September 08, 2010

By By Billboard staff

EMI Group CEO Roger Faxon unveiled his plans for the company in an email to EMI staffers Tuesday (Sept. 7). As Billboard.biz reported yesterday, he is putting his stamp on the company by moving back to a strong centralized leadership.

The memo was part strategic roadmap ("This note is designed to start the process of laying out our vision for the company"), part rallying the troops ("As I have travelled around the company over these last weeks, I have been struck by the talent of the people I have met..."), and part outline for some immediate changes. Below are highlights from the email followed by the full text of Faxon's message to staff:

Werre, Mann and Gatfield
-- "...we will be losing some trusted leaders: Ronn Werre, Billy Mann and Nick Gatfield. I will be writing to you separately about each of them as I have already done with regard to Ernesto Schmitt, who announced his departure last week."

The Matrix Is Dead
-- "In our travels, much has been said about the Global Business Unit structure, the so-called Matrix. While there is broad appreciation for the people and skills it has brought us, in trying to focus the business on the key business streams we seem to have created a confusing maze of accountabilities and responsibilities. For this business to work every one of us needs to know to whom we are responsible and for what. We need a much simpler approach. So we are going to completely dismantle the GBU structure, and put in its place a simpler organisational structure. At the same time, we are absolutely going to preserve the value that the GBUs and its people have created."

The New Structure
-- "The new structure has three major building blocks:
1. A strong office of the CEO, able to draw on a staff organisation focused on developing the ideas, strategies and practical tools essential to driving the business forward on a new path.
2.Operating ?Hubs?, with the resources to support and lead their regions.
3.Local business units focused on execution and delivery with the authority to act."

Moving Forward
-- "The goal of transforming EMI into an artist-focused global rights management business, cannot be done overnight. The changes we are announcing today are the first steps in a process, and over the coming weeks there will be a series of initiatives to ensure that we put our strategy into action. Those initiatives will broadly fall into six central themes on which we will focus:
? Unmatched insight into emerging consumer and market trends
? Excellence in new music, the lifeblood of our business
? A revitalised catalogue, with a robust re-discovery and recommendation process
? Broadening the revenue base through global rights management
? Scalable, low-cost organisation and infrastructure
? Industry reform"


Below, the full six page internal memo sent from Roger Faxon to EMI staffers:

Dear all

It?s been just under three months since I was asked to take up my role as CEO of EMI Group and I have no doubt that as the summer has progressed your level of curiosity about our plans for the business has been rising. Well, the wait is over. This note is designed to start the process of laying out our vision for the company ? a vision I hope you will come to share. As we move forward, we will be setting into motion a series of strategic initiatives to ensure that this vision becomes a reality. But first let?s talk about what that vision is.

As I have travelled around the company over these last weeks, I have been struck by the talent of the people I have met, and their sense of pride about working for what I believe to be one of the greatest music brands in the world. However it has been a long time since EMI Music has been able to fully live up to its potential. After three years of unrelenting change, much has been accomplished but we have been left without a clear view of the future and our role in it. So, the time has come to step back and ask ourselves what sort of business do we really want to be, and maybe even more important what sort of business do we need to be? This is not some idle business planning question. It is a question about our philosophy ? the very soul of the business we each chose to be a part of.

A common philosophy

I don?t know about you but I came into this business because I love music and I wanted to be a part of an enterprise that helped the creators of that music achieve their goals and dreams. I still want to do that. That deep passion, for music and for the careers of our artists, is something that we must all feel deeply. We work in a world of emotions and dreams. There are those of the artists, hoping and believing that their music will touch a broad spectrum of people. And, those of the fan, whose emotional life is enriched, expressed and made sense of, by and through music. Our job is to make the connection ? an artist and their music with the fan. If we cannot bring to our work a deep passion for music, we have no business getting between them ? we will never understand how to make that connection.

We are enablers of success, not its creators. The music ? and the people who write, produce and perform it ? creates success. It is our job to enable them to create the very best music, to help them and their music connect with fans and, most difficult of all, to realise the greatest possible value for them from those connections. We cannot continue to view that effort as being limited to selling records. Music touches people in vast numbers of ways and we must be at every one of those touch points, helping to make the connection and extracting the value that rightfully belongs to the creators of the music we represent. That is the essence of being a Global Rights Management business.

However EMI Music today still acts like a product company ? we gear ourselves up for product launches, and we get ourselves worked up about market share and units shipped and so on. But the market has moved on, we need to understand that we are not a product company at all ? we have to be a service company, and one that is obsessive about discovering great music (or rediscovering great music from our catalogue) and connecting it with an audience through every route available to us.

Let?s be clear, there is no singular goal that should be greater to every one of us than seeing successful outcomes for our artists ? artists who are active, artists who no longer work with us and even artists who are no longer alive. It?s what should get us up in the morning, and it?s what will keep us going long after our competitors have gone home. But passion for music alone will not get us there.

First, I believe that if we are to deliver more successful outcomes for our artists, we have to change the way that we consider our relationship with them. Music companies today ? even EMI Music ? often just do things TO their artists. The new EMI has to do things WITH and FOR its artists, in a partnership. And I don?t mean paying lip service to partnership, I mean changing the whole dynamic of the relationship from the contract up. We have to establish a new relationship with our artists that is predicated on trust, honesty, transparency and performance ? on both sides.

As for us, we need to bring superlative skill and understanding to what we do. If our job is to make connections between our artists and their music with the fans, then we need to have a deep understanding of those fans. We need to have unmatched insight into their behaviour and trends. But understanding the fans is not enough; we have to embed that understanding into our processes so we are actually using it to drive better outcomes for our artists. However, our commitment to analysis cannot be limited to just understanding consumers. We need to develop a deep understanding of every element of the process of finding, developing, connecting and yielding value. It is only through constant evaluation and analysis and by embedding the learning into what we do, that we can fulfill the promises we make to our artists.

However, in order to provide greater service to our artists, we must be prepared to provide a greater service to each other. Teamwork has to be absolutely fundamental to everything that we do, and every way that we work. The service we provide involves an intricate and multidisciplinary process where every element must come together seamlessly to succeed. Without teamwork that is just not possible. We have incredible people working in this business, but we have failed to find a way for us all to consistently work together. We need to take the barriers down - we must be one team, working for the common goal of achieving the greatest outcomes for our artists. And as we do that we must all accept that when the artist comes first, we must by definition come second.

However our existing structure stands in the way. We need a far simpler approach to running this business, one that brings everybody closer together, and that tightens the links between us.

With that in mind, today we are announcing a series of organisational changes that will help improve the way we operate, to move us towards being a single global team and to give us the ability to become a truly connected global rights management business with the interests of our artists at its core.

Organisational structure

In our travels, much has been said about the Global Business Unit structure, the so-called Matrix. While there is broad appreciation for the people and skills it has brought us, in trying to focus the business on the key business streams we seem to have created a confusing maze of accountabilities and responsibilities. For this business to work every one of us needs to know to whom we are responsible and for what. We need a much simpler approach. So we are going to completely dismantle the GBU structure, and put in its place a simpler organisational structure. At the same time, we are absolutely going to preserve the value that the GBUs and its people have created.

One of the consequences of eliminating the GBU structure is that we will be losing some trusted leaders: Ronn Werre, Billy Mann and Nick Gatfield. I will be writing to you separately about each of them as I have already done with regard to Ernesto Schmitt, who announced his departure last week.

As we move forward to a new structure it is important to be clear that we are not going back to our old structure. That structure too encouraged division and isolation. We need a structure that puts teamwork at its centre with clear accountabilities and clear authorities.

The new structure has three major building blocks:

1. A strong office of the CEO, able to draw on a staff organisation focused on developing the ideas, strategies and practical tools essential to driving the business forward on a new path.
2.Operating ?Hubs?, with the resources to support and lead their regions.
3.Local business units focused on execution and delivery with the authority to act.

We have deliberately chosen to move away from the terminology of Region to the concept of Hubs. A Region is a ?command and control? form of organisation. The Hub is meant to be so much more. While it will indeed be where the local business units look for leadership, it is meant to be a source of resources, people, skills and knowledge on which the local businesses can draw, so that they can execute with the excellence we demand of ourselves. So, that means returning key disciplines such as marketing and catalogue back into the operating Hubs and territories. In a world of scarcity we must be able to bring together the best we have behind every release and every initiative. It is the job of the Hub to make sure that happens. Driving our strategy, bringing it to bear on every release, and fulfilling our promise to our artists all rest on the shoulders of the leaders of the Hubs. And they will be empowered with clear decision-making rights, and agreed delegated authorities.

To begin, we will have three operating hubs: Europe/UK/ROW, North America and Latin America. Over time we intend to create more Hubs shaped around the different kinds of businesses we operate so we can provide each of them with the greatest amount of support possible.

Country teams will report into these hubs, and be focused on discovering and helping to develop the very best new music, reawakening our catalogue, connecting that music to the fans, and deriving the best possible value out of those connections on behalf of the artists we represent. We can have the smartest strategy, the best marketing plan, and fabulous music - but without brilliant execution, we have little chance of delivering for our artists. And execution takes place on the ground. So while we will hold the local teams accountable, we will also empower them to get on with doing the job.

In North America, I will lead the Hub as its CEO with the constant support and help of Leo Corbett. However, the day to day responsibility for the Hub will fall to Colin Finkelstein who will step up to be its Chief Operating Officer. I could not be more pleased to be able to partner with Colin, who I have known for my entire career at EMI. He exemplifies the best of who we are. He is a person of great skill, unquestioned integrity, and unbounded energy and dedication.

What we have dubbed the ?Europe Plus? Hub , includes our businesses in the UK, mainland Europe, Australia, Japan, Africa, and the remainder of Asia, along with the Middle East. David Kassler will be taking on that monumental job. He will become the CEO of the largest and most successful business unit within EMI Music. He is not only the right person for the job because he has demonstrated his leadership. What sets him apart for me is that he takes care to understand, to listen before he acts, and to work with his colleagues not over them. In other words, he is a team builder. And that is the essence of what we are trying to do ? build the greatest team in music.

Latin America has its own distinctive characteristics, market dynamics, and competitor realities. So it made sense to us to designate it as its own Hub. At EMI Music Publishing, Nestor Casonu has demonstrated the strong leadership and integrity that is so vital to success in the region. With his lieutenant, Juan Manuel Garcia, he has built a dynamic team, and developed deep and trusted relationships across the region. Therefore, we believe he is the right person to lead the Latin American Hub (which will now include both US Latin and Mexico) as its CEO, and for Juan to take on the role of COO. At the same time both Nestor and Juan will continue to run the Latin American Region for EMI Music Publishing. While Nestor and Juan will lead both Latin businesses, it is important to understand that each business will operate on a stand alone basis, cooperating when it is in their mutual interests and going their own way when that is right for each.

The next essential ingredients are the central functions which include:

Finance (led by Shane Naughton)
Legal/Business Affairs (Kyla Mullins)
Technology (Simon Hollins)
Supply Chain & Procurement (Gareth Thomas)
Digital New Business (Mark Piibe)
Human Resources (Jenny Bryant)
Artist Relations (Caryn Tomlinson)

Each of these areas or functions has a set of responsibilities that run right through the company. With that global remit, they provide a vital assurance of control; bring special expertise to planning, analysis and deal making; provide knowledge about emerging areas; give essential focus to the development of our people; and help us manage strategic relationships across the world. These leaders and their organisations need to see themselves as partners with the operating managers at each level of the business. Like everyone else, we expect teamwork and mutual respect to be central to their way of working.

Finally and not unimportantly, that brings me back to the Office of the Group CEO. It is our job is to provide leadership and direction across both EMI Music and EMI Music Publishing. Leo Corbett as Group COO and I commit to you that we will not only be hands-on managers, focused on creating the environment, the culture, and the strategic vision necessary for you to succeed, but also making the decisions when they need to be made with clarity and decisiveness.

To do that we are forming a small and lean organisation, directly reporting to us, designed to continuously refine and build upon the distinctive strategy of each business, to help us embed that strategy into every part of both businesses; it will provide unsurpassed insight not only into consumers but also the markets, institutions and channels which create the environment in which we operate. This is not just some think tank ? everything it does will be aimed at empowering you to succeed.

Strategy must be actionable to have value, and the new Strategy & Research Office led by Jim Brady will give us that. It will have three branches. The Office of Strategy Management is charged with working with each of you to bring to life the strategy in everything we do. Music Insight which has played such an important role in EMI Music will see its remit expand across both businesses. The new office will also encompass a group focused on Channel Analytics to build a deep understanding of the competitive setting and to develop the actionable strategies to meet the challenges we face.

Moving forward

The goal of transforming EMI into an artist-focused global rights management business, cannot be done overnight. The changes we are announcing today are the first steps in a process, and over the coming weeks there will be a series of initiatives to ensure that we put our strategy into action. Those initiatives will broadly fall into six central themes on which we will focus:

? Unmatched insight into emerging consumer and market trends
? Excellence in new music, the lifeblood of our business
? A revitalised catalogue, with a robust re-discovery and recommendation process
? Broadening the revenue base through global rights management
? Scalable, low-cost organisation and infrastructure
? Industry reform

All of our efforts should be centred on driving progress around these themes. That means that we need to place more emphasis on the initiatives that deliver progress in these areas, and get out of those initiatives that don?t.

Today has been about laying out the direction, and a new shape for the organisation. But I am very clear that what counts is actions, specifics, and sound execution - not words. So you will be hearing - and more importantly, seeing - much more in the near future.

For today though, let me just talk about two specific initiatives.

Firstly, the deal process. What is clear to me is that while we have brought strong analytic disciplines to the process, we seem to have lost the connection to frontline advocates of those deals. Deals live in the real world, with urgency and immediacy. We need to simplify the process, set parameters early, and shorten the time needed for decision making - but not at the expense of diluting the analytical rigour we have worked so hard to instill. That means giving greater accountability and responsibility to those on the ground, and that we in the centre work in partnership with them to achieve our goals. New deals are a vital component of our business, and we are going to be smarter and faster in this area. Hank Forsyth of the Office of Strategy Management together with Shane Naughton and Amanda Cupples are well into the redesign.

I have asked Leo Corbett to lead an effort to refine the way we work, so that we can do it better, and importantly do it less expensively. Getting control of costs is a priority. We have to have a less expensive cost structure. Leo and I know how important it is to deal with this thoughtfully but also to do it expeditiously. Our aim is to work through the issues over the next few months so we will get it behind us quickly. But make no mistake about it we are builders of businesses, every change we make will be aimed at making us more competitive and bring us closer to fulfilling our promise to our artists.

After all these words the simple message I want you to take away is about hope, about a new way forward to build a new and better EMI, about effectively working together in a simplified organisation, and about giving life to a new culture of teamwork dedicated to delivery on the promise we make to our artists.

I am a firm believer in EMI, its people, and the music we represent. It?s an honour for me to be able to lead this company. We have an opportunity to build a whole new EMI as a different kind of music company at the forefront of a wholly different music industry. We now have to take the concrete actions to take advantage of that opportunity. I am confident that we have it within us to achieve this, and I am excited about working with you all to do exactly that.

Best wishes

Roger

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