I feel a sense of foreboding with our current electric industry structure. There is the increased spending on transmission, distribution, and smart grid. There are huge amounts of development money being spent on technology that could make these very investments uneconomic.
Are we careening toward the cliff of despair? If you work for a big, leading company, whether it is a utility, generator, wholesaler, or retailer, do any of the descriptions of newspaper incumbents, below, look familiar? Or are you confident in the future?
Like other industries that have been disrupted by new forms of competition, Clay Christensen says that newspapers were almost incapable of taking the steps they needed to take — even long after the danger of not taking those steps had become abundantly obvious.
When it comes to digital disruption of traditional industries, Clay Christensen is a bit like the Oracle at Delphi, in the sense that the Harvard business professor and author predicted much of what we are seeing now in the media business and in fact throughout the technology industry. But even Christensen admitted in a recent interview with the Nieman Journalism Lab that he was surprised by just how quickly things fell off a rather large cliff in the media industry. And unfortunately for newspapers and magazines, there is no way of getting back to the top of that mountain — there are only alternate routes through the valley below, some of which lead to success and some of which are likely to be dead ends.
One of the classic lessons from Christensen’s seminal book “The Innovator’s Dilemma” is that companies with a commanding lead in their field, whether it’s hard-drive makers or steel mills, are almost incapable of taking the steps that need to be taken to survive a technological and/or behavioral disruption — even when the danger of not doing so is blindingly obvious. In other words, even when a company can see quite clearly that a freight train is approaching or a cliff lies directly ahead, it is still almost impossible to step off the tracks or do anything other than stampede over the edge.
Newspapers were doing well, until suddenly they weren’t
This has a lot to do with human nature and corporate culture, but Christensen also notes that industries like newspapers are often seduced into thinking that things aren’t as bad as they seem, because their traditional business often continues to do quite well — until all of a sudden it doesn’t:
“Even as the disruption is getting more and more steam in the marketplace, the core business persists, and is really quite profitable for a very long time. Then, when the disruption gets good enough to address the needs of your customers, very quickly, all of a sudden, you go off the cliff.
Even though managers realize that disruption is occurring — even though they know it’s happening — they don’t do it, because the data becomes clear after the game is over. They really have to act on the basis of theory, which I think a lot of people find hard to do.”
So newspapers have arguably seen the writing on the wall over the past decade or so, and yet making the kinds of decisions that were required to get in front of that wave of disruption was still extremely hard, since doing so would mean potentially derailing their existing successful businesses. Although Christensen doesn’t mention it, this is likely one of the reasons why the only newspapers that have made significant strides tend to be ones that have gone bankrupt or are close to it, like the Journal Register Co. — in the most obvious sense, they have nothing else to lose.
Interestingly, Nieman Lab founder Josh Benton also notes that newspapers with strong religious affiliations have made some big moves, including the Christian Science Monitor — which was one of the first to go digital only several years ago — and the Deseret News, which Christensen mentions as a pioneer (perhaps in part because it was taken over by one of his graduate students).
The other newspaper that gets high marks for adapting quickly, or trying to do so, is the Washington Post. For Christensen, the model that the Post pursued from the earliest days of online news — with the digital unit set up as a separate entity and even located in a different building — is the one that has the best chance of success, because then it is easier for the digital operation to pursue whatever steps it needs to in order to survive. This is why so many Washington Post staffers were disappointed when it seemed as though the “printies” had won.
Taking risks and learning to fail are necessary skills
The Post has also been one of the few major dailies to take some interesting risks in the digital realm, including the creation of its Trove news-recommendation engine and the launch of the “social reader” app for Facebook, which has driven a lot of traffic to the newspaper’s site but has also been subject to the whims of the platform on which it sits. And Christensen also gives the company praise for diversifying away from the news business and into online education as a way of subsidizing its journalism (although there are critics who say this model is working less and less well for the Post).
Although Christensen doesn’t mention it, the decline and now disappearance from print of the Newsweek brand name is another great example of the processes he is trying to describe. At one time, the aggregation of a week’s worth of news was a great service for readers — something they couldn’t get anywhere else. Now, that kind of thing is available in a thousand different places, and so the purpose of Newsweek has essentially been removed. Is there a purpose for The Daily Beast, the entity that merged with (and possibly helped to kill) Newsweek? That remains to be seen. Meanwhile, Forbes is another entity that gets praise from Christensen for trying to disrupt itself.
While the introduction of paywalls may be helping to delay the disruption, and prop up what remains of the traditional newspaper ad-revenue business, they don’t feel like a long-term solution to the challenge that Christensen is talking about, which is to develop a sustainable online business that solves a real problem for readers. Are readers suffering from a lack of paywalled content for which they can submit their credit cards? Probably not. It’s also interesting that the newspaper that gets the most praise from Christensen is the Post, which remains adamantly opposed to a paywall.
In the end, the only advice Christensen can provide for newspapers — or magazines, for that matter — is to aggressively cut costs in the traditional side of the business (the Deseret News cut more than 50 percent of its staff) while also investing in new digital-first businesses. So far, most newspapers are getting good at the first part of that equation, but not so good at the second.
Post and thumbnail images courtesy of Flickr users Zarko Drincic and George Kelly