FOR PPT:

Organizational Structure and Leadership:

 In 1995, Steve Luciani initiated a project to bring The New York Times online.

 Martin Nisenholtz, an interactive media expert, was hired to lead the digital division
(NYTimes.com).

 NYTimes.com started as part of the newspaper but later became a distinct digital unit
focusing on added value, such as news updates and features.

 In 1999, NYTD (New York Times Digital) was created as an independent operating division
overseeing all the company’s digital properties.

 NYTD centralized operations by 2000, folding smaller websites into NYTimes.com and
appointing general managers to lead day-to-day operations.

 Product managers were introduced to oversee new digital initiatives like "DealBook."

Culture and Values:

 NYTD aimed to create a distinct, experimental “Internet culture” separate from the
traditional, conservative newspaper culture.

 Bureaucratic processes were minimized, and decision-making was transparent.

 A new office space was designed to promote openness and collaboration.

 Tensions arose between NYTD and the core newspaper due to differences in culture and
attention from the media.

Hiring and Compensation:

 NYTD focused on hiring young, tech-savvy professionals from outside the company, offering
stock options as incentives.

 The workforce grew to around 400 employees, mostly external hires, with a strong emphasis
on autonomy and ambition.

 Internal competition and a confrontational leadership style emerged to manage the high
expectations of employees.

 There were concerns about transferring digital expertise back to the newspaper organization

The Budgeting Process of NYTimes.com

1. Initial Budget Integration:

o In the early stages, the NYTimes.com budget was integrated into the larger corporate
budget of The New York Times.

o Martin Nisenholtz, hired to lead the digital initiative, became an advocate for
increasing investment in the website.
 o CEO Russell Lewis supported this, stating that with Nisenholtz in place, the company
needed to commit financially to the project.

2. Challenges with Corporate Constraints:

o Despite the growing commitment, Nisenholtz felt limited by the financial constraints
of a large company.

o He recognized that the digital infrastructure needed major investments, but it wasn't
feasible to get significant funding within the corporate structure in 1997.

3. Impact of the Dot-Com Boom:

o The dot-com boom and the separation of NYTD from the newspaper drastically
changed the budgeting process.

o Wall Street encouraged heavy spending, and NYTD ramped up investments in

building a world-class IT infrastructure for interactive media.

o NYTD’s IT systems were very different from those of the newspaper, and building
them required new expertise.

4. Benefits of Separation:

o Being a separate division allowed NYTD to move faster in prioritizing projects and
taking advantage of vendor pricing, which was still tied to the corporate structure.

5. Bottom-Up Approach to Budgeting:

o NYTD adopted a bottom-up budgeting approach, encouraging ideas from across the
organization, not just from top executives or journalists.

o Usage data was regularly reviewed, but the team also encouraged ideas that could
attract new customers, not just cater to existing users.

6. Project Proposal and Evaluation:

o Promising ideas were assigned to product managers, who created mini-business

plans with cross-functional input.

o The senior executive team evaluated these plans using a mix of net-present-value
analyses and experienced judgment.

o Budgets were updated monthly due to the rapidly changing internet market.

7. Challenges with Hiring and Capacity:

o For a period, NYTD’s ability to invest was constrained by hiring and training
challenges, which slowed the pace of project implementation.

o Senior executives had to prioritize projects based on the limited personnel available.

8. Shift in Market Focus – Profitability Over Growth:

o In late 2000 and early 2001, financial constraints reemerged as Wall Street began
focusing more on profitability rather than revenue growth in dot-com businesses.
 o Anticipating this shift, Nisenholtz discussed potential layoffs with the company.

9. Layoffs and Budget Cuts:

o The company implemented budget cuts in response to financial pressures, resulting

in two rounds of layoffs in January and April.

o Features that were not attracting significant user engagement were discontinued to
conserve resources.

10. Profitability Pressure and Project Selection:

 NYTD faced intense pressure to become profitable quickly.

 Project proposals with speculative long-term returns were declined unless they were critical
to the core editorial mission or the technical infrastructure of NYTD.

 Even for essential projects, costs were scrutinized to ensure high-quality outcomes at
minimal expense.

Performance Evaluation and Conflicts with Core Business at NYTD

1. Early Performance Evaluation:

o NYTimes.com had its own profit and loss (P&L) system despite being part of the
corporate budget.

o Key questions focused on tolerating losses, operating problems, and potential

damage to the core business or brand.

o A goal was set for NYTD to become profitable within five to six years.

2. Measures of Success:

o NYTD’s performance was evaluated not only on financial metrics but also on
audience reach, traffic, and customer satisfaction.

o Financial targets were set through negotiation with corporate leadership, focusing
on key metrics that changed yearly.

o Revenue growth, especially compared to competitors, became the most significant

factor shaping performance perceptions.

3. Volatile Financial Performance:

o During the first half of 2000, revenues surged, surpassing budgets, but forecasts
became difficult to manage due to rapid changes.

o Despite volatility, NYTD was expected to manage expenses and meet bottom-line
targets.

4. Impact on Core Business:

o NYTD had to meet corporate performance targets like any other division.
 o However, profitability was hard to calculate due to overlaps with the core business,
such as discounted advertising rates for the newspaper and use of New York Times
content by NYTD.

5. Perceptions of Performance:

o Beyond financial data, internal discussions, politics, and relationships between NYTD
and the core business influenced performance perceptions.

o As the core business faced an advertising downturn in 2001, resentment grew within
the core business toward NYTD for its losses.

6. Editorial Operations and Brand Concerns:

o NYTD respected the traditional separation of editorial and business operations, a

principle rooted in protecting journalistic integrity.

o However, cross-functional collaboration between journalists, marketers, and

technology staff led to innovative features, challenging this separation.

o New features, like DealBook and online collaborations with companies such as New
Line Cinemas, emerged from this collaboration.

7. Advertising Sales Challenges:

o Integrating advertising sales between the newspaper and the website was difficult.

o Newspaper sales teams were hesitant to embrace digital sales, seeing it as a smaller
and riskier market.

o Classified advertising sales were more successful due to competition from new
online platforms, leading to collaborations like Boston Works.

8. Subscription Sales:

o Initially, there were fears that offering free content online would hurt newspaper
subscription sales.

o However, data showed that the web attracted a different audience—more affluent
and geographically dispersed.

o The website became an important source of new subscriptions, with many online
readers eventually subscribing to the print edition.

9. Conflicts with Core Business:

o NYTD faced friction with the core business in areas such as editorial operations,
advertising sales, and subscription management.

o By 2001, the relationship between NYTD and the core business remained strained as
both navigated challenges in the evolving digital media landscape.
1. NYTD’s Evolution and Strategy:

Evolution:

 Initially, NYTD was integrated into The New York Times corporate structure, with its budget
aligned with the overall company. Over time, as the internet became more significant, NYTD
was separated from the newspaper operations, allowing it to focus on building its own IT
infrastructure and digital media platform.

 The rise of the Nasdaq market and the dot-com boom encouraged aggressive investment in
creating a world-class infrastructure for digital media, distinct from the newspaper.

 NYTD became more autonomous, adopting a bottom-up approach to budgeting and allowing
ideas to come from different parts of the organization. However, by the early 2000s, financial
constraints forced cutbacks and a shift in focus from revenue growth to profitability.

Strategy:

 NYTD’s primary strategy was to expand The New York Times' presence online, creating a
digital platform that complemented the core print business.

 It focused on building its own IT infrastructure, developing new digital content, and
attracting a broader audience, including those outside New York.

 The strategy included cross-functional collaboration between journalists, technologists, and

marketers to innovate new products, and a push to monetize through advertising and
subscriptions.

Organization and Control:

 The organization and control initially followed the corporate structure, but later became
more autonomous with its own IT, budgeting process, and operational control. This allowed
for more rapid innovation and investments in digital projects.

 This was consistent with the strategy of building a fast-moving, innovative digital platform.
However, when financial constraints hit, the focus shifted to tighter control over costs,
limiting the organization's freedom to experiment.

2. Impact of NYTD on The New York Times Company:

Positive Impact:

 NYTD significantly expanded the reach of The New York Times brand beyond the core
newspaper audience, especially by attracting readers from outside the New York metro area.

 It generated new subscription revenue for the print edition by converting online readers into
subscribers.

 NYTD contributed to maintaining The New York Times' relevance in the digital era, building
new audiences and diversifying the company’s revenue streams.

Challenges:
  The substantial investment in NYTD, especially during its early years of losses, created
internal tensions. Employees from the core business resented the resources funneled into
NYTD while their own departments faced cutbacks and tighter budgets.

 There were operational conflicts, particularly in advertising sales, where traditional

newspaper sales teams were reluctant to embrace the digital shift, and overlapping
operations created friction.

3. Comparison to Venture Capital Management:

 Venture Capital Approach: Venture capital firms typically invest in startups expecting high
growth but also high risks. They push for rapid scaling, innovation, and product development
but are also focused on reaching profitability as quickly as possible. They provide funding and
guidance but allow significant autonomy to founders to experiment and iterate.

 NYTD Management: Similar to a venture capital-backed startup, NYTD was given the
autonomy to develop its digital strategy, build new infrastructure, and innovate. Like a
startup, NYTD operated with a high degree of risk and was expected to show rapid revenue
growth during the dot-com boom.

o However, unlike most startups, NYTD was part of a large, traditional company, which
meant it had to balance innovation with maintaining the integrity of the core
newspaper business. Additionally, while VC firms tend to accept early losses in
pursuit of growth, The New York Times eventually shifted its focus to profitability,
placing constraints on NYTD’s ability to operate like a typical startup.

Insight:

 The comparison reveals that while NYTD had the flexibility to act like a startup in its early
stages, the need to align with corporate goals and traditional business values created
limitations that wouldn’t exist in a more independent, VC-backed startup.

4. Impact of Internal Perceptions on NYTD’s Operations:

 Internal Resentment: Employees in the core business, especially during economic

downturns, felt that NYTD was being given more leeway despite its losses. This created
friction and likely affected morale, making it harder for NYTD to gain internal support for its
initiatives.

 Pressure on Profitability: As the company and Wall Street shifted focus toward profitability,
NYTD faced increasing pressure to deliver financial results. This led to cuts in speculative
projects and layoffs, affecting the company’s ability to innovate and experiment.

 Perception of Success: When NYTD was seen as successful—during periods of rapid revenue
growth—it received more internal support. However, during downturns, it faced criticism,
which impacted decision-making and operational freedom.

5. Changes to NYTD’s Organizational Structure:

  Current Structure Issues:

o While NYTD has some level of autonomy, the overlap with the core business creates
inefficiencies and conflicts, particularly in advertising and subscription sales.

o The separation between the digital and print operations has allowed for rapid
innovation but also created silos that hinder collaboration and integration with the
core business.

Proposed Change:

 NYTD could benefit from more integration with the core business in areas like advertising
sales and subscription management, while maintaining its autonomy in content creation and
digital strategy. A hybrid structure where certain operational functions are shared but
creative control remains separate would help align both divisions.

6. Impact of Proposed Changes:

a. Culture and Leadership Style: - Integration would likely lead to a more collaborative culture,
fostering better relationships between the digital and core business teams. - Leadership would need
to balance the innovative, startup-like culture of NYTD with the more traditional values of the core
business, ensuring alignment between both.

b. Budget: - A more integrated structure might lead to a more efficient use of resources, as shared
operational costs (like advertising and IT) could be streamlined. However, NYTD may face tighter
financial oversight from the core business.

c. Performance Evaluation: - Performance would likely be judged more holistically, considering both
NYTD’s contribution to the overall company (in terms of brand value, subscriptions, etc.) and its
individual financial performance. - The focus might shift from short-term profitability to long-term
growth, depending on how well the integration aligns with the company’s broader goals.

d. Generation of New Ideas: - A more integrated structure might hinder some of NYTD’s freedom to
experiment, but it could also lead to more cross-functional collaboration, generating ideas that
benefit both digital and print audiences. Collaboration with the core business could lead to
innovations that serve both divisions effectively
FOR REFRENCE :

Organizational Structure and Leadership

In early 1995, Steve Luciani from The New York Times Company foresaw the significant impact of the
Internet and began working on a new website project with a small team. Initially, they used
"shovelware" to transfer newspaper content online. By mid-1995, the company hired Martin
Nisenholtz, an interactive media expert, to lead what would become NYTimes.com. He reported to
both the general manager and editor, an unusual arrangement due to the traditional separation
between editorial and business sides of the newspaper. The website began to develop a distinct
identity, focusing on web-specific features and updates, while the newspaper remained responsible
for core journalism.

As the company's investment in NYTimes.com grew, they created a separate digital division called
NYTD in 1999, amid concerns that they weren't fully leveraging the Internet's potential. NYTD
became responsible for all of the company's web properties, allowing experimentation and a looser
organizational structure.

However, over time, NYTD faced increasing pressure to achieve profitability, which led to centralizing
operations and folding some websites into NYTimes.com. Product managers were introduced to
streamline cross-functional coordination, focusing on developing and managing new digital products.
By 2001, the structure under CEO Nisenholtz was considered to be working well, and NYTD had
grown as a key digital arm of The New York Times Company.

Hiring and Compensation

As NYTD sought to create a distinct culture after separating from The New York Times, hiring policies
were revised to bring in more external candidates, particularly for technology-related positions. The
competitive late-1990s tech job market made hiring difficult, with stock options tied to the planned
NYTD tracking stock being a major incentive for attracting the ideal candidates—young, ambitious,
and experienced in dotcoms. Traditional benefits like pensions were removed from NYTD’s
compensation packages.

By 2001, NYTD had grown to around 400 employees, with most new hires coming from outside the
company. This shift brought a highly ambitious and assertive workforce eager for responsibility, but
often lacking the experience to match their confidence. As a result, NYTD had to adopt a more
confrontational leadership style to manage the growing internal competitiveness, which was
different from the company’s traditional approach. Additionally, there were concerns about how to
transfer valuable Internet-related skills back to the newspaper organization.

Budgeting Process

In the early days of NYTimes.com, the budgeting process was fully integrated with The New York
Times' corporate structure. However, with the hiring of Martin Nisenholtz in 1995 to lead the website
initiative, there was a push for increased investment in the online platform. Nisenholtz advocated for
more financial commitment, but initially, he felt limited by the budget constraints of a large
corporation.

As the Nasdaq boom and the separation of NYTD (New York Times Digital) occurred, financial
limitations eased, allowing for aggressive investment in IT infrastructure designed specifically for
interactive media. NYTD implemented a bottom-up budgeting approach, encouraging project ideas
from all levels of the organization, while also reviewing usage data to help shape new content and
features. Promising ideas were assigned to product managers to develop business plans, which were
evaluated by senior executives using a mix of judgment and net-present-value analysis.

Budgets and forecasts at NYTD had to be flexible, given the rapid changes in the internet market, and
were updated monthly. However, by late 2000 and early 2001, the dotcom bubble burst, and Wall
Street began prioritizing profitability over revenue growth. As a result, NYTD's financial resources
became constrained again, leading to two rounds of layoffs and a focus on cost-cutting. Project
proposals that were speculative or lacked short-term payoffs were declined, except for those crucial
to the core editorial mission or the development of technical infrastructure. NYTD was under
significant pressure to become profitable quickly, while maintaining New York Times quality at the
lowest possible cost.

Main Budgeting Process :

NYTD developed a bottom-up approach to budgeting.Though most solid ideas for new pro jects were
generated by experienced executives and journalists, ideas for new content and new features were
encouraged from throughout the organization.

To help generate ideas, NYTD constantly reviewed usage data for its website but also encouraged
thinking independent of this data. This was meant to ensure ideas were generated that could attract
potential customers, not just existing ones.

Promising ideas were assigned to product managers, who developed mini–business plans based on
cross-functional input. The plans were then evaluated by the senior executive team, using a
combination of loose net-present-value analyses and experienced judgment. Because of the rapidly
changing nature of the Internet market, budgets and forecasts had the potential to change rapidly
and were updated monthly.

There was a lot of guesswork in volved, particularly in projecting revenues. The process was still
coordinated with the corporate budgeting process, and financial targets were set at the corporate
level. However, corporate budgets were based on expectations of much smaller variability and were
revised at much longer intervals.

Conflicts with Core Business

Conflicts between NYTimes Digital (NYTD) and the core New York Times business arose due to
operational overlaps, particularly in editorial operations and their potential impact on the New York
Times brand. Traditionally, newspapers strictly separated editorial and business functions to
maintain editorial independence, a practice developed to prevent unethical behavior by owners that
could erode reader trust. This separation led to "deep silos" between departments, especially
between newsrooms and business staff.

Initially, NYTD respected this separation, but as the company evolved, the principle was increasingly
questioned. Cross-functional collaboration between journalists, marketers, sales, and tech staff led
to some of the most successful innovations on the website, challenging the traditional silos. For
instance, projects like DealBook, a real estate feature, and a collaboration with New Line Cinemas
for the promotion of the Lord of the Rings trilogy were the result of such collaborations. These new
products relied heavily on technology to enhance user and advertiser experiences, blending editorial
content with marketing efforts. This shift raised concerns about maintaining the editorial integrity of
the New York Times brand.

Advertising sales

Integrating advertising sales between NYTimes Digital (NYTD) and the core newspaper business
faced several challenges:

1. Traditional sales teams were hesitant to sell digital advertising because:

o They lacked understanding of the new media.

o Long-established relationships with customers were seen as at risk by involving

"dotcom" staff.

o Digital ads were seen as less valuable compared to print, and reps often gave away
online space as an incentive to sell print ads.

o Web advertising was harder to sell due to customer unfamiliarity, and commissions
favored easier, higher-value print sales.

2. By 2001, Nisenholtz felt some of these challenges were resolved, though many traditional
clients still resisted online ads.

3. In classified sales, there was smoother integration. With the rise of competitors like
Monster.com, the newspaper team saw a clear need to combine print and online classifieds.
This led to successful projects like Boston Works, which merged job listings with
employment articles in both print and digital formats.

4. At the New York Times, a classified leadership team was formed, and the responsibility for
recruitment classifieds (print and online) was given to the newspaper, while NYTD managed
online real estate and automotive classifieds separately

Initially, the New York Times' circulation staff feared that offering free content online would hurt
subscription sales. However, after analyzing data, they found the online readership to be a
different audience—younger, wealthier, and more geographically diverse than the print
readership. Surveys and focus groups showed no significant cannibalization of print
subscriptions by the website.

By mid-2000, the website became the second-largest source of new subscriptions, serving as a
tool to introduce readers to the paper. Despite this, as of September 2001, the circulation staff
operated mostly independently of NYTimes Digital (NYTD