Jonathan Rothermere on Thinking Big About Digital Businesses

Jonathan Rothermere took over the Daily Mail and General Trust (DMGT), a global media company based in the U.K., in 1998. This was just when the newspaper business was about to begin to swoon. Rather than preside over the decline of a media empire that had been in his family for four generations, he oversaw its reinvention.

Under Rothermere's leadership, DMGT has gone digital by, among other things, starting the highly successful MailOnline. The site is now the world's largest online newspaper, with more traffic than the online site of The New York Times, most of it from outside the U.K. DMGT has also built up its business-to-business activities, which now generate three-quarters of the company's profits.

Rothermere has strong views on what traditional business need to do to stay relevant in the face of digital competition. They need to take advantage of scale and global reach. They need to make bold, long-term moves and be willing to fail. They need to put their best, most entrepreneurial people into their digital business and let them compete against the company’s legacy business. If a company is unwilling to do these things, he says, they should probably sell the business. The best defense against digital disruption, in other words, is a strong offense.

Rothermere spoke recently with Paul Zwillenberg, a BCG partner and managing director. Excerpts follow.

When you first took over at Daily Mail and General Trust, 15 years ago, the business was very different from where it is today. What were some of your initial strategic priorities for the group and how have those changed over the years?

Our original strategic priorities were to diversify out of newspaper businesses and into subscription-based media—in particular, the B2B area—and to diversify globally.

How have the fortunes of your industry changed over the last 15 years?

We have seen a massive decline in the classified-dependent elements of the newspaper industry. And we have seen a huge growth in our B2B assets. We have gone from about 80 percent newspapers to about 70 percent B2B. And we have moved out of local newspapers.

How do you protect the value of your content and your brands in the online world of aggregation and instant disintermediation?

I would say that “protect,” in the digital world, is the wrong word. If you are going to talk about protection, you probably ought to go and find something else to do. The only way you can protect is by moving forward, by getting bigger, by dominating your space. The moment you start getting defensive, you are going to start shrinking, because there is no way that you can compete against the dynamic entrepreneurialism of the Internet.

Are we seeing the second wave of digital coming, and how do you deal with that?

I think we are probably into the third wave of digital. Businesses are maturing and are beginning to get eaten. The life cycle of a lot of digital businesses is shorter. In digital businesses, you have to have a lot of scale. It helps to be global. Otherwise, new people will come in. It is a much more competitive marketplace and much more dynamic.

We've talked a lot about B2C [business-to-consumer] businesses. You also have a thriving B2B business. How are those businesses? What is digital doing to those businesses? What opportunities is digital creating for B2B businesses?

You have to decide where you are going to put your priorities. Do you have permission to play? Do you want to spend resources in an area, and is your management team prepared to fail? If they are not prepared to fail, they cannot succeed, because they are not willing to really try. Or they try a little bit, and that won't be enough to work.

If you can think big around your business, then you can play big. We are trying to do that with RMS [Risk Management Solutions], our insurance-data business. We are investing around $150 million in that project and trying to change the nature of the insurance industry.

You have been one of the leading proponents of using social and collaboration tools to open up and flatten the company and to increase the quality of the dialogue. How has that changed the company?

You have to incorporate social media into any and all your products going forward because people expect to be able to communicate around any kind of information source or digital brand. In some areas, you will find a very rich conversation. You can build a very strong relationship with your customers if you can get them talking to each other using your platform or service about your product. That is really a very valuable place to be.

In a large company such as DMGT, how do you create a culture of entrepreneurialism that nurtures these startup businesses?

It is very difficult, but ultimately you have to have a slightly decentralized culture. You have to back individual leaders. Entrepreneurs tend to find their way. They might start off with a great strategy, but it normally ends up being different. They have to change direction several times. So you have to be patient. You cannot get too stuck to business plans. You have to decentralize the entrepreneur. Big companies always get in the way. Entrepreneurs need to be nurtured and protected, and allowed to get on with it.

What advice do you have for the chairmen and chief executives of the next industries that are being digitized?

If you feel that your business is going to be disintermediated by an Internet business, then sell it or become your own biggest competitor. Put your best people into it, separate it out, put real money behind it, don’t look for profits over the short term, and really believe in it. And then you might have a chance of success.

How do you support your managers in making that transition?

If you want to set up a digital business, you have to give it 100 percent support. It is probably going to compete with your traditional business. If you are not prepared to take that kind of risk, you should get out of that business, because it is not going to work. To try to do it incrementally is not going to work. In the long term you are not going to compete against Internet businesses, because they are so focused, so driven, so well capitalized, and have such smart people running them.

You have to try and play their game and utilize the skills that you have in your business to the best advantage. In our newspaper business, our skills are editorial, our ability to know what stories to produce. None of the other things that were in our newspaper businesses played on the Internet. So we literally just said, “We are going to try and produce a website that is rich in content and that is going to be as good as it possibly can be for an Internet audience.”

When the newspaper guys where saying, “A free Internet site is hurting our circulation,” we just said, “Well that is a pain we are going to have to take in order to be successful.”