Disruption Theory

A summary of the key message of Clayton Christensen’s “The Innovator’s Dilemma” and the “Newspaper Next” reports by the American Press

Institute.

Dan Pacheco

Chair of Journalism Innovation

S.I. Newhouse School of Public Communications

Journovation: Creating the Next News Startup

Clayton Christensen

Why do established

companies, even those with

brilliant leadership, fail to

see disruptions until too

late?

That’s the topic of Harvard

Business School professor

Clayton Chirstensen’s book,

“The Innovator’s Dilemma.”

The reason

“It’s not because of stupidity or stubbornness.

Rather, they were the victims of the very habits and

behaviors that had made them successful.”

(Newspaper Next, American Press Institute).

“Too much money makes you stupid.” –Jon

Nordmark, founder of eBags and CEO of Using

Miles.

Two common mistakes

1) Failing to dedicate resources to new

opportunities.

2) Putting the square peg of an innovation into

the round hole of an established business

model.

Sustaining Innovations

Incremental improvements.

Cater to people already using a product.

Tend to focus on:

The heaviest, most demanding users.

The most profitable users.

Incumbents usually beat out competitors in this way. It’s good business.

Sustaining Innovation

Disruptive Innovation

Triggered by new technologies.

Fundamentally changes the game.

Focus on non-consumers of a product.

Often cheaper than the incumbent.

Provides lower performance.

Example: cell phone quality vs. landline quality.

New competitors nearly always win.

Disruptive Innovation

Phone industry example

Landline

phones

Long

distance

plans

Fiber

optic

lines

Friends and

family plans

Car phones –

huge, bulky

First cell

phones

Blackberry

and Treo

w/ internet

iPhone &

touchscree

n phones

Does Performance Really

Matter?Mobile phone

Superior voice quality.

Works the same way

everywhere you use one.

Predictbale, uniform

design. made for a desk

or chair.

“Good enough” voice

quality.

Works differently as you

move around (reception

issues).

Designs change radically

every few years.

Landline phone

Sometimes, “Good Enough”

works

Lesson: In times of great

technological change, being

just “good enough” at a

focused goal can be better

than being the best.

What phone companies forgot

Phone companies thought they were in the

telephone business.

In fact, they were in the communication

business.

Mobility mattered more than perfect sound

quality.

Increasingly, more important to

communicate vs. just talk. Twitter, Facebook,

Wikipedia in your pocket.

Newspaper classifieds

Paid Print

classifieds

Color

print

ads

Print ads

online, too!

Photos & videos

in print ads

online

Craigslist:

free online

classifieds

More

categories

More cities

Paid online

jobs, real

estate

listings

A local example

Let’s compare online

newspaper car classifieds to

Craigslist classifieds …

Newspaper site: Busy. Lots of visual design. Professional look.

Leave no space behind for commerce. Even the car ads have ads on them.

Craigslist: no visual design. Simple list o’ links. Almost ugly.

Craigslist: just the facts!

Who’s winning?

Other examples

Henry Ford: middle class wanted to move from horses to motors, too.

PCs started as toys for hobbyists, but swept business world, then everything.

Southwest Airlines first made air travel affordable for bus travelers, then attacked major carriers.

Wal-Mart first created low-price model for low-end consumers, then drove department stores to consolidate.

Amazon selling $25 print books as $9.99 eBooks.

How to be disruptive

“Be like water, and get down the

mountain the fastest and most

efficient way possible.” – Dan

Pacheco

Source: Newspaper Next

Newspaper industry competition

Source: Newspaper Next, API

Source: WikiMedia Commons

Local,

national

and

global

news

Comics

Car ads

Coupons

Sports

Apartmen

t listings

Service

directorie

s

Share

opinionsCrosswords

Find a job

Delivered to

you every

day in one

nice

package!

The Internet:

go get it for

free!

Local,

national

and

global

news

Apartment

listings: Craigslist

Share opinions:

Twitter, Facebook,

blogs

Find a

job:

Craigslist

Service

directories:

Angie’s List, local

discussion

boards.

Comics: online,

apps

What’s left?

API found that most people aren’t looking for new sources of news.

They are often looking for local information.

Examples:

Newcomer info like parks, doctors, good mechanics. (City-Data.com, Angie’s List)

Youth league news. (No single source)

Local school happenings. (Not the school!)

Local shopping deals. (Groupon, Living Social)

The bitter pill in 2006

“Most signs indicate that the newspaper itself is

likely to shrink into a boutique product, serving an

ever-smaller audience and advertiser base. How

long a newspaper will remain a viable product is

unknown, but the pace of shrinkage appears to

be accelerating.”

- Newsaper Next, API

A local information example

City-Data.com – “Good

enough” local information.

API advice: Portfolio solution

Suite of products and services in addition to the

newspaper, intersecting the population on a

variety of planes.

Target audiences not necessarily interested in

newspaper’s contents. Attract advertisers for

whom the newspaper isn’t necessarily a suitable

way to reach their target audiences.

Media-agnostic: online, paid, free, mobile, email

or even print.

Dangers of portfolio model

Managers are likely to run these new internal

startups like sections of their old one-size-fits-all

model, rather than as new businesses.

Danger of “brand pollution” by bundling them

together or putting the newspaper brand on

them.

Since such services can and do work well as

standalone products, why not run them as

separate companies? Newspapers rarely do

this.

Discussion question

What products or services can you

think of that are disrupting local news?

What new technology are they

exploiting?

How does their “good enough”

approach trump the competition?