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In 1850, Paul Julius Reuter spotted a chance to capitalize on a 76-mile gap between Germany’s main telegraph line and the line that ran from Brussels to Paris. If Reuter could somehow link the two lines, he could supply his German clients with timely news and financial information from France. Reuter was an early adopter of the new telegraphy technology, so the obvious patch was to string his own telegraph line, at great expense. A more practical approach would have been to put his dispatches on trains to span the divide. Instead, Reuter filled the missing link via thin air—by using carrier pigeons. They could start flying at dawn, before trains began traveling, and could make the trip in just two hours, which was faster than the trains of the time. Whatever "technology" it takes, Reuters Group PLC (www.reuters.com) has consistently jumped on new ideas quickly and has taken imaginative leaps to gain advantage over its rivals in the financial news business. With each new wave of technology—whether telegraph, radio, computers, satellites, or the Internet—Reuters changed its business into something bigger and more successful, even when that meant moving into unfamiliar markets. Today, Reuters’s traditional news business has burgeoned to nearly 2,000 journalists, photographers, and cameramen who deliver dispatches about everything from options trading to the Olympics from 185 bureaus around the world. But it has morphed into far more than a news service. Traders worldwide deal in stocks and currencies over Reuters’s electronic-trading systems. The Reuters currency-dealing network alone handles about half a trillion dollars of trades daily. Reuters, with a total of 17,000 employees in 100 countries, peddles technology that permits banks, mutual funds, and other big institutions to better manage the risky swings in financial markets. After some uncharacteristic reluctance about the Internet, Reuters has embraced it and begun a new round of technological change. It is providing news and photos to hundreds of Web sites. To reach tens of millions more customers, the company is shifting the distribution of its financial information away from its massive private network and on to the Internet. The company is investing heavily in start-up companies, to make sure it catches the next wave of change, too. "One of the amazing things about Reuters is how it continues to reinvent itself over and over again," says 19-year Reuters veteran Andrew Nibley, co-founder in 1994 of the company’s Internet publishing unit, Reuters NewMedia Inc., and now president and chief executive of GetMusic LLC (www.getmusic.com), a music distribution company. The seeds for Paul Julius Reuter’s business were sown when the young German attended lectures in the 1830s about groundbreaking research into sending electric signals by wire, according to Donald Read, a professor of history at the University of Kent. "Young Reuter realized that a system of telegraphy would transform world communications," Read says in his book The Power of News: The History of Reuters. His first attempt at a news agency failed in 1849, but, once his carrier pigeons filled in the gap between two of the Continent’s important telegraph lines, he was on his way. In 1851, Reuter moved to England and used the technology to begin expanding his news-gathering network. Initially, he sent news dispatches between England and the Continent via a newly built undersea telegraph cable and built a reputation for being ahead of competitors—among other scoops, Reuter’s journalists were the first in Europe to report Abraham Lincoln’s assassination in 1865. Reuter eventually expanded beyond Europe, moving into the Far East and South America in the early 1870s. The telegraph cable was so important to Reuter that he commissioned an 1869 portrait of himself with his hand on a globe showing the path of a transatlantic cable he helped bankroll; the portrait still hangs in Reuters’s headquarters on Fleet Street in London. Reuter died in 1899, at age 82, but that didn’t stop the company’s experiments with communications technologies. In 1923, Reuters pioneered the use of radio to transmit exchange rates and commodity prices to clients in Europe and the U.S. In the second half of the century, not long after the invention of the computer, change at Reuters picked up speed. In 1973, Reuters unveiled Monitor, a service that permitted banks to post their foreign-currency rates electronically for all traders to see on video screens. The flickering "real time" quotes eliminated the need for trading desks to be littered with telephones and squawk boxes—the chief technologies dealers had used to get price quotes from other dealing rooms. The timing was good. Governments were dropping their systems of fixed exchange rates, so traders hungered for instantaneous currency prices. Later, Monitor was expanded to carry news as well as prices for stocks, commodities, and currencies. In 1981, Monitor was revamped to permit actual currency dealing. The system became, in effect, the world’s biggest private Internet. Reuters also looked to the heavens to expand its private network. The company was an early user of the Telstar communications satellite, using it in July 1962 to transmit a news report to the London bureau from New York. And in 1982 Reuters began using satellite technology to provide subscribers with news, information, and pictures via small dishes. Through all the change, the company’s culture remained that created by Reuter, ever-striving to do better and expand further. "Reuters always thinks it’s doing a lot worse than it is," says Nibley, who began his career as a reporter. "It’s a culture of neuroses and paranoia that breeds workaholics and a sense of urgency" and that spawns innovation. Nibley recalls how, in the early 1980s, as a journalist in Reuters’s Washington bureau he raced down halls to file stories that might move markets. After Paul Volcker, then the chairman of the Federal Reserve, testified before Congress one day, Nibley slipped and fell as he sped for the phone. He tore his suit and bloodied his knees, but he crawled into a senator’s offices. He snatched a phone from an office worker and dictated a headline to New York—but his competitor from Dow Jones & Co. got the story out slightly ahead of him. When Nibley explained to his editor all he had done to get the headline out, the editor was unimpressed. "Not good enough," he said. "That summed up Reuters," Nibley says. "No matter what you accomplished, you never felt like it was enough." In the mid to late 1980s, under Managing Director Glen Renfrew, Reuters began another important shift—to an electronic marketplace where stocks could be traded. A big gamble came in 1987, when Renfrew bought electronic stock trader Instinet Corp. (www.instinet.com) for about $100 million. "People thought he was a little nuts," says Stephen Lake, formerly senior vice president at Reuters NewMedia and now CEO of a San Francisco high-technology company. Renfrew argued that the combination of Reuters and Instinet "would create a significant new force in the area of financial information and stock trading," allowing it to compete with the Nasdaq Stock Market and New York Stock Exchange. As Lake notes, the purchase proved to be a shrewd gamble. Instinet has developed into the world’s largest electronic agency brokerage, generating $276 million in revenue in the third quarter of 2000. According to Read, the historian, innovations such as Instinet transformed Reuters. "The introduction of computerized services changed Reuters, not because of the wonder of the technology...but because it meant a change of main market for the organization. It still continued energetically to serve the world’s press, radio, and television; but it was now earning most of its money from the global financial industry," Read says. By 1989, just 9% of its news and information customers were media. Some 85% were financial institutions and companies. When it came to the Internet, Reuters was, oddly, a laggard. There were internal conflicts over the new technology, partly because some executives, like many in Europe, had doubts about the global computer network, which was embraced more quickly in the U.S. In addition, Reuters’s Internet-publishing venture, Reuters NewMedia, created a divisive controversy when it chose to distribute Reuters news and photos over the Internet through services such as Internet search engine Yahoo! Inc. (www.yahoo.com), and Internet service providers America Online Inc. (www.aol.com) and Prodigy Communications Corp. (www.prodigy.com). While the online companies paid Reuters for its content, they provided it to consumers free of charge. Senior Reuters executives asked: Why should a company that earned a lot of its money from financial institutions that shelled out big bucks for its products allow consumers to read its news and information for nothing? "We were openly told by members of the Reuters executive committee not to do things on the Internet and not to pursue the consumer market," recalls Nibley, the co-founder of the NewMedia unit. "We thought we were going to be shut down." The issue came to a head in the fall of 1999, when CEO Peter Job admitted to Wall Street analysts that it was "hard to be clear about strategy" in the rapidly changing media business. The stock was pounded. Some investors privately called for Job’s ouster. But executives were warming to the Internet, especially once they saw what the company’s online exposure was doing for the Reuters brand in the U.S. Suddenly, millions of ordinary people were familiar with the Reuters name in a market where the company had high hopes for expansion. In February 2000, Job finally defined a strategy for the Internet. He announced that Reuters would spend $800 million over four years to shift its distribution of financial information onto the Internet and away from its private network. In the process, Reuters hopes to reach beyond its traditional customers, such as banks and brokerage houses, and reach well-heeled individual investors. Job estimated the potential market at 60 million investors, who would pay less than $100 a month for financial news and information, compared with the $1,500 or more paid by big corporate customers. Reuters’s stock rose sharply. Reuters has since expanded its online presence to the point where it sells its news and information to more than 900 Web sites, reaching roughly 40 million viewers. To get access to new technologies, Reuters has invested in about 80 start-up businesses, primarily in Europe and the U.S. Reuters executives say they conjure up their worst nightmares about how technology might change their business, then invest in companies that could make those nightmares real. The idea traces back to 1994, when Reuters dispatched John Taysom to Silicon Valley to set up a venture fund. Soon after he arrived, he read an article in the Stanford University student newspaper about two young guys starting a Web indexing and search service named Yahoo. Taysom invested $1 million in Yahoo, while the start-up company agreed to carry Reuters. The deal, and Yahoo’s offbeat name, made for an interesting discussion in front of Reuters’s directors, who needed to approve the investment. "They were puzzled...but they made the right decision," recalls Alex Hungate, the co-CEO of Reuters America Inc. After the company took a stake in Yahoo, which was such a success, Reuters set up the Reuters Greenhouse Fund to expand the strategy of getting access to new technology through investments. "We have an inside track on the new technologies as they come through," Hungate says. Job won’t be around to see the results of the investments or of his plan. He is scheduled to retire in July, at age 60, and turn the post over to Tom Glocer, 41, who will be both the first American and the first nonjournalist to head Reuters. Glocer, a lawyer, was chosen in part for his familiarity with technology. He is known to quote liberally from Philip Evans’s book, Blown to Bits: How the New Economics of Information Transforms Strategy. Will Glocer and the company be up to the task? "It’s too soon to say. The Reuters ship of state is still turning," says analyst John Blossom of research and advisory firm Outsell Inc. (www.outsellinc.com). Reuters has made tough transitions before. "Just as Julius Reuter launched his pigeons at just that moment when that technology was still of use, and went on to the telegraph, Reuters must remember when it’s best to leave the past behind in the coop," Blossom says. "The will is apparently there now. I hope for their sake that the opportunity is, too."
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