Leaders must be supremely confident about where they’re taking their organization, or at least look like they are, in order to be effective. Who wants to follow someone who’s lost? One of the most engaging parts of studying leadership is watching leaders decide where to go – the process of forming grand-scale strategy. It plays out over years, highlighted by moments that brightly illuminate the giant forces that leaders must judge and contend with. For leaders in two industries, we’re in one of those moments now.
As everyone who wasn’t in a coma is well aware, Walt Disney’s Star Wars: The Force Awakens just had the greatest opening weekend of all time. Disney CEO Robert Iger looks like a genius for his big investment in the Star Wars franchise. But the world barely noticed something else that happened last weekend: Disney’s stock price plunged. From the market opening on Friday to the close on Monday, the stock dropped about 5%. What gives?
While most people were watching the box office numbers (or the movie), investors were focused on big-picture strategy. On Friday morning, analyst Richard Greenfield of BTIG Research downgraded Disney stock to “sell” because he’s worried that ESPN, the locomotive that drives Disney’s profits, is headed for long-term trouble. ESPN extracts billions of dollars annually from cable TV subscribers who are forced to buy programming in bundles that include ESPN regardless of whether they want it. But cable TV is in trouble as millions of viewers cancel their service (or never sign up) in favor of buying exactly the programming they want online. This “over the top” model was widely dismissed as insignificant just a few years ago. Now Reed Hastings’s Netflix, delivered over the top, has about the same market cap as Jeff Bewkes’s Time Warner. In the business that we used to call TV, who sees where they’re going most clearly?
Several media outlets are now reporting that Google and Ford are in talks about developing autonomous cars. A source has told Reuters that Ford CEO Mark Fields and Google co-founder Sergey Brin met earlier this month in California to discuss the possibility. The idea of self-driving cars was widely dismissed as impossible only a decade ago, and even two years ago several mainstream “experts” said it was decades away. Google’s Brin, CEO Larry Page, and former CEO Eric Schmidt saw where they were going more clearly than any auto industry CEO. Fields looks smart for possibly getting in on the trend with the leading player, but we don’t know if any deal will happen. Nor do we know what Apple’s Tim Cook may be thinking; he hasn’t even commented on widespread reports that Apple will introduce an autonomous car in 2020 or so. But it’s already clear that no auto industry CEO saw that one day a car’s software would be more valuable than the physical vehicle.
This is business chess at the grandmaster level. We rarely get to glimpse what’s going on in the minds of leaders as they decide where to take their organizations. It’s a lot of fun when, at moments like these, we do.
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What We're Reading Today
Exxon, GE face off over Common Core
ExxonMobil's Rex Tillerson, Microsoft's Bill Gates, and other business leaders have worked hard to enact Common Core education standards. But some companies, including General Electric, have fled the fight as Tea Party supporters and billionaire Charles Koch fight the standards. Tea Party protests have helped stop businesses from supporting the standards nationwide. Fortune
Kim Dotcom to be extradited to the U.S.
The boisterous internet entrepreneur faces the possibility of years in prison on charges including conspiracy to commit copyright infringement, racketeering, and money laundering over the running of his now defunct file-sharing site MegaUpload. A New Zealand judge made the extradition ruling, which Dotcom will appeal. Wired
Sprint paid $25 million for advice it didn't use
Shortly after CEO Marcelo Claure took the top role, he engaged a group of advisers - headed by his mentor, Dennis “Sol” Trujillo - to develop a plan to improve the quality of Sprint's network. Over five months, Sprint paid the consultants $25-$30 million, which some claim is a higher rate than normal and unusual since Sprint was in cost-cutting mode. The contract ended because Sprint Chairman Masayoshi Son did not agree with the recommendations. It's a peek inside Claure's difficult first year. WSJ
Uber wins a small victory in California
Uber faces a class action lawsuit over whether drivers in California should be classified as employees. A ruling by U.S. District Judge Edward Chen on Dec. 9 allowed over 100,000 more drivers to join the case. But he said yesterday he will not issue a ruling after the June trial unless the appeal process over his Dec. 9 decision has ended. Travis Kalanick's business model would change dramatically if he's forced to pay drivers as employees rather than as contractors. OC Register
Building a Better Leader
An ad agency in Australia banned email at work...
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In order to rest at work...
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The Sports Biz
Sepp Blatter: “I’ve finished my work in football”
Although the ousted Fifa president says he will appeal the eight-year ban by Fifa's ethics committee, he seems resigned to the reality that his time at the soccer federation has ended. Blatter maintains his innocence and says that threats by American sponsors to cancel the contracts were hollow. WSJ
NFL avoids paying for brain study
The NFL and commissioner Roger Goodell have declined to help sponsor a brain study with the intended purpose of diagnosing chronic traumatic encephalopathy (C.T.E.) sufferers while they're still alive. The Foundation for the National Institutes of Health, which administers $30 million in funds provided by the NFL for C.T.E. research, did not provide money for the study. ESPN reports that the NFL did not want the funds used in the research because it was awarded to Boston University professor and NFL critic Dr. Robert Stern. NYT
Brooklyn Nets head takes full ownership
Russian billionaire Mikhail Prokhorov took full ownership of the Brooklyn Nets and their arena this week. He had owned 80% of the Nets and 40% of the arena, and now, through his company Onexim, he has purchased the remaining shares. The deal values the Nets at $875 million and the arena at $825 million. Fortune
Up or Out
Under Armour has hired Chip Molloy as CFO, replacing Brad Dickerson. MarketWatch
Fortune Reads and Videos
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Wonder how bad Beijing's smog problem is?
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Caterpillar found guilty of stealing trade secrets
It used secrets for a piece of machinery equipment from British supplier Miller UK while a client. Fortune
Foursquare's new funding round values it at $250M
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On this day...
...in 1951, the NFL's championship game was televised across the country for the first time. TV rights to the game, which pitted the Los Angeles Rams against the Cleveland Browns, cost $75,000. NFL.com
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