What media companies can learn from the Japanese car industry

In The Innovator’s Dilemma, Harvard Business School professor Clayton Christensen explained how successful firms can fail when confronted with disruptive technologies. Meanwhile, upstarts who leverage those same technologies are able to get a foothold at the edge of a market and then work their way up the value chain. That’s what happened with Japanese cars — they began life as sub-compact jokes but then transformed into power brands like Lexus.

Now, Christensen is applying his theory to the media industry where similar forces are at play. He points to disruptors that began as little more than crude cat-photo aggregators (BuzzFeed) and outlets for lefty commentary (Huffington Post)  but quickly evolved into major media brands (the HuffPo now even has a Pulitzer Prize to its name). At the same time, many once-prestigious news brands have failed to reinvent themselves for the digital era — witness how Newsweek shuttering after 80 years.

In a report published this week by Nieman, Christensen and his co-authors acknowledge the hard reality for media executives who are chained to legacy business models with large but shrinking cash flows:

This search for new business models remains elusive for most. Executives interviewed in that Pew report confirmed that closing the revenue gap remains a struggle. “There might be a 90 percent chance you’ll accelerate the decline if you gamble and a 10 percent chance you might find the new model,” one executive explained in the report. “No one is willing to take that chance.”

But pursue it they must, or their organizations will be deemed irrelevant by news consumers. New entrants are already leaving their mark on journalism—stealing audiences and revenues away from legacy organizations.

To meet these changes, Christensen argues, media companies need to look at what they produce as a function — serving people the right information in the right package in the right place. For example, Twitter offers rapid content to someone standing in a Starbucks line while, at the other end of the spectrum, publishers like Longreads and Instapaper can deliver thoughtful, stimulating content appropriate for those on trains or airplanes. (BuzzFeed appears to have figured this out too with an explicit appeal to the “bored at work” crowd.)

The Christensen report, while long, is also refreshing in its candor about how traditional media infrastructure like the newsroom has become “an albatross” in many ways. It also points out that news outlets  have to expand their core business model if they want to survive. In practice, this is already happening as news outlets are discovering new cash sources in everything from consulting to events to commercial printing to e-books.

Finally, there is the “if you can’t beat them, join them” approach. Christensen explains that media companies like Forbes and Dow Jones are hatching or acquiring their own digital properties and — as importantly — creating management processes to ensure their existing legacy operations don’t smother them:

Given that a young upstart may cannibalize the company’s traditional business, it is critical that such a project have high-level support and be independent from normal decision-making processes …  Having a separate workspace for the spinout organization can be helpful, but what’s most important is that a disruptive start-up not be placed at the mercy of the old organization—which might see the upstart as a competitive threat and attempt to have it shut down or cause it to fail.

The larger point is that, just like the auto industry and steel industry before it, the old-guard media industry is being engulfed by newcomers that began by nibbling
at the edges of the market and are now crawling up the value chain. This means legacy companies can adopt the disruptive technologies shaking their business — or be eaten by it.

Flickr/hbomb1947 the turnstile-jumper’s photostream