Condé Nast Is Experiencing Technical Difficulties

While other media rushed online, Condé Nast dug in its Louboutin heels. Now, with its much ballyhooed iPad play stalling out--so 2010!--the knives are out for digital wonder boy Scott Dadich.

AFTER THE RUDE AWAKENING of the recession, Condé Nast faced a turning point. It was clear the old model—concentrating on publishing elegant and high-end content and assuming that advertisers would line up for pages—was failing. Mr. Newhouse, who is in his 80s and has never been much for innovation, began increasingly to take a back seat, sources say, leaving a something of a power vacuum at the top of the company.

During the McKinsey era, when the white-shoe consultancy was paid seven figures to help turn things around, Condé Nast’s then-CEO and president, Chuck Townsend, was ready to ask for help. He created a ideas box—grandly named “The Power of Suggestion”—and invited any Condé employee with an idea to benefit the company to submit it. The best idea would be selected once each quarter, and the employee would be awarded a $10,000 bonus. But why, some wondered, would anyone with a truly disruptive idea give it away for $10,000 when they could walk to the Flatiron and get half a million in funding?

Later that year, Mr. Townsend handed over the president’s role to Bob Sauerberg, former group president of consumer marketing. That left Mr. Townsend (an operations-side suit), Mr. Sauerberg (a consumer marketing guy steeped in the world of blow cards and direct mail) and editorial director Tom Wallace (former editor-in-chief of Condé Nast Traveler), as the decision-makers charged with leading Condé to its digital destiny.

Though all had mastered various ins and outs of the print magazine business, at least as it was practiced in the last century, none were digital natives, and the mobile world was even more foreign. “These are not guys with iPhones in their pockets checking-in on Foursquare,” noted one insider.

It wasn’t a surprise, then, that the young Mr Dadich was viewed as something of a savior. “You know what it’s like,” a former employee told The Observer, regarding Mr. Dadich. “You sit in a room, and you don’t know much about a subject, but some person is able to discourse in it. All of a sudden someone says, ‘Wow this guy must be incredible!’ They’re anointed as the new king.”

And minting stars is what Condé Nast has always done best—from promising young designers selected as Anna Wintour’s favorites and aggressively promoted in the pages of Vogue, to internal staffers who find themselves propelled up the masthead. It’s the same model Condé used to promote James Truman, known as the “prince of Condé Nast,” to become the company’s second-ever editorial director.

“But,” the source was quick to point out, “just as in every royal family, the king has a certain time when he’s being fawned over, and then there will be a moment when someone chops off his head.”

It doesn’t appear likely that Mr. Dadich is on his way to the guillotine. But there are certainly those ready to plot a coup. Condé Nast employees described Mr. Dadich as “Tom’s boy,” and wonder if Mr. Wallace, the company’s editorial director, hasn’t developed something of a “mancrush” on his young protege. Many of the sources who spoke to The Observer wondered why, in a city suddenly teeming with venture capitalists, entrepreneurs and coders, a print guy like Mr. Dadich was picked to lead the way in the first place. One told The Observer that, last year, even Adobe requested a different point person better versed in interactive design. But that didn’t stop Condé from flying Mr. Dadich, who didn’t respond directly to an interview request, to Moscow a few months ago to deliver his spiel to the company’s Russian titles.

One source we spoke to said Mr. Sauerberg was busily trying to counter Mr. Wallace’s unwavering faith in Mr. Dadich, a relationship backed by Mr. Townsend. Then again, we heard some staffers blame Mr. Sauerberg for the seemingly short-sighted decision to partner with Adobe, while others pinned it on Mr. Townsend. Whichever view is closer to the truth may be less meaningful, in the long run, than the impression of a company on the edge of obsolescence increasingly falling victim to finger-pointing and internal power struggles.

It is, according to a Wired designer speaking from the magazine’s headquarters out in San Francisco, a “snake pit.”

Still, there are signs that things may be changing. A few weeks into Mr. Sauerberg’s tenure, he tapped an unglamorous outsider, Joe Simon, an Indian expat from Viacom, to be the company’s first-ever CTO. It was a move toward what one source called “the way every other sane company in the world works.”

Mr. Simon’s biggest challenge might be finding a way to move beyond the Adobe partnership and a mind-set that looks at the iPad and sees a newsstand, but with virtual stacks of print.

“It’s obvious it wasn’t going to work,” said Mr. Vinh, the former design director. “It’s only if you’re under the spell of this very traditional print-centric bias that you would ever think that this would work. I don’t know who the executive was that said this is the way we’re going to approach it, but this is not a decision that I would put on my résumé.”