The Boston Globe Caught by Disruptive Innovation

April 14, 2009 by  

The announcement a couple weeks ago by the New York Times that they were considering closing down the Boston Globe was just another chapter in the story of the troubled newspaper industry. I’ve written about this and related troubles in content-creation businesses a lot lately but here are a few new angles.

Disruptive innovation is hardest on the incumbent. There was a story in the Globe this weekend explaining that, in 1995, the founder of Monster.com, the huge job search site approached the Globe. He offered an equity share for $1 million. At the time, the Globe’s job classifieds generated $100 million per year. The Globe didn’t even have a website then and they couldn’t see why they should compete with themselves. Fast forward to 2009. Monster’s revenues exceeded $1.3 billion last year and the Globe is losing $50 million.

There was a great discussion last night on PBS’ The News Hour about the whole trend. There was an academic as well as two entrepreneurs developing on-line news businesses-one for profit and the other not for profit. It’s worth checking out if they post it on their website (as of right now, it still isn’t up there). The for-profit entrepreneur explained that these new efforts could get down to the core competency of journalism in concentrated pockets for 5% of a newspaper’s costs. This is because the newspapers run a tangible business-producing and distributing physical papers on a quick turnaround every day. There are a lot of fixed costs.

It really gets back to the question of core competencies and focus. Newspapers say they are in the journalism business but their financials tell another story. They are saddled with the physical legacy of their old business model. It should be no surprise that the Globe didn’t get it in 1995.

It’s obvious now what’s going on in the newspaper business. But there are similar disruptions going on all around our economy. Your business may not be disrupted out of business but there are threats and opportunities at every turn because the shift to a knowledge economy continues to accelerate. Computers offer economies of scale and innovation to everyone. You need to be relentless in finding new ways to create more value at a lower cost.

Your best protection is to understand your knowledge assets, your intellectual capital, how you create value for your customers using them and, every now and then, take a step back and ask, “What could change in this system?” or even better, “How could we change the system to create more value?” Like it or not, you are in the knowledge business. Get used to it.

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