Lessons From The Founder Of The Discovery Channel
Last year I stumbled across the biography of John S. Hendricks the founder of Discovery Communications, it’s titled, “A Curious Discovery: An Entrepreneurs Story”. Initially, I thought the book would be another typical business biography (a la Jack Welch), but I was wrong. The book is about the remarkable life of a “media” entrepreneur and the role of learning, curiosity, & multidisciplinary thinking in achieving entrepreneurial excellence. This is one of those books that resonated so much with my personality and interests that it motivated me to restart this website. Below are some of my favorite bits from the book (I have categorized them by topic).
First, here’s Amazon’s summary of the book.
Hendricks is the founder and chairman of Discovery Communications, a global mass-media entertainment company consisting of 28 network brands including the flagship Discovery Channel, Animal Planet, TLC, and the Science Channel. Inspired by such classic television documentaries as Walter Cronkite’s The Twentieth Century and Carl Sagan’s Cosmos, Hendricks boldly set out to create an all-educational cable network to air documentary, nature, and science programming 24 hours a day. That was in 1982, when cable was still an unproven medium. How he went from a $100,000 second mortgage on his home and the brink of bankruptcy to a $23-billion media empire is one of the most engaging entrepreneurial stories you’re likely to read and also one of the most personal. From his anecdotes about growing up in 1960s segregated Alabama to his recounting of a courting by the enigmatic Ted Turner, Hendricks’ humility, sincerity, and prescience shine through. Along the way, you may even get a behind-the-scenes look at one of your favorite shows, such as Mythbusters, Shark Week, American Chopper, How It’s Made, and Planet Earth. –David Siegfried
What Drives Entrepreneurs
I have taken a different approach in this book. I want to explore “why” businesses are created. Why do entrepreneurs do what they do? Why do they devote such enormous time, with a very high risk of failure, to create something new in the world? Why don’t they give up in the face of enormous obstacles? Why can they see things that others do not? Why are entrepreneurs so passionate about what they do? Why do they spend so much time daydreaming? And why are they so darn optimistic? It all begins, I’ve come to believe, with an overpowering sense of curiosity.
It struck me then that humans were somehow genetically wired to be most satisfied, most pleased, when they were working freely to create something new or better for themselves and their fellow humans.
When I pictured myself in the future, it was always working in a company or for a cause in a role where I was totally in charge of my own destiny. I simply could not envision going to work every day at a job where others planned my tasks. So, even then, my inner life was pointing me in the direction of entrepreneurship.
I have come to believe that successful entrepreneurs think differently from everyone else in some important way. Some of that difference may be baked in early as genetic or learned character traits. But even then, those traits will lie dormant unless they encounter the right opportunity. And almost always, that opportunity cannot be identified without some prior knowledge about new technologies or ideas or possibilities to which others haven’t been exposed..
It wasn’t that my work at the University of Maryland was boring; it was just that it suddenly seemed important to me to be in control of my own destiny. I needed to be on my own. I desperately wanted to be able to explore and develop ideas without any constraints. It sounds a little crazy now—and it seemed that way even then—but that’s the best way I can describe the emotions I felt…
I think most people I meet, at least from what they tell me, have such dreams. I also think that a sizable percentage of folks even turn their dreams into ideas. But only a small fraction of those “idea” people ultimately become entrepreneurs and execute on their ideas. Thus, if we are to develop more successful entrepreneurs in our society not only will we have to cultivate curiosity at the front end; we will also need to teach the skills needed on the back end to turn ideas into practical implementation.
For the first time since I had formulated my vision for cable educational programming, I began to sense—and worry—about an impending deadline to make it real. Like many other entrepreneurs in the same situation, I began to fret that there might be others out there not only with the same idea—but also further along in making that idea real. What if they beat me to market? What if their strategies were better than mine? Most of all, what if they lived out my dream and left me behind with a lifetime of regrets?most entrepreneurs will agree with me that they too went through a similar point of inflection sometime in their career. Before that moment, their dream, their idea, was more an idle fantasy that might be realized someday. After that point, it becomes an obsession; the clock is ticking, and every new day may be too late. And what sparks that moment is the sudden realization that you may not be alone in your quest, that there could be other competitors in the race.
Although vital to the creation of a new business, the obsessive nature of an entrepreneur can nevertheless impede the development of good management processes and practices that facilitate long-term business sustainability. I have watched numerous entrepreneurs build a business with admirable zeal and fervor only to lose it because they could not transition the venture to a stable enterprise that takes maximum advantage of all human talents within..
Entrepreneurs love every aspect of their creations but they simply cannot hang on too long to their micromanagement of operations. This is the fatal flaw of many entrepreneurs. The intense passion and single-minded obsession that was so necessary to overcome all the doubters standing in the way of a new business creation can prove deadly within a large organization searching to develop efficient operational systems that depend on disciplined analysis rather than wild-eyed optimism. The trick is to find a balance between the bold, optimistic risk taking of an entrepreneur and the intelligent management of resources by experienced business executives.
The ideal partner for an entrepreneur is an individual who deeply shares the passion and purpose of the entrepreneurial brand but also brings something more to the table: an intense drive to achieve growth through discipline and intelligent risk taking.
Again, it is a matter of balance—and, in my opinion, no entrepreneur can successfully embody both the “passion” and the “discipline” required to create an enduring company.
One of the key distinguishing traits of entrepreneurs is their willingness to pay close attention to their daydreams. Daydreams offer clues to what really interests us in life and persistent daydreams often unlock pathways toward the creation of something new in the world.
New Venture Creation
There comes a time when every prospective entrepreneur must first share his or her big idea with another person. It is a perilous, even terrifying moment. What has been boiling in your brain for months, the obsession that has consumed your every waking moment and wrecked your sleep, suddenly demands to get out of your head, to be told to another human being—if only as a reality check to make sure that you aren’t crazy.
At that nexus, which can occur at the most unexpected times, often when you have other plans, everything comes together into an idea so stunning that it captures your imagination and won’t let go until you do something about it.
It is precisely that vast chasm between vision and reality, between the big picture and the secret, private dream that makes entrepreneurship one of the most exciting, and important, of all life endeavors—and in my mind puts great entrepreneurs on the same plane as those scientists, artists, and political leaders we celebrate on Discovery television
The process of becoming an entrepreneur, of taking the field in the great game of free enterprise, is mercurial. Because the path of each entrepreneur is different, there is no simple and universal road map.However, over the years I’ve observed that there are some shared experiences in the creation of any successful entrepreneurial enterprise. I passed through all of these stations while creating Discovery and I believe they are common to most entrepreneurs: 1. Curious observation 2. Preparation 3. Ignition of passion 4. Idea 5. Plan 6. People 7. Brand…
Having Conviction In Your Research & Ideas
But it’s my vision, I told myself. I’ve checked it and rechecked it. I’ve challenged every part of it and not found a single fatal flaw. I’ve read everything I can get my hands on about cable television, satellite communications, content sourcing, sponsorship prospects, and business plan development. I know I’m right—and if the Big Boys haven’t seen it, then it is their mistake, not mine.
Risk & Reward
Leaving the secure, but pay-limited, job at Budd’s for the wide-open world of Bill Fowler’s enterprise also taught me the absolute joy of embracing risk—of being in charge of my own paycheck. If I sold nothing, I made nothing. If I sold a lot, I made a lot. My fate was my own. And I loved that.
That moment when you jettison your career and go all in on a new venture has been called the scariest part of being an entrepreneur. It sure was for me.
That was my next lesson in entrepreneurship: offer your customers what they need, set a price based on perceived value, then work your butt off to match, then exceed, what you are offering. Too many start-ups die because they fail at one or more of these three variables: they either don’t understand their customers’ needs, they price too low to grow and thrive, or, worst of all, take the money from the customers and then don’t do whatever it takes to deliver on their promise.
There should be nothing amateur or homemade in a company that plans to play in the big leagues—and that included our “look,” the first thing about us that our clients and customers would see.
There is a tendency in start-up companies to identify the senior management slots you need to fill—and then to rush out and fill them as quickly as possible. It’s not a bad strategy, because it enables you to get under way fast and then fix any mistakes as you proceed. But I chose the opposite—and I think even better—strategy of filling those slots with the best people you can find, no matter how long it takes.
When you are building a company, you don’t think much about how many shares you own. After all, if the enterprise fails they won’t matter anyway. Instead those shares become a kind of barometer of control—how much control of the company you give away to investors and employees, and how much you retain for yourself.
My role in Discovery’s board crisis taught me that my shares, and my ability to retain them, would largely define my role in the company in the future. Had the board’s venture capital team forced a shareholder battle, the cable team directors and I might have lost—and I might well have been driven from my own company. I needed to be more vigilant in the future. Like so many entrepreneurs, I had made decisions and choices throughout the start-up period that ultimately affected my level of ownership in the company.
Most often this failure stems from companies mistakenly identifying their core business with a currently popular delivery or distribution technology. A business that defines itself as a “railroad” company will likely miss the opportunities of overnight air express delivery. By comparison, a company self-defined as being in the “transportation” business would more readily realize that all the alternative delivery technologies to railroads—air, highway, and shipping—are within their scope.
Content and technology aside, the heart of our business—frankly, of any consumer business—is the ability to discern fundamental trends in consumer behavior.
when a cable network drifts off brand, it may enjoy a short-term ratings bump—but then the numbers shrink again because the core audience has been driven away. Once you are not predictable anymore, not true to your brand promise, your core audience tunes out. This was true in the world of fifty channels, and it is even truer in the world of five hundred channels. It will be absolutely crucial to stick to brand promises as we embark on the next phase in television’s evolution.
Define your business mission in a way that separates it from what may be a fleeting means of distribution or delivery technology.
Don’t be intimidated by not being a current player in the business sector you are targeting.
Launching a business outside your career experience sounds like a bad idea, but there are also real advantages. For example, it can be advantageous to not be enmeshed in a static corporate culture that has obviously not seized on the opportunity that you have uncovered.
It sounds simple, but it is very hard to identify with any certainty major consumer behavior trends that are just now emerging but will define the future of your business.And the only way to obtain this knowledge is to get out there in the world and watch and listen. Read everything you can, from trade journals to pop culture magazines. When you have the money, commission surveys and focus groups. And never, ever become complacent, or convinced that you know what people are thinking.
To endure over the long term, I believe companies must continually address and be mindful of key survival questions.
1. Does the company’s brand stand for a purpose or cause and is that brand carefully protected and guarded?
2. Are the founding entrepreneur’s passion, obsession, and zeal complemented by the recruitment of experienced and skilled management team leaders who bring the discipline required to steward corporate assets over the long haul?
3. Does the company have ready access to capital and does it have publicly traded stock “currency” that can be used to acquire companies important to achieve economic scale and business leverage?
4. Are the interests of shareholders, employees, executives, and board members aligned and incented to produce long-term revenue and cash-flow growth?
5. Finally, and most important, is the company constantly poised to undertake intelligent risks?
Understanding The Business of Cable TV
From the beginning Discovery was a “basic” cable service—that is, it was included in the lowest-priced service package sold by cable operators to their customers. If you got basic cable service from these operators, you typically received the Discovery Channel along with CNN, ESPN, MTV, WTBS, and a host of other advertising-supported networks. Other cable networks, like HBO, were “premium” services and therefore carried no advertising to support their programming. These “premium” networks (sometimes called “pay” services) had to rely solely on subscription revenue generated by an extra purchase decision, beyond basic-level cable service, made deliberately by cable customers.
The advertising subsidy worked powerfully to minimize the subscription cost of basic service to cable customers in the same way that it had made broadcast television “free.” However, no television content is truly free. Advertisers recover the cost of the billions of dollars that they spend in advertising by setting higher retail prices paid by consumers for their products and services. Thus “free” television is a great illusion.
Basic cable television networks that have a specialized theme, such as Discovery, CNN, and ESPN, enjoy the same dual stream of revenue (from advertising and from subscription fees) that also supports, in the print world, such specialized magazines as Scientific American, Time, and Sports Illustrated. Magazines and newspapers, which all carry advertising, generally cost much less than publications, including books, that carry no advertising. An advertising supported newspaper, like the Washington Post, also consists of a bundle of different types of content—sports, opinions, local news, movie theater listings, etc.—that, because of advertising revenues, is priced very affordably for the consumer. Some readers may never read the sports section or the movie listings but they are still, of course, paying for this unread content. Now, imagine if these unhappy readers complained about the content they never read but still paid for, and the government then forced the Washington Post to break apart its editorial bundle and sell the individual sections separately, creating, for example, a separate Post sports newspaper, a Post opinion newspaper, and a Post entertainment newspaper. The interest in each of these new narrowly targeted newspapers would be less, readership for each would be diminished, and advertising would plummet since none of the new independent special-interest newspapers would attract the entire readership of the original Washington Post.
If you break apart that bundle, the economic model also breaks down—and consumers will find themselves having to pay more for a few “à la carte” channel choices than they previously paid for the entire basic 50–100 channel package. It is important to understand this characteristic of cable because, in 1985, we were setting out at Discovery to distribute television through cable systems—and we had two choices, “basic” and “premium.”
Now, by comparison, let’s look at the “premium” or “pay” model. The most successful premium service in history is HBO. Yet, after more than four decades of marketing, it has penetrated just 28 percent of cable and satellite homes. HBO in 2012 had 28 million subscribers. Thus, when a cable network is not provided as part of the basic package—even if it is HBO, with its compelling schedule of entertainment—that network can only attract about one in four cable customers as subscribers.
Recap: The 7 Traits of Successful Entrepreneurs
1. An intense, driving curiosity I would like to say that all people have what it takes to be an entrepreneur, but it isn’t true. New business ventures can only be started by people who have a fundamental curiosity about the world and are powerfully driven by their curiosity to find solutions and solve puzzles.
2. A willingness to really “listen” to daydreams Persistent daydreams are often the key precursor to a burning passion to create something new in the world. When you find that your thoughts consistently drift toward an activity or idea or puzzle, this is a clue that there is something worth investigating and exploring in your life. Daydreams offer a path to discover what really engages our curiosity and passions in life.
3. A burning passion that leads to periods of creative obsession Passion is responsible for the stamina and perseverance needed to “stay on task” until the target is in sight. Yet often that target is in sight but frustratingly just out of reach for months or years.
4. An ability to visualize success There are many activities in a young person’s life through which a visualization of a successful effort or project becomes the groundwork for confidence and optimism. Planning a science project, a debate performance, or a well-researched term paper all involve “seeing” the activity before it is actually accomplished. If someone has never experienced the process of visualizing success in advance and seeing that visualization come true, I believe they are poorly prepared to create something new and risky in the world. There is a world full of doubters who stand ready to discourage and kill the dreams of those lacking a confident vision. You need to visualize past them.
5. Optimism and confidence that defy logic Like that young man at Harvard Business School, if you really think you cannot accomplish something, you won’t. If you really think you can accomplish something, you will. Pessimists never become great entrepreneurs. Optimism, even when it is against all odds, is the prerequisite for success. In business, “logical” is only what has been proven to work in the past. Prove your vision, and you will be the new “logical.”
6. Self-reliance and an eagerness to undertake the risks of creating one’s own destiny
7. Purpose An entire book could be written about this trait. In fact, a friend of mine, the advertising guru Roy Spence, wrote just such a book, titled It’s Not What You Sell, It’s What You Stand For. Like me, Roy believes that no one can build a valuable company without the fundamental ingredient of “purpose.” Of the seven traits I have listed, it is “purpose” that most singularly holds the secret to entrepreneurial success.