Sunday, July 29, 2012

How big companies make big mistakes

"How can such a big company be so stupid?"

Maybe it's because I was just at Romance Writers of America 2012, but a lot of the conversations I had around the Harlequin litigation turned on that question. And every time I gave my answer, the amazed looks I got spoke volumes about what my next post should be about.

My answer: "What they did isn't stupid. It's just stupid to you and me."

I'll use the Harlequin facts to explain, but the principles apply far beyond. If you're creating content for distribution by a large company, I'm afraid you'll have to deal with these kinds of situations pretty often in your career.

If you've looked at my bio you've seen that I've worked inside some big companies. So I know this from experience: big companies have lots of smart people working there. (I'll let you decide whether I should have added "present company excepted"!). So it's not a lack of intelligence that leads them to make mistakes or ham-handed decisions.

It's focusing on your own priorities without thinking of the bigger picture.

Although I don't have any inside knowledge of what decisions actually led to this situation, I can map out several scenarios that involve conversations that I can totally envisage happening.

  • The e-book rights were licensed by the Swiss company. Harlequin decided to run its e-books business through the main Canadian company. So they had to license them. So the mid-level people in the relevant back office departments did the relevant paperwork and that was that. No one ever thought about the consequences, they were just doing their jobs.
  • If someone did think about it, their first priority would have been protecting the tax strategies that led them to make the Swiss company in the first place. Whether doing this would raise a risk of litigation would be a distant second. And if that issue came up at all, it would have come down to a cost-benefit analysis: is it more expensive to face the lawsuit from the authors, or to lose the benefits of the tax strategy.

Ask yourself: except for the last part of the second bullet, do you see anyone in there trying to be malicious? Or do you see people making the kinds of decisions that people make in their jobs every day: doing what they're told, promoting the interests of their department, and not really thinking about how their actions will impact outside of their immediate environment? They're not trying to make their companies a windfall, they're trying to make themselves a living.

But this becomes a problem when the people who are paid to think about consequences don't do that.

I've seen this kind of thing more times than I can describe. One story I'm able to tell: I was at Xbox when the Wii (then known as the Revolution) had its demo at E3. On the afternoon of the last day, when the first people had already left and the ones who weren't flying out of LA that afternoon were mostly planning where to go for dinner, the conversation turned to whether Nintendo was going to do well with the Wii. People were saying things like "It doesn't have HD graphics" or "the games are too cartoonish" or "no one wants motion-controlled gaming". And I remember saying, "Have you looked at their booth? It's Friday afternoon and people are still lined up to get in and try this out."

I've been wrong plenty in my life, but I wasn't wrong here. The Wii, as everyone knows, went on to be the biggest-selling console of this generation. Only in the last 18 months has Microsoft been able to move more Xboxes per month than Nintendo has sold of the Wii, and that's at least in part because of the success they've had with Kinect. Which is motion-controlled gaming. But at the time no one was thinking outside the bubble: it was more important to be technologically advanced than it was to be fun.

You see the same thing with Sony's decision to focus on getting a Blu-Ray player into the PlayStation 3 even if that drove the cost up or made the device lose money. Sony needed consumers to want Blu-Ray, they had used the PlayStation before to get DVD players into homes, and so the PS3 needed to have a Blu-Ray. The fact that it was expensive and difficult to create games for, that didn't really factor into the equation.

But consumers' and creators' priorities aren't usually companies' priorities.

If it doesn't settle, I suspect the Harlequin litigation is going to have some pretty big consequences on the publishing industry far beyond just romance novels. But the amazing thing is something that I'm sure is going to come out in the depositions: no one inside Harlequin will have seen it coming.

1 comment:

Thanks for commenting. Posts and comments aren't legal advice; requests for legal advice in the comment probably won't get answered. Sorry to have to do this but someone someday is going to make me glad I did...