I re-read Clayton Christensen’s “The Innovator’s Dilemma” (1997) over the last few days, and I’ve concluded he should write a new edition of the book that uses newspapers instead of disk drives as his central case study. Christensen found in his research that time and time again, disk drive companies were made aware of radical new innovations — there were even prototypes built — but chose to ignore them. Why? Because these innovations were disruptive and generated “no value within the established network.” In other words, if you take the disruptive idea and try to make it work inside a company’s existing cost structure, customers, resources, processes and culture, it would be a failure. So instead, these companies focus on incremental innovations and startups are able to take the disruptive ideas and run with them.
“At its core,” writes Christensen, “the issue may be the relative flexibility of successful established firms versus entrant firms to change strategies and cost structures, not technologies.” So it’s not the ideas or the technology, but the ability for a company to flex into a new business in a timely fashion.
If it were only that easy. Newspapers and television stations have extensive and entrenched cost structures, not to mention strategies and systems. And it’s even more challenging when you consider the need to balance two separate but co-dependent sets of customers: readers/viewers/users and advertisers.
This month, Christensen co-published a Harvard Business Review article, “Reinventing Your Business Model,” that outlined a framework for established companies to execute on disruptive ideas. “Many companies begin with a product idea and a business model and then go in search of a market,” the authors write. “Success comes from figuring out how to satisfy a real customer who needs to get a real job done.”
And the most important of our two customers is the advertiser, not the user. After all, we have an advertising problem more than we have a content problem. What do advertisers and potential advertisers — the vast majority of businesses — need to drive more profits? What can we do to give them a competitive edge?
I don’t believe local media has invested enough time, effort or money to learn the answer. Surveying your customers doesn’t count: as Christensen explains, they’ll just suggest incremental innovations and you’ll be “held captive” by their responses. To find a disruptive answer, you’ll need to immerse yourself in the dynamics of what drives value for local businesses.
And quite possibly the answers are already there, but managers chose not to pursue them because they require revamped cost structures, fresh resources, redesigned processes and new customers. And yes, most likely smaller profit margins. But the alternative is much worse: watching startups like Google attack from the bottom, capture enormous new value and eat your lunch.
