Prime Group

What are the first two questions you ask yourself when you hear about a new PR disaster? Here are mine. First, what the hell were they thinking? Second, how can smart people do such dumb things?

Take the Hewlett-Packard leak flap. These are smart people. CEO Mark Hurd, in just 19 months, is turning the company around. Board chairman Patricia Dunn, as a member of the Conference Board’s center for corporate governance, is no stranger to corporate ethics issues. Nor is the HP boardroom populated by unsuccessful, inexperienced, or dumb people. So when Dunn proposed conducting a clandestine probe into boardroom leaks, why didn’t alarms go off in the head (or conscience) of at least one board member? Had no one read All the President’s Men (or even seen the movie)? Didn’t it occur to anyone that the whole exercise was ethically and legally questionable and, from a PR perspective, dangerous in the extreme?

Here are two explanations for these incredible lapses of judgment – one about the nature of the incident and the other about the people involved.

In my White House and Senate staff days, I learned that how you respond to leak probes can help either exonerate you or indict you. “Great idea, let’s get those bastards”? suggests that you have nothing to hide. “Do you really think this is a good idea?”? on the other hand, can raise all the other eyebrows in the room (there are only nine HP board members, and at least one of them was “guilty”?). This is why, even after approximately 99.99% of all leak probes have backfired, they are still proposed and endorsed by otherwise intelligent people.

And what about those people? Of the nine HP board members, six are techies, one comes from finance (Dunn), one from healthcare, and one is a consultant. Notice what’s missing? Here’s a hint by way of board members of similar companies. Apple: Al Gore. Xerox: Vernon Jordan. Dell: Sam Nunn. AT&T: Lynn Martin. United Technologies: Christine Todd Whitman. Intel: Charlene Barshefsky. No one on the HP board has any obvious political experience. It’s not even clear that there’s a lawyer on the board (at least no one is identified as such on the HP Web site).

Of course, having political experience is no guarantee of sagacity or even common sense on politically sensitive issues like leak probes. But, it is hard to believe that Gore, Jordan, or Nunn wouldn’t have sounded the alarm if they were in the HP boardroom that day. It is also unlikely that any of them would have been intimidated by the prospect of being suspected of leaking.

Possibly HP is now looking for a prospective board member with these kinds of credentials, but so far, its only structural reaction has been to take a giant step back from corporate reform and name Hurd chairman of the board. Circling the wagons may be the only political strategy less likely to succeed than probing leaks

I have just finished reading The Washington Post over a cup of Starbucks coffee – a morning ritual that occurs less regularly now than it used to. The Starbucks part still happens every morning. But the Post part happens a few days each week instead of every day as it once did. It seems to me the contrast says something about Starbucks and about newspapers.

Traditional papers are in decline. We’ve all heard the familiar explanations: the Internet, consolidation of advertisers, a new generation’s short attention span, increased competition. Wait a minute. There’s something wrong with that last one. In fact, it is dead wrong. The greatest cause of newspapers’ troubles – and the one seldom mentioned – is their historic lack of competition. And, if anything will save the medium, it will be the fact that they now have to fight for every reader.

Monopolies are not good for their customers nor, ultimately, for the monopolies themselves – and most major papers were monopolies until very recently. And, they acted like monopolies with arrogant disregard for the customer and a dismal lack of innovation. They probably would also have adopted the third characteristic of monopolies – price gouging – except papers make their money off ads and have always subsidized the subscriber in order to boost circulation.

Starbucks, by contrast, was an upstart startup just a few years ago, taking on the coffee giants like Dunkin’ Donuts and McDonald’s. And Starbucks acted like startups do – it broke the rules, listened carefully to customers, and innovated like crazy. The greatest threat to Starbucks now is that it has become so ubiquitous it may soon look – and act – like a monopoly. But Starbucks and newspapers have (or,at least, had) one important trait in common: They are driven by habit. Therein lies more depressing news for newspapers. I have two college-aged sons. Both have already developed the coffee habit. Neither has developed the newspaper habit. Unless newspapers can find a way to reverse this trend, they will soon look like tobacco companies – dependent upon a dying generation of “addicted”? users.

The good news for newspapers is that they seem, finally, to understand their new situation. Increased competition – mostly from nontraditional sources like all news Web sites and blogs – has caused them to think competitively, to listen to their customers, and to innovate with their own Web sites, online communities, localization, blogs, and RSS feeds. Even the traditional dead tree product is susceptible to innovation, as The Wall Street Journal has recently shown.

If newspapers can continue this pattern of innovation and find ways to make newspaper reading – in whatever format the reader chooses – a habit again, they will not only survive, but prosper. The invention of TV was supposed to doom radio. The VCR was going to kill the movie theater. Neither prediction proved true, but only because radio and theaters started innovating and finding new ways to meet customers’ needs (think Howard Stern and the multiplex). Papers can survive in the same way – now that they have finally woken up and smelled the coffee.

In business and in life, we all depend on role models to help shape our decisions and behavior. Countless “how-to”? business books testify to this. I was reminded of this when I heard that President Bush’s summer reading list includes two books on Abraham Lincoln.

I suspect Lincoln is Bush’s presidential role model. After all, Lincoln faced a defining moment in our history – a mortal threat to our nation’s existence. Bush sees the “global war on terror”? as just that. Lincoln had a singular focus – to win the war at all costs. Ditto, Bush. When others wavered, or thought the cost of war was too great, or the outcome too uncertain, Lincoln was a rock. Just like Bush. Lincoln would not be deterred by constitutional niceties like habeas corpus. Bush remains determined to adopt “all necessary means”? – Lincoln’s phrase – to win the war on terror.

To those worried about the direction of Bush’s war in Iraq, the Lincoln analogue might be reassuring. But if Bush is modeling himself on Lincoln, he seems to be doing so selectively. Particularly in terms of communication with the American people, Bush would do well to study Lincoln’s example more closely.

Lincoln understood the importance of maintaining popular support for his war effort, famously asserting that, “With public sentiment, nothing can fail; without it, nothing can succeed.”? He also understood the importance of language in rallying the support of the nation, and no President has been more eloquent. Bush disdains eloquence, preferring to use language to convince the average American that he is one of us. Americans want their leaders to lead in words as well as in deeds, especially during wartime.

Lincoln also grasped the practical and non-ideological nature of the American people. Pressed by Abolitionist supporters to declare the Civil War one of emancipation, he refused, claiming that he would free all the slaves or none if either course would bring victory and preservation of the union. Bush insists on framing his war in Iraq as one of liberation and democracy (at least since the WMD rationale evaporated).

Lincoln’s flexibility of character helped him maintain public support throughout the Civil War. He ran through five “Generals-in-Chief”? before settling on the successful Ulysses Grant. Bush, however, seems determined to stand by failed appointees in order to avoid the perceived sin of his father – vacillation. And, in contrast to Bush’s “God is on our side”? view of world affairs, Lincoln said, “In the present civil war it is quite possible that God’s purpose is something different from the purpose of either party.”?

Perhaps Bush should add one more book to his list: a biography of Franklin Roosevelt. The most eloquent president since Lincoln, FDR was committed to government by trial and error – always experimenting, acknowledging mistakes, correcting them, and moving on. If Bush considers Roosevelt too liberal and flexible a model, he might consider that FDR was the preferred model for a recent and, so far, more successful conservative President – Ronald Reagan.

Vladimir Lenin famously cited the principle “You can’t make an omelet without breaking eggs”? to justify creating a Utopian society through bloody revolution and dictatorship. For seven decades, the Communists broke a lot of eggs without producing an omelet.

But Lenin was right – to drive change, you have to break some rules and, often, some laws. Consider Google. The company is under siege by publishers for digitizing and distributing copyrighted work, and by the Bush administration for refusing to turn over individual search histories. The former is probably illegal and the latter a dangerous challenge to a President who thinks he’s Jack Nicholson in A Few Good Men.

Ironically, while breaking the rules in the US, Google is timidly observing China’s rules of wholesale Internet censorship – the so-called “Great Firewall of China.”? Next time you visit Beijing, try Googling “democracy,”? and you’re likely to get the same result as placing a collect call to Osama bin Laden from New York City. Apparently, Google thinks it can make an omelet in China without breaking the yolk.

The inconsistency of these policies – one bold and rebellious, the other compliant and complicitous – says a lot about Google and the relationship between change and rule-breaking. Google’s mission statement – “to organize the world’s information and make it universally accessible and useful”? – is high-minded and populist. If information is power, Google promises “power to the people.”? The company further cloaks itself in righteousness with its motto of “Do no evil.”?

For Google, “Do no evil”? isn’t the same as “Break no rules.”? If society’s rules are designed to screw the little guy, Google is happy to pursue a high-profile, defiant rule-breaking strategy – in line with its commitment to avoid evil-doing and illustrative of its corporate persona as a populist defender of the common man.

But Google needs to be careful. Rules help preserve the power of the powerful, and when challenged, those interests are fierce defenders of the status quo. Ask Napster’s Shawn Fanning. While Google has plenty of economic and market power of its own, there are only so many times it can stick its finger in the eye of the ruling elite with impunity. The company is already finding that, despite its positive buzz and soaring market cap, it can’t find a well-connected Republican in Washington willing to represent its political interests. It should ask Bill Gates what being an outsider in Washington can cost a company in legal bills alone.

And Google, like a self-righteous politician (think Tom DeLay), could easily become an overstuffed political piñata for competitors, politicians, and the media. The hypocrisy of its China policy looks like the big bull’s eye on that piñata’s butt. Google is in its corporate adolescence – big growth spurt, lots of testosterone, moral certitude, and flagrant disdain for authority and rules. But adolescents who don’t learn when to play by the rules become obnoxious and, ultimately, unsuccessful adults.