bloomberg terminal scandal
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Media Management Case StudyMEJOS3Katrin Ehnert
Olga JavitsJaana Pasonen
2013 Scandal and Consequences
1. The Bloomberg Company
2. Investigation of the Crisis
3. Organization configuration
4. Analysis results - 4 levels of management & markets
5. Conclusions
Presentation Structure
Part 1 The Company and Its Business
• Bloomberg Terminal (“The Bloomberg”) is a core business and money-generating product
The Company and Its Business
1. Bloomberg’s media products and their role in the company business
2. Bloomberg News:
“News that move markets”. Finance information 24/7 Employs more than 13 000
people in 185 locations globally Services 174 countries 5000 original articles daily
Source: Bloomberg.com
• Bloomberg is a growing company • Operating profits
2006 – annual revenue $1.5 billion 2011 - annual revenue $7 billion2013 – about $8 billion annually315,000 terminals sold worldwide (by the end of 2012)
• 85 % from terminal sales• Terminal subscription $20000 per
year
Bloomberg’s Performance on Market Competition
Source: Gustin (2013) TIME Business & Money
• Michael Bloomberg, MBA in Harvard University
• 1981 - Innovative Market Systems (IMS)
• 1986 - Bloomberg LP• 1988 - 5,000th terminal installed, a
financial data industry leader • 1990 - Bloomberg Business News
with a six-person team, based in New York, editor-in-chief Matthew Winkler
• 2010 - 20th anniversary, 146 bureaus in 72 countries, > 2,300 journalists and multimedia professionals
Milestones in History
Sources: Funding Universe (1998), Business Insider (2013)
Part 2Investigation of the Crisis
• Data breach scandal at Bloomberg L.P.'s news division:
Bloomberg reporters had extended access to data about individual customers' terminal usage
• Publicly revealed by the New York Post on May 10, 2013
The Crisis' Triggers
• Viewed customer information included:
what functions they
used on the Terminals who was logging in
and at what time what they asked the
help desk for
Source: Horowitz, 2013
Bloomberg's culture
Journalists considered to be representatives of the Terminals
Michael Bloomberg in 1997: “Most news organizations never connect reporters and commerce. At Bloomberg, they're as close to seamless as it can get” (as cited by Geller, Huffington Post, 2013)
Bloomberg's goal
To be the most influential news service in the world Innovative ways to recognize customer needs, wants and trends
quickly
Reasons for the Crisis' Emergence
Source: Geller, Huffington Post, 2013
• Impacts on Bloomberg's business environment and partnerships Breach of trust with customers Several investigations against Bloomberg regarding possible misuse of other
customer Terminal's confidential data No significant Terminal subscription fallout:
“[The Terminals] are prized as windows to information that can help brokers keep or lose fortunes” (Geller, 2013) Company's transparency, reputation and business culture came into question
• Reactions by Bloomberg's management Public apologies Immediate restriction of reporter's access to the confidential data Initiation of 2 independent reviews on internal standards
Major Consequences of the Crisis
Source: Gustin, TIME, 2013; Bloomberg.com, 2013a
Several improvements according to the reviews' recommendations:
New positions at governance level: chief risk and compliance officer
Ongoing periodic independent reviews on internal compliance controls
No extended access for Bloomberg reporters Enhanced training programme for employees New positions at editorial level: Independent Senior Editor
and Standards Editor
Current Status of the Case
Source: Bloomberg.com, 2013a; Bloomberg.com, 2013b
Part 3Organization Configuration
• Bloomberg strives to have a flat organizational design with few levels of hierarchy:
• No private offices or enclosed meeting rooms• All employees sit in long rows of identical, terminal-laden desks,
including the Editor-In-Chief• Employees do not stay in any one position for too long and do not
have official titles.• Managers are constantly rotated between different departments• Employees are evaluated entirely on their performance. This
allows for them to move vertically, horizontally, and diagonally throughout the firm
Bloomberg’s Organizational Structure
Sources: Bothra et al., 2008, Round Table, 2008,
Organization Configuration
1980 1990 2000 2013
•Michael Bloomberg's role
•Entrepreneurial organization
•Years of rapid growth and expansion
•New divisions and products
•Moving towardsmore innovative organization
•Over 15 000 employees
•Michael Bloomberg no longer active in the company
•No single type of organization configurationSource: Mintzberg et al., 1998
• Bloomberg's strategic apex and middle line work innovatively, avoids bureaucracy and hierarchies
• Sales division, Speed desk at Bloomberg News - Machine organization
• Independent divisions for products, independent goals and processes - elements of diversified organization
• The Bloomberg LP is more of a LEGO than a jigsaw-puzzle configuration.
• multiple configurations depending on division, department and time.
A Jigsaw puzzle or a Lego organization?
Despite an innovative culture and complex organizational structure , Bloomberg has a very clear strategy and all its parts work collectively to achieve the company's goals.
New Energy Finance
Daniel L. DoctoroffCEO & President
Executive CommitteeCOO, Head of Financial Products & Services, Editor-In-
Chief
R&D News & Media Financial Products & Services
Law
Govern-ment
Professional ServiceNews
Sports
EnterpriceSolutions
Web &MobileMagazines
BusinessWeek
Television & Radio
Terminal
Markets/ Pursuits
Peter Grauer Chairman of the Board
Source: Bloomberg.com, 2013
Part 4 Analysis Results
Corporate Management and the Political Market
Main role of corporate management is to legitimate and secure the role possibilities of the enterprise, effects influence mainly the political market
Immediate reactions to the crisis were necessary:• Investigations from U.S. Federal Reserve & Treasury Department• Critique from European Central Bank and other big clients
To reassure and to regain the trust of partners and influencers in the political market, the extensive actions were necessary
-> When crisis' effects on the popular market might result in declining revenues, poor management on the corporate level after the crisis could lead to legislative and normative restrictions
-> In worst case scenario might result in bankruptcy
Source: Alm & Lowe, 2001, Gustin, TIME, 2013
Actions taken on Corporate Management level
• Immediate damage control PR: Public apologies in public and in person• Independent reviews • Results and recommendation published• Enhancing the company's governance framework (Risk and compliance
responsible)• Approval for continuous periodic reviews
The Crisis' impact on Political Market
The actions taken were considered sufficient, no significant penalties or further conflicts occurred
Source: Bloomberg, 2013a
• Internal implications: Decisions /actions are aligned to support Bloomberg's core business: Selling
more Terminals
Reporter's access possibilities as intended strategic approach from the beginning
• “The concept of reporters working hand-in-hand with the sales team served as a centerpiece to Mr. Bloomberg’s vision” (Chozick, New York Times, 2013) Need for internal process innovation to regain customers' trust New CEO and 100-day-strategy at Bloomberg Media Group
Strategic Management and the Open Market
External implications:
Second strategic focus at Bloomberg: Innovative technology for its Terminals' systems
Increased pressures from competitors (Thomson Reuters, Dow Jones) with new Terminal replacement strategies
Dependence of open market on popular market highlighted
Source: Alm & Lowe, 2001
Bloomberg's revealed strategic objectives: Strategic decisions set a direction Clear plan of actions to hold leading position No real strategic turnover at Bloomberg after crisis Weaknesses regarding approaches to Terminal
sales and high investments in the media division Bloomberg needs to find a clear direction in
innovation
Source: Mintzberg et al., 1998
Two aspects of product and business management The Terminal - main product All the media products: Magazines, TV,
radio, Mobile etc. Two approaches to Popular market:
Terminal subscribers - main target group, most of the profit
All the subscribers and consumers of the Bloomberg media products
Business Management and the Popular Market
Source: Alm & Lowe, 2001
The public apologies and other damage control actions were needed to regain trust of Terminal subscribers to convince the readers, viewers and listeners of the produced
content and its reliability.
First priority was to minimize the terminal subscription fallout, however... Customers consider Terminal use vital for their business Customers locked in long term contracts Barriers of exit, excellence of the product
No big changes needed, once "the dust settles", main product remains the same
Source: Geller, Huffington Post, 2013
• Media products facing heavy competition, losing credibility might be fatal
• BusinessWeek - Forbes, Fortune• CNBC and Fox Business winning Bloomberg TV• Financial Newspapers - Wall Street Journal, Financial Times
• The unique strategy of Bloomberg effects the business management and the popular market:
The main focus at Bloomberg is to sell the Terminals, and as long as the Terminal subscriptions are not declining, the effect on the media product level might stay small, the audience of media products are a secondary target group
Crisis Impact on the Popular Market
Source: Porter, 2004
• Main impacts on the internal level: New positions created, e.g. Chief Risk and Compliance Officer Rotations:
previously Special Adviser to the CEO, Editor-at-Large at Bloomberg News Clark Hoyt Independent Senior Editor
previously Executive Editor for Bloomberg News in Europe, the Middle East and Africa Tim Quinson Standards Editor
Relations between journalists and commercial departments changed Managerial skills exercised: communicational organizational
• Why changes have been made?
Operational Management and the Professional Market
Source: Bloomberg press release (2013), Lowe (2013)
• Lost access to the client private data = lost influence on the professional market
• New strategy of making news?
Impacts on Professional Market
Conclusions
No “real” crisis for Bloomberg in the short-term
Reasons:1. Core business is Terminal sales: uniqueness of the Terminal service 2. Fast and active response to the crisis by Bloomberg's management3. Barriers of exit for the Terminal's customers Long-term impact:
– Loss of time advantage in news gathering ↔ Competitive advantage – Questionable “final” cut of connections between reporters and sales department
Source: Mintzberg et al., 1998
• Alm, Ari, & Lowe, Gregory F. (2001). Managing Transformation in the Public Polymedia Enterprise: Amalgamation and Synergy in Finnish Public Broadcasting. Journal of Broadcasting & Electronic Media, 45(3), pp.367-390.
• Bloomberg.com (2013a, August 21). Bloomberg Releases Report Following Client Data Review. Press release. Retrieved October 20, 2013, from http://www.bloomberg.com/now/press-releases/bloomberg-releases-report-following-client-data-review/
• Bloomberg.com. (2013c). Bloomberg Facts. Retrieved November 9, 2013, from http://www.bloomberg.com/now/bloomberg-facts/
• Bothra, Aditya, Gandhi, Vishal, Profeta, Mike, Rewari, Rajeev, Tripathi, Shankar (2008, February 22). Organizational Analysis: Bloomberg LP. The Round Table. Retrieved November 2, 2013, from http://roundtable.typepad.com/round_table_blog/2008/02/organizational.html
• Geller, Adam (2013, May 16). In Bloomberg Uproar, Ethics Flags For New Media. Huffington Post. Retrieved. October, 18, 2013, from http://www.huffingtonpost.com/2013/05/16/in-bloomberg-uproar-ethi_n_3284025.html
• Gustin, Sam (2013, May 14). What Bloomberg’s Snooping Scandal Says About Wall Street’s Culture. TIME Business & Money. Retrieved October 20, 2013, from http://business.time.com/2013/05/14/what-bloombergs-snooping-scandal-says-about-wall-streets-culture/
Sources:
• Funding Universe (1998). Bloomberg L.P. History. From: International Directory of Company Histories, Vol. 21. St. James Press. Retrieved November 2, 2013, from http://www.fundinguniverse.com/company-histories/bloomberg-lp-history/
• Horowitz, Alana (2013, May 11). Bloomberg Terminal Spying Targeted Ben Bernanke, Tim Geithner: CNBC. Fox News (vía Huffington Post). Watched September, 20, 2013 at http://www.huffingtonpost.com/2013/05/11/bloomberg-terminal-spying-bernanke-geithner_n_3260559.html
• Lowe, Gregory F. (2013). Lecture on Strategic Management and the Open Market, University of Tampere. • Lowe, Gregory F. (2013) Lecture on Corporate Management and Political Market, University of Tampere.• Lowe, Gregory F. (2013). Lecture on Operational Management and Professional Market, University of
Tampere.
• Mintzberg, Henry (1989) Mintzberg on Management: Inside Our Strange World of Organizations. NY: Hungry Minds Inc.
• Porter, Michael (2004) Competitive Advantage. NY: Free Press.
Sources:
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