It’sa jungle out there, and the ITV Digital monkey suffered due to mismanagementand intense competition. But could HR have saved the day? Nic Paton reports onthe short but eventful life of ITV’s ‘bastard child’When it comes to writing the history of TV, ITV Digital’s knitted monkeywill probably be listed somewhere between the Betamax video format and theill-fated ‘Squarial’. What began as a bold attempt to persuade the Britishpublic to switch their allegiance from traditional analogue television to digitalterrestrial TV ended in acrimony this May with the loss of 1,700 jobs, as hugedebts plunged ITV Digital into administration. While, as we shall see, there were many reasons for the collapse,commentators point the main finger of blame at a series of executive andmanagement misjudgements, some of which can be laid squarely at the feet of HR.It was all so different in October 1998 when the then ONdigital was unveiledat a glamorous party at London’s Crystal Palace. The launch was the culminationof a vision set in motion in 1995 by Virginia Bottomley, media minister in thelast Conservative government, to turn Britain into a digitalised nation throughspecial set-top boxes. At first, the operation was backed by BSkyB, Carlton, Granada and the BBC.But when BSkyB was forced out by the European competition authorities, itrapidly turned into a dangerous rival. And ONdigital immediately ran into problems of its own making. In November 1998, the chief executive Stephen Grabiner was forced to admitthat supply problems with the set-top boxes meant the company would miss out onthe crucial Christmas sales period. Eight months later Grabiner spectacularlyresigned, suing ITV in a high-profile court case, and was replaced by StuartPrebble, who later became chief executive of ITV. ONdigital’s woes were compounded by the fact the signal – described later byCarlton chairman Michael Green as “softer than an electric razor” –was so weak it would go fuzzy at crucial times. Even when the signal could bepicked up, the technology would often freeze or not work at all. And instead ofattracting customers by putting on first runs of Coronation Street, the channelrelied on low-budget, in-house fare such as The Carlton Food Network andGranada Breeze. Then in June 2000, Carlton and Granada switched tack, splashing out £315m ona three-year deal with the Football League for the rights to the NationwideLeague and Worthington Cup matches. Even at the time this ‘deal’ looked expensive (BSkyB paid £125m for therights in 1995), and it would prove a financial millstone and soon became thebutt of embarrassing analogies, such as the calculation that it would have beencheaper to take each viewer to matches by taxi, pay for their tickets and putthem up in a hotel. By April 2001, a rebranding exercise to create ITV Digital was ongoing andthe channel was expensively relaunched last summer with the knitted monkeyfronting the campaign. But it was all to no avail and, with revenues andaudience figures collapsing, ITV Digital went into administration in May 2002,losing its shareholders more than £1bn. BSkyB’s Rupert Murdoch eventually agreed a £95m four-year rescue package tobroadcast Nationwide League football matches – a move seen by many as the finalnail in the coffin for ITV Digital. And ITV and the Football League foundthemselves in the High Court late last month, battling over the £178.5m theleague says it is still owed by ITV Digital. While it would be unfair to lay the technological failings at the feet ofHR, the HR team, led by director Malcolm Swatton, does have to take at leastsome responsibility for what commentators argue was a catastrophic series ofexecutive and management misjudgements. So how did it all go so wrong? Merger most horrid As ITV Digital’s troubles deepened in June 2001, Granada chairman CharlesAllen wrote to Prime Minister Tony Blair warning him the channel would collapseunless the Government intervened. He urged the relaxation of media ownershiprules to allow Granada and Carlton to merge, to provide greater economies ofscale. This inability of the two parent companies to merge was at the heart of ITVDigital’s problems, argues John Smyth chairman of Smyth Dorward Lambert, aconsultancy that specialises in bringing about people-centred change withinorganisations, particularly during mergers and acquisitions. “The words ‘bastard child’ come to mind,” says Smyth. “ITVDigital appeared to be this poor thing in the middle that never knew where itwas going. “An organisation like that is constantly looking over its shoulder toits parents. In such situations, it is easy to have an unclear, inconsistentvision – something that unsettles everybody,” he adds. Neither Granada nor Carlton had any experience of running a digital channeland neither was prepared to make it a core part of their operation. “You get the feeling they negotiated as they went along rather thanbefore setting it up,” says Smyth. Any joint venture needs someone capable of asking the tough questions, of havingthe confidence to be a challenging voice within the process. And while thatperson does not necessarily need to come from HR, in a people-centred industry,perhaps it should have. “It is hard for the HR person to come across as a commercial adviser,but they need to say, ‘let’s remember what the genetic code we are putting inplace here is’. It’s not just a transfer from the two parentorganisations,” says Smyth. While a merger of the two businesses may have helped to bring throughgreater economies of scale, cost reductions and, possibly, a more streamlinedbusiness model, it is unlikely this would have have been enough, he believes.”The leadership has to say ‘this is not just a merger, we are going tocompletely change the whole show’. Otherwise you simply get a bodge, somethingin the middle. And the cultural impact of any merger normally takes five to 10years to work through anyway,” says Smyth. Ironically, in May, the Government published its Communications Bill, whichcleared the way for a merger between Carlton and Granada. Leadership own goal BSkyB chief executive Tony Ball memorably said of his counterparts at ITVDigital that they were unable to run a bath, let alone a TV company. And in aninterview in The Daily Telegraph, Carlton’s Green admitted management mistakes.”Is it a mess? Yes. Would I do it again? Yes. Would I do itdifferently? Of course. Did we make mistakes? Definitely,” he said, beforeshifting a large part of the blame on to the failing technology. But according to John Clarke, media analyst at stockbroker Brewin DolphinSecurities, a series of executive mistakes – from over-confidence about thetechnology to naivety in paying so much for the football rights – were more theroot cause. “These were all failures of the executive,” he says. “Theyalso attempted to target BSkyB customers, when they should have targeted thelower spending customer. Executive errors compounded strategic mistakes.” Executives were over-confident about the take-up of digital television,believing the Government’s support would help the organisation to ride out anyinitial teething problems, he adds. “Essentially, they did not have muchto offer,” explains Clarke. Carlton and Granada mistimed their entry into the market and, crucially,were inconsistent in implementing their strategy. The departure of Grabiner,the change of tack to focus on football, the expensive rebranding – these wereall signs the leadership was failing, argues interim HR executive LouiseMarron. Marron, who works closely with HR consultancy Courtenay, was a consultantfor e-peopleserve, the outsourcing joint venture between BT and Accenture thatrecently took over some of Cable & Wireless’ HR function. She specialisesin organisational redesign. “For those who were not interested in football, there was effectivelynothing on offer,” she says. “They had not worked out where they satin the marketplace relative to BSkyB. It’s been a case of poor service, processand administration.” Carlton and Granada also made the mistake of resourcing the business tooheavily in expectation of profit rather than building it incrementally on theback of profit, she believes. “They had huge upfront costs and did not seem to think about how torecoup them, even in the long term. The amount they invested in the FootballLeague was phenomenal,” she says. Changing the name created brand confusion, smacked of panic and would nothave helped morale, she adds. Good leadership, when two parent companies are running something such as ITVDigital, involves having leaders who can strike out and make a go of theventure in its own right, argues Smyth. “HR should be the catalystdefining the requirements for the original leaders. When you compete with aculture like BSkyB’s you do not necessarily want to emulate it but you need tounderstand your enemy,” he says. Distinct lack of skills ITVDigital’s inexperience in the sector – particularly when up against asstrong a competitor as BSkyB – showed itself in the way it underestimated theskills needed to be a significant player in this market. “From people I have spoken to within the company, they went with theiroffer without having their staff fully trained. People were still being trainedthe night before they opened,” says Marron. The management team not only failed to put the right skills in place, theyfailed to follow one of the basic maxims of a people-centred business – workback from your customer – contends Professor David Norburn, director ofImperial College Management School and an expert on mergers, acquisitions andjoint ventures. “They got excited by the technology, but did not think about whatcustomers would think, which was, ‘how much is it going to cost me to watchthis particular game?’,” he says. “They forgot the customer has a choice,” he adds. “It was asupply-side failure. They were too sales focused and not enough marketingfocused. It was a technology-driven deal. It is up to HR to orchestrate themenu of skills, put them in place and take things forward.” With an exciting new technology to play with, it is perhaps not surprisingmanagement became blinded to the basics. The ITV Digital saga was a classicexample of a business being too concerned with the short-term and, critically,seemingly not interested in its people management, argues Alan Hooper, directorof the centre for leadership studies at the University of Exeter. “This is particularly important when you have a merger or partnership.The critical thing is whether the two cultures really fit together. “The lesson for HR is that the most successful companies are the onesthat focus on the people,” he says. The key playersCharles Allen, chairman of GranadaAllen and Carlton chief executiveGerry Murphy had a very public spat when Allen sent a letter to Tony Blaircalling for a relaxation of media ownership rules to allow Carlton and Granadato merge, which was subsequently leaked to the press. Murphy, in turn, accused Allen of “hystericalscaremongering”.Allen is still considered a rising star in the media world,despite the ITV Digital debacle. Once Granada and Carlton merge, he will be oneof the most powerful people in commercial television.A former executive at Grand Metropolitan, he followed hismentor Gerry Robinson to Granada in 1991, becoming chief executive of Granadatelevision the following year.Michael Green, chairman CarltonCommunicationsOne of the driving forces behind ITVDigital, Green described himself as being “seriously upset” by itscollapse and describing the fiasco as the worst period of his business career.Probably the next most powerful man in commercial televisionafter Charles Allen, Green is renowned for his fiery temper, but is widelyrespected for the way he built up Carlton from scratch.He first made an impact in 1985 when he made an audacious bidto snatch Thames TV’s television licence. This was blocked, but Green finallysucceeded in 1991 and Carlton was born.Stuart Prebble, former chiefexecutive of ITV DigitalA former World in Action journalist,Prebble was appointed to head ONdigital after the departure of original chiefexecutive Steve Grabiner in July 1999. Within a year he had been promoted tochief executive of ITV and oversaw the rebranding exercise to ITV Digital. Prebble resigned following the company’s collapse and isconsidered by some commentators to have been made a scapegoat. He is widelybelieved to have been too much in thrall to Carlton and Granada and unable tocarve out enough of an independent leadership role for himself or the business. Monkey businessOn 20 Aug 2002 in Personnel Today Previous Article Next Article Comments are closed. Related posts:No related photos.