wolfgang was sincerely discussing this matter with me, not setting me up or framing me. Nevertheless, my reply might really embarrass him (though not any of my intentions). Because I, who cares less about how to be politically correct, immediately replied without hesitation, “I wish to report to the boss who understands the China market. I have no opinion on who it has to be.”
You see, the boss inquired about my preference for politeness, but I took it too seriously and demanded the qualifications for my reporting boss. Really, no wonder they had to get rid of me…...
When all of us were waiting for Roger, the new global CEO, to formulate the company’s specific business strategy and direction, his first concrete action was to set up the ELT, an executive leadership team at the New York headquarters. He then announced the change of reporting structure, one by one, until the reporting line of each and every function was transferred from the local President/Managing Director in each market, to the direct control under the New York headquarters. The last one was to integrate the core editorial content team globally. After everything was in place, New York headquarters would be able to export the values depicted in American magazines, their central ideas, and the specific contents to various markets around the world, replacing the local content.
This model is not only completely contrary to the original intention of insisting on ideals and years of pursuing perfection as introduced at the beginning of this post, but also contrary to the practical learning experience of the modern media industry. In the short term, it may be possible to cut costs by integrating production processes and content creation, but it is not a sustaining strategy that can continue to flourish for the long run. Even readers who are not in the industry messaged me, and questioned how the New York headquarters of Condé Nast believes that a media company can use such a centralized model to do business well.
Based on this centralized decision, now global Vogue only needs one editor-in-chief, Anna herself. All the other senior Vogue editors are no longer needed.
