Newspapers, Who's In Charge? The Non-Customers

Media-watcher Jeff Jarvis says there is an important subtext in struggling media companies these days. He asks who's in charge at newspapers that struggle to define their future: The traditional print bosses or the new online content bosses?

The specific case under discussion is Dow Jones, publisher of the daily Wall Street Journal, Barrons, the online service Marketwatch and the traditional Dow Jones news wire, among other properties reaching 14M customers worldwide. But the issue of how traditional media companies stay relevant in an online-Googlized-24/7 -instantaneous-information-world is being  considered by every media player, from network TV to the New York Times.

Dow Jones has struggled for years and has seen its profit erode by 65% in the past two years.  Now, like many newspaper publishers, it is setting up a task force to figure out its future in light of competition from web services and new media companies etc. The task force has several members from each of the divisions and is mapping out something they call "Project Journal 3.0: Newspaper for the Digital Age."

Jarvis's concern is that at DJ, the online guys are losing control of the future:

"The ballsy news company will not only give precedence to the internet but also to the people who know the internet. I’m afraid I’m not seeing that happen..."

Jeff seems to be allergic to task forces and I think anyone who has been involved in once would be sympathetic to that view. In an earlier posting, he writes:

"If the journalists truly want to be involved in the reinvention, perhaps their starting point should not be trying to preserve the past but instead ideas for the future... These strategic task forces can’t afford to be about resisting change. They have to be about making change happen, and quickly."

Dow Jones has set out important goals for the task force:

• Develop a strategy that incorporates all DJ markets, all DJ brands, all the media in which we operate;
• Optimize products and services so each medium is used to its full advantage;
• Serve the customers of each product as efficiently and effectively as possible;
• Deliver differentiated and unique content how, where and when consumers want it;
• Minimize efforts on lower-value content;
• Reduce duplicated efforts;
• Eliminate unnecessary effort.

And this all makes total sense. And this will likely fail. Regardless of whether online or print people are in charge.

I don't mean to be pessimistic or critical of Dow Jones specifically.

But this looks like a recipe for failure for any incumbent and dominant supplier, which DJ is.  The problems faced by Dow Jones are similar to those faced by any successful company that is about to be blown out of the water by a disruptive innovation, in this case, primarily web-based information services.

Think of mainfame computer makers  vs mini-computers... minicomputer maker DEC vs PCs... Kodak vs digital cameras... Palm vs BlackBerry... Microsoft vs Linux.

In each case, the established and dominant suppliers typically failed to recognize that bigger, more profitable markets could be created based on new disruptive innovations. To be successful, the market disruptor catered to a new set of customers, thought initially to be low-end or marginal and therefore ignored by the incumbent. The disruptors also had a different business model, often with a different distribution channel, that seemed to make no sense to the incumbents and to the incumbent's customers.

Each incumbent doomed itself by over-allocating resources dedicated to preserving the past instead of harnessing the new disruptive innovation. Often, they waited until the new market proved itself. But by then, they were too late.

A committee structure designed to boost efficiency and effectiveness of the current operations is focussed on the wrong thing. Its like moving the deck chairs on the Titanic.  Or worse, arguing about who is in charge of the deck chairs. 

The iceberg was in charge of the Titanic.  The customers are in charge of the news business.  And the customers by and large have spoken: Newspapers are less relevant today than ever. The most important group that newspapers should pay attention to are not their customers. It is the non-customers.

As Warren Buffet observes:

"Newspaper readers are heading into the cemetery, while newspaper non-readers are just getting out of college." 

Further, to develop a strategy that encompasses all DJ brands, all DJ services and all DJ media, might prove to be blinded by what the company already knows and does. 

Sure, the Wall Street Journal runs a great online site, with more than 700,000 paid subscribers. One of few online newspapers to make money. Also probably the best newspaper in the country.

But it is very difficult for a committee of various stakeholders in the status quo to come up with clean, unbiased views on where the best new growth is available. They will be caught in the classic dilemma created by disruptive innovation, stuck catering to current customers, preserving their cost structure and business model, seeing their volume whittled away as new competitors steal the low-margin or unattractive customers. As summarized in the CEO Refresher:

"Well-run companies find it difficult to allocate resources for products that fly in the face of mainstream demands. In order to get essential resources for disruptive technology, savvy managers align the unorthodox product with the 'fringe' customers who can put it to immediate use."

Any new market-disruptive services or products will likely look too small or too unprofessional or just too weird to the eyes of the DJ task force, which will likely assess things using market size studies, focus groups and surveys, ROI analysis etc., the traditional tools of successful companies. These tools seldom greenlight disruptive innovations.

After all, markets that don't exist can't be analyzed. What would a market study say the demand was for Google before Google existed? 

For example, Kodak pioneered work in digital photography in the 1990s but failed to transform itself because it underestimated the digital opportunity and was more focussed on preserving its traditional film business.

Instead of establishing a complex multifaceted task force with many objectives, DJ needs to reflect only on a few simple questions, cribbed from Peter Drucker and Clayton Christensen:

• What parts of the customer experience are good enough or commoditized? (defocus here)
• What parts are not good enough? (focus on improving this)
• What are the jobs to be done that consumers are already doing themselves?
• What businesses and processes should be sloughed off altogether?

A small team of creative people, armed with only a small budget, complete independence, and a mandate to create a profitable business quickly, can address these issues faster and better than any task force.

Remember, it took only two guys to create YouTube, a video download service that has some videos more popular than top network TV shows.

**Alternative Views **

Rupert Murdoch, who knows a bit about the media, is optimistic but says newspapers and journalists condescend to their readers: "What is required is a complete transformation of the way we think about our product. Unfortunately, however, I believe too many of us editors and reporters are out of touch with our readers. Too often, the question we ask is “Do we have the story? rather than “Does anyone want the story?”

Robin Sloan produced a captivating, but haunting view of the future of newspapers, called EPIC 2014, an 8-minute flash movie that sees the demise of the New York Times, and the ascent of a Googlized world of trash news.

Michael Bloomberg, now mayor of New York City, created a networked media conglomerate that emerged from nowhere in the 1980s to beat the dominant incumbents, Dow Jones and Reuters, in the financial newswire market. Bloomberg's autobiography  explores his business methods and how he disrupted the competition, summarized here.