Prompted by Google’s YouTube buy, NBC and Fox returned to the drawing board and came back with a new venture—NewCo #2, for now—based on new momentum led by my deputy, NBC’s chief digital officer, George Kliavkoff (known as George K) and our digital team. The Fox side would be led by Mike Lang, their EVP of business development and strategy, and George would be interim CEO.
We hoped it would become the online source for premium video content. It would give Fox and NBC a two-way digital relationship with viewers, and it would create real community among the viewers, who’d be able to enjoy content online anywhere.
We were deeply excited. But I feared that the motherships would fight us. When we brought together the launch team—one hundred staffers plucked from NBC and Fox—at a grand kickoff meeting at a W Hotel in Manhattan, my worst nightmares were realized. The meeting disintegrated into a chaotic turf war designed to ensure that each team did not lose a single inch of its “own” property.
As Mike Lang, George K, and I watched the chaos of the meeting at the W, and the media’s reaction to it, we agreed we’d need a great CEO to make this work. My experiences with iVillage had taught me some painful lessons about what start-up digital leadership required. We knew that it was imperative that we hire an outsider for our NewCo CEO, someone without preconceptions, allies, and turf. It was also important that we bring in someone who was skilled in building a sort of pioneer team that worked toward one goal, without the ossified processes and the old ways of thinking of our parent networks.
Hulu
Jim Citrin of Spencer Stuart introduced us to some very impressive executives like former Ticketmaster CEO John Pleasants; and Travelocity CEO Michelle Peluso. But we kept coming back to one name: Jason Kilar. Before leaving to take a break from the grind, Jason had spent nine years at Amazon, building up its DVD service from scratch before moving to other roles.
What attracted us to Jason was that he’d grown up under Jeff Bezos’s theory of innovation management. As an Amazon executive, Jason had attained a Zen-like mastery in managing conflict. To Jeff Bezos, workplace harmony is overrated; conflict is the spice that leads inexorably to innovation. Executives at Amazon are inculcated in Bezos’s management notions, such as #13, Have Backbone; Disagree, and Commit. “Leaders are obligated to respectfully challenge decisions when they disagree, even when doing so is uncomfortable or exhausting. Leaders have conviction and are tenacious. They do not compromise for the sake of social cohesion. Once a decision is determined, they commit wholly.”
If you’re going to innovate to greatness, you have to be able to give your colleagues candid feedback on their ideas—and be prepared to face the same firing squad yourself. Striving to maintain harmony is dangerous; it silences honest criticism and allows people to serve up polite praise for bad ideas.
Real innovators can be disagreeable; they don’t require the social approval of their peers to move ahead with disruptive ideas. On this point I believe Bezos is demonstrably right, as uncomfortable as I know this is. Research shows that creative tension promotes stronger idea generation and group problem-solving. Constructive dissent and debate encourage people to reexamine assumptions and make room for creative thinking. In the words of Pragmatist philosopher John Dewey, “Conflict is the gadfly of thought. It stirs us to observation and memory. It instigates to invention. It shocks us out of sheep-like passivity, and sets us at noting and contriving.”
Bottom line: You have to get up in the morning and fight for what you believe in. And you have to create a climate in which your people have permission to do the same.
That is exactly why we all liked Jason immediately. The problem was, he wasn’t as excited about the job as we were. After leaving Amazon, he had gone on a year-long trip around the world with his wife and two young children, blogging from nineteen countries as he hashed out his next move. He worried, with good reason, that having two corporate masters would kill the business we were trying to create. He doubted that he would be given the independence he needed. And he really didn’t like some of the contract terms.
“Listen, Jason,” I told him, “you justifiably have doubts about how adaptable and fast we’ll be. But we are completely committed to making you successful. We need this to work. And we need someone like you to lead this. Not a media wonk.”
Jason sighed on his end of the phone call. “I need freedom to make fast decisions on behalf of my people. I need to prototype things quickly and trash things quickly. I need to pay people in stock, because there has to be an upside to match the risk.”
“I totally understand. This is about making something new, and about making it work,” I said. “Have faith, Jason.”
One big issue that had separated us was equity in the new venture. Like everyone who’d worked in the start-up world, Jason knew that equity grants and options aligned employees with the NewCo’s interest: if they stayed and it succeeded, they won big. But that was anathema to GE. Jeff once was close to signing a deal to acquire a start-up and keep it separate, and Jack killed it at the last moment, saying, “We have one currency at GE: GE stock.”
Those kinds of edicts take a long time to die, I discovered, as I pushed for the crucially necessarily tool: non-GE equity. The issue was how much ownership to give and how much freedom Jason would have to give it. My challenge was to get the NBC/GE system used to the fact that NewCo employees would have a different “currency.” It was an uphill fight. When I pointed out that this was a fifty/fifty joint venture and the new team needed to have an ownership stake in that venture, Marc, our head of HR, worried that people in NewCo might get richer than people at the same level inside NBC. When I noted that they were taking a huge risk joining a start-up, he fell back to the “one currency” argument.
To my delight (and the chagrin of many others), Jason got most of what he wanted in the end: the ability to offer equity and the ability to run the new company with near total independence.
Even before his first day at the headquarters in Santa Monica, Jason traveled to Beijing with a few minders from NBC and Fox, where he introduced them to Eric Feng, a twenty-eight-year-old poker buddy from Seattle. Jason and Eric had never worked together, but Jason had tried Eric’s software at Mojiti, a year-old online video start-up, and he had loved it. Jason was convinced that Eric would make the perfect CTO to build the tech he wanted. The folks at Fox and NBC thought that Eric was too green for a project this big (even Eric admitted that he wasn’t sure what a CTO actually did). But Jason got his way.
Jason’s phrase for building a fast-moving, dynamic, and rebellious dream team was “the Ocean’s Eleven approach.” He hired buddies from Amazon and classmates from Harvard Business School, anybody he knew and trusted to spend eighteen-hour days arguing and coding in an almost suicidal bid to get the NewCo site running within ninety days. You can’t confuse credentials with character, competence, or chemistry. When your aim is to disrupt the status quo, you have to know the team has your back.
My experience at iVillage had encouraged me to believe that the conflict and tension inherent in change inevitably equated to an atmosphere of nasty infighting. Yet Jason’s approach made people engaged and happy. He kept them focused on what mattered. He fought the battles with the mothership. The employees I saw in the offices were a tight team, and they seemed thrilled to be there. Jason had installed himself in a tiny office just off the main project room and attached whiteboards to the walls. He and his launch team had put together a mission statement that united them in a quest. It was a mission statement defined by frugality, meritocracy, and ownership (they all had equity). Jason and his cohorts wrote, in part:
We are in the business of building and innovating….We invest in whiteboard wallpaper. We invest in flat, highly talented teams. We invest in Costco snack runs, particularly the M&M trail mix. We see it as all of our jobs to make it as easy as possible for builders to build and for innovators to innovate. In this, we serve each
other.
One of my HR managers wrote to me to say he had been “hearing some concerns about how Jason is making some decisions too autonomously.” Jason signed people up without confidentiality agreements, committed to equity plans without having them approved, and removed IP language from offer letters. Our people wanted him to act like an entrepreneur, but they didn’t know what that meant. Tension ran high.
Jason was a youthful executive at the time, both in appearance and energy. During my initial visit to the NewCo headquarters in Santa Monica, he acted like a kid excited to show me his new room. Fox had rented offices that befitted a big-time media company—replete with a swanky corner office with high-end Steelcase furniture for him—which went against every fiber of Jason’s start-up being. “Can you believe how big and wasteful this is? We don’t need this much space. We’re going to sublet it,” he told me. And the fancy furniture? Gone, replaced with a few Costco desks and a shared printer. The food? He held up a big plastic tub of pretzels. Costco, of course.
“Come here,” Jason said, taking me by the arm into an office furnished with only a folding table that was surrounded by a gaggle of twenty-year-olds. “Look at this, I’ve hired a dozen interns from USC and UCLA; they are digitizing all the clips from Saturday Night Live. Your lawyers are so slow to give me permission, so I’m just doing it. I’m sure we’ll be able to use them by the time we’re done digitizing them. If we waited for the legal folks, we’d never get anything out.”
He was baffled we had hired Price Waterhouse Cooper to help with strategy. “What on earth does a start-up team need with consultants? They make more in a month than I can pay the team in a year. Gone!” he told me, giddy with movement. Jason dumped everything.
Jason was doing exactly what needed to be done: he was exceeding his authority based on his need. Amidst all Jason’s seeming chaos, the vision—the direction—was always there: we are going to create the future of television.
It was eye-opening to watch Jason dance on the edge of his authority, constantly pushing the limit of what others thought he ought to be doing. The need to go beyond what you are authorized to do can be a positive trait when you are pushing to change the way things are done. The secret is to know where the boundaries lie. Some who resist your efforts will tell you you’re “pushing too hard.” Others, just as resistant, will encourage you to “go for it” because it makes you more likely to be fired. The key is to learn how to push the limits without being seen as unacceptably subversive.
Later, the press would describe the first months at NewCo as a chaos of crazy ideas, with whiteboards filled with wild notions of what could be.
Jason kept pushing the limits. “Consumer behavior is one of the hardest things to change,” he said. “The gap between the existing and the new has to be so materially better that it shocks you into a behavior change.” Jason’s maniacal obsession with the user experience is a large part of why NewCo was successful in creating a service that one customer called “brain-spray awesome.”
At the time, though, Jason’s maniacal obsession seemed petulant and out of bounds to many. I remember getting a desperate call from Darren, the CTO at NBC, asking for help convincing Jason to use the digital video player that Darren’s team had built. They’d spent $5 million (a lot, even then!) and were proud of it. And they were convinced it could help Jason move up the launch date.
But Jason’s response was unequivocal: no. To him, it had so many doodads; he said it looked like Tokyo at night. He wanted a service so easy to use his mother would understand it. “My team can build something that suits our needs,” Jason said. “The video player has to be a superb experience. NBC’s is not.” It became clear that we couldn’t—in fact, shouldn’t—make Jason do anything. I think that had NewCo been a wholly owned subsidiary of NBC, we would have forced him to use that clunky player. Or we would have had ten meetings about it and lost weeks deciding what to do.
Jason transgressed every “rule” at NBC in his push to disruption—from the video player he wouldn’t take to the older shows he insisted be recoded into HD to the sacrilege he committed by telling NBC’s bosses to not only limit the number of ads viewers saw but also give viewers the ability to choose which ones they saw. And our executives pushed back. You don’t digitize old shows. You don’t open digital rights. You don’t ask producers for special content. And every time, Jason went around them.
A few years down the road, many of his ideas became industry best practices. It serves as a vital reminder that it is the outsiders, the rule-breakers, who possess the kind of disruptive intelligence that cultures have always relied on to catalyze reinvention and renewal. On the other hand, weirdly, I believe having gatekeepers is a positive. Constraints and obstacles are as necessary for the mischief-maker to produce great work as it is for a poet to create a great poem. The most creative ideas are often triggered by restriction and scarcity.
Jason tried to dub the service Cream, “because it rises to the top,” which elicited a groan from NewCo’s advisors. Thankfully, Jason’s new CTO, Eric Feng, had a better suggestion. Why not call it Hulu, he said; it meant “vessel” in Chinese.
Jason continued to drop bombshells, of course. He wanted to open with an invitation-only beta site so that he could keep iterating before the real launch. And the search engine his team had built would display results for all broadcast video across the Internet, not just from Fox and NBC. Both those ideas drew the ire of the TV people. Showing a beta site was like letting people watch a film before it had been edited. And putting the competitors’ content alongside our own? Jeff Zucker and Fox COO Peter Chernin were furious at the very idea. But Jason was adamant, as always.
The friction between Jason and the higher-ups at Fox and NBC illustrated one of the inherent difficulties for challengers like Hulu: the role of top leaders in “green-lighting” the structure. We set up a Hulu board with Chernin and Zucker as cochairs. I was on the board, with George K and Mike Lang. Our job was to oversee and green-light his efforts. But those efforts—like including competitors’ content—often ran up against the parent companies’ turf interests. NBC and Fox had each committed $25 million to funding Hulu, which created tension at the parent companies.
Exacerbating the tension was Jason’s apparent allergy to making money, at least at the start. He was obsessed with creating constant feedback loops with the user by requesting actual comments and tracking user actions. His laser focus was on the user experience, not on revenues. He didn’t plan to introduce advertising until later. It was in complete contrast with my experience at NBC, where I was fighting with Zucker over the number of ads we could allow on TV. During one meeting with Zucker and our financial strategists, we looked over another dismal month of ad revenue, and Zucker asked, “How much more could we make if we dumped another ad block in ER?” I squirmed; ER was our top-rated show. My sense was that viewers were already drowning in ads. “Couldn’t we find different ways to price the ads? Like better targeting? What if we charged advertisers different rates based on how well their ads hold viewers?” I said.
But Jeff waved me off. In the end, though, I believe choosing profits over the user experience is one of the things that made broadcasting so vulnerable to disruption, something Jason knew intuitively.
Challenger Brands
Hulu’s mission statement—its “culture document”—reads like a manual for why and how challenger brands are so effective in creating the conditions that foster innovation: small teams, autonomy and freedom, insulation from the practices of the parent company, relentless focus on solving consumer problems, an approach that encourages experimentation (with no stigma attached to failure), and a reverence for creative disobedience.
Successful challengers aren’t just agile relative to legacy companies; they share Jason Kilar’s indignation and purpose. To change an industry, you must be driven by a passionate conviction for how that industry should be�
��that is, you must have clarity around what the business or team believes and the change it’s trying to bring about. You’re always fighting for and pushing against something—for the consumer, generally, and against the self-satisfied established practices of the market leader.
Hulu’s mission statement included the words “the world has long since exceeded its quota in the mediocrity department….We are aiming to dramatically improve and change the way that media is distributed, discovered, and consumed.”
Hulu thrived because it was insulated from the parent culture while at the same time enjoying its plentiful resources. I helped to make this possible by acting as a kind of Yoda, taking on the political battles, calling in favors, and carefully navigating the existing order of the company.
Challengers need someone to play that role, because they have none of the advantages granted the incumbents. Their budgets are smaller. They have less time. They can’t get away with incremental improvements. The challengers must take big risks, because they know they have to produce something—a product, a service, whatever—that is so much better and more persuasive and easier and more exciting to use that users are almost forced to change their behaviors—such as, “From now on, I watch TV on the Internet.”
I believe creating a challenger brand is an effective way to introduce entrepreneurship into organizations. We weren’t “managing” Jason, we were watching a brilliant and unpredictable garage entrepreneur. To me, he demonstrated the real value of creating a separate space to build something with an existing corporation. The role of the parent company or mothership is to seed innovation and make tough choices, as well as to give the entrepreneur the permission, space, and freedom to take only what’s valuable from the large entity and move quickly to build what is next. Challenger brands create value only inasmuch as they are led by someone who knows how to challenge.
Imagine It Forward Page 16