Urlocker On Disruption

Disruptive Media: Newspaper Redesign

Many major newspapers across the U.S. and Canada have redesigned in the past year to freshen up their look. It's part of the ongoing battle to win back readers or at least to offset declines vs. the Internet and other news sources.

But can an underdog newspaper redesign itself to be more disruptive?

The National Post, out of Toronto, is aiming to do something different with its new design launched this week:

• Narrower page
• larger typeface, larger line spaces
• Shorter stories, more pull-out sidebars
• More specific investment angles on business stories
• Unusual vertical masthead

Some early reaction has been favorable, but to many readers, the new design seems like pretty mild stuff and not nearly as radical as the way insiders see it.

Seismic changes may indeed be what an underdog newspaper needs. But this goes beyond mere design and goes to the function of the newspaper as well.

A few months ago, I did an informal survey of Canadian investment professionals and it was clear that the National Post and its business section, the Financial Post, was less relevant to this group than it had once been. Also there was an increased perception that the newspaper was a pale imitation of its larger competitor,  the Globe and Mail.

Clearly, a more disruptive approach is necessary, but has the Post been focussed enough in its new undertaking?

Experience in disruption show that the newspaper can achieve great growth and deliver high value to customers if it focuses on any these attributes:

• solve important new problems for customers that they can't solve today
• increased accessibility
• increased customization

To the extent that the National Post helps readers solve problems, and is more accessible, it will succeed.  Even a relatively small change, such as if the business section were to focus entirely on buy/sell ideas for stocks, would clearly differentiate the newspaper and help solve important, frequent problems for readers interested in investing.

What problems do readers need to solve that they can't solve today?  Newspaper publishers (and most managers in any industry) don't normally think this way.

How far can a newspaper go with this? Here are four somewhat crazy ideas for new businesses, some of which lend themselves more towards new web services than printed pages:

1. Community-focused Medical Information: Help families find reliable, competent family doctors, specialists and physiotherapists. A Canadian version of www.RevolutionHealth.com
2. Family-focused Local Entertainment Services: Help busy mothers plan their days with activities suitable for toddlers through to tweens. An extension to informal “mommy blogs,” but created to be more consistent so that the service can be relied upon daily.
3. Rate my Broker: Help baby-boomer investors find reliable, trustworthy local stock brokers and financial planners. An investment version of www.RateMyProfessors.com
4. Desi Family Network: Help Asian families continue to hold multi-generational ties by sharing entertainment, social and family information.

**Other sources**

Newspaper Next is a joint undertaking of the American Press Institute and Innosight, Clayton Christensen's management consulting firm, to help revitalize the newspaper industry.  Their industry report is available for download.

Some thoughts on newspaper redesign from BrassTacks Design. Highlights: Focus; Admit shorter is better; Innovate like you mean it.

Like all potentially disruptive innovations, redesigns are risky because they can alienate current customers. Here are some scary charts on newspapers which have seen circulation declines accelerate after redesign from newsdesigner.com, a blog that tracks major newspaper redesigns.

FYI: On Disruption, a newspaper column on disruptive innovation, appears in the Financial Post. Archive of articles.  

Disruptive Media: Harvesting the Great TV Back-Catalog

The New York Times has an interesting story today about one of the few growth segments in big media: TV series on DVD.

"Although DVD sales are down this year, television series on disc have fared better than other categories. Sales of complete seasons are a rare bright spot, registering actual growth."

Let's think about this from a customer's persective.  What 'job' is the consumer trying to accomplish by purchasing these boxed sets of DVDs?

• Bring me up to date on a TV show I just discovered
• Let me watch a favorite show at my convenience
• Let me get to know a character or series better

The key issues seem to be that DVD boxed sets are more convenient, more flexible than broadcast TV and allow a deeper level of interaction. 

Here's are two questions for broadcasters, publishers and other media executives: Are there other ways that media companies can build more convenience and flexibility into their product offerings? Does the Simpsons movie, which grossed $500M in two months, fit some of these elements?

Also note how these boxed sets are sometimes sold through Starbucks and other non-traditional channels. Disruptive products typically need disruptive channels to be successful.

**Other Sources**
NPR carried a segment on how mp3 downloads has created a new business tapping into record back-catalogs (4:04min)  .

Simpsonize me: Create your own Simpsons character from a photograph.

Or is this just the long tail phenomena made famous by Wired Magazine's Chris Anderson? 

Long tail data doubtful according to WSJ columnist Lee Gomes.

TV screens get busier with more ads... and TV downloads rule at NBC; two related  NY Times articles.

Careers: Are You A Sitting Duck? 13 Unlucky Questions to Ponder

Most of the articles and resources at The Disruption Group focus on corporate strategy and ways to use competitive disruption to grow your company. But what about your own career strategy?  What should you do if your company appears to be a target of disruption?  Guest columnist Zack Urlocker shows how to know if your company is being disrupted and what you should do about it to save your career.

Whenever I think about companies being disrupted I can't help but recall Michael Bedard's iconic poster from the early '80s "Sitting Duck." It says it all. 

There you are, a hard working employee, doing your job and next thing you know someone's taking shots at you.  The sad thing is most employees never really take notice or what's going on until it's too late. 

Of course, from the outside, it's a whole lot easier to be objective.  Most people outside of the music industry would not now consider a career in the record industry.  And the magazine publishing and newspaper industries have been in trouble for years.  Enterprise software?  Outside of hosted on-demand offerings, it's not exactly a barn-burner.  All of these sectors have seen seismic changes due in large part to the disruptive effect of the Internet.  But would you recognize such changes in your own industry? 

Here's a checklist of 13 unlucky questions to consider:

1. Is your company consistently unprofitable?  A failure to generate profits is the first and most significant sign that a company is in trouble.  While there are times when companies will run unprofitably as they invest enter new markets, in most other cases, lack of profitability indicates a more fundamental problem in strategy or execution.
2. Has revenue growth stalled or even declined?  To most investors, if you're growing at more than 20% a year, you're considered a growth company. In tech stocks, it's not uncommon to see growth that is 40 - 100% per year.  If your company used to be growing and is now flat, watch out. This was the biggest warning sign I saw when I was at software maker Borland in the late-90s and it caused me to write up a checklist similar to this one to benchmark our turnaround. Guess what? We failed the checklist and I was saw similar troubles across the sector.
3. Is everyone in your market having trouble?  If your company is the only one suffering, that's one issue. And it may be fixable with changes in leadership, product strategy or better execution.  But if all or most of your competitors are also suffering, then it's an indicator that the entire market is in trouble and likely being disrupted. 
4. Do people routinely say "Are they still around?" when you tell them where you work? This sounds tongue in cheek, but its a sign that your company may have become irrelevant.  Similarly, if industry analysts and editors frequently write about the demise of your industry, they may be closer to the truth than you realize.  When Marc Benioff, CEO of Salesforce.com declared the "End of Software" few people took him seriously.  But if you worked at Siebel or PeopleSoft or dozens of other traditional enterprise software companies, you probably should have.  Similarly if the "death pools" predicting the demise of magazines have been scarily accurate.  These social indicators draw on the wisdom of crowds and can be more accurate than you might think. 
5. Is there high turnover in the executive ranks?  While some turnover at the executive level is normal, if you've had three CEOs in as many years, or if your exec staff have all left "to spend time wiht family" those are red flags.  When Ed Zander retired from Sun it was along side several other high-profile departures. While bad execs get fired, good execs leave if they don't see a financial upside.  Since most executives have stock that vests over a 4 year period, it's not just about short term prospects either. If your company has a problem retaining executive talent, it may mean they believe the situation is unfixable for several years. 
6. Is your company strategy zig-zagging every six months to catch some new wave? That could be a sign that the core business is in freefall and management is distracted looking for the next big thing. Consider the tenure of Carly Fiorina when she was CEO at HP. She was out promoting a strategy based on multi-media convergence, big screen TVs and iPods.  Naturally she was out at CES and Davos hobnobbing with the likes of Gwen Stefani, Sherly Crow and Matt Damon.  So who was minding the store?  Oh yeah, no one.  But when she got sacked, she took a severance package with her worth a minimum of $21 million.  If your job gets cut, you'll be lucky to get a couple of extra weeks paid.  Good CEOs focus on operational excellence and strategy; not gimicks. 
7. Are you losing deals to competitors that are a fraction of your size?  Often new entrants to the market are much smaller and their products have far less functionality, but they do enough to get the job done.  If your company is losing deals to companies that weren't even on the radar a couple of years ago, that could be a sign that the market is changing rapidly. 
8. Do customers complain that your products are too complex? That may indicate that your product has become overkill.  The next step is if customers sideline your products only for existing implementations and start using simpler solutions for new projects.
9. Is your company half pregnant? Sometimes companies that are disrupted will try to show that they too can play the disruption game.  They may launch a high-falutin' project or acquire a small startup to show that they too can be nimble and responsive.  Media companies were among the first to create web sites, but they never figure out how to make money with them.  And lots of enterprise companies introduced on-demand offerings, but none had the kind of focus Salesforce.com brought to the table.  If the CEO refers to your company as being "like the largest startup ever" with hundreds of millions of dollars in the bank, he's omitting a few key points.  Like the fact that your company is proabably too bloated to compete with hungry startups and that the corporate culture kills innovation. 
10. Is your company a bottom-feeder? Larry Ellison joked about CA years back by saying "Every healthy ecosystem needs a bottom-feeder."  While that's true, you don't necessarily want to work for a company that keeps acquiring companies and stripping out the costs.  You can prop up a share price for quite a while with revenue through acquisitions, but unless there are significant prospects for growth, it's not much of a strategy for the long haul. 
11. Is your company obsessed with cost cutting?  You can't cost-cut your way to growth. So when companies are focused only on reducing expenses it may indicate a lack of attention on growing revenues.  Pay particular attention to short-term cost-cutting measures that hurt long-term prospects.  Elimination of employee benefits and training programs are particularly bad signs. 
12. Have layoffs become a regular occurance?  While regular performance appraisals and even dismissals to cut "dead wood" are healthy, you should be wary of companies that are routinely engaged in layoffs.  And again, if the same is happening at other companies in your space, it's double wammy. It means that if you are laid off, your prospects at finding a new job are going to be slim.
13. Are you hoping for an acquisition to be your savior? Sometimes employees will think that if things really go poorly the worst case scenario is that the company will be acquired. This is like waiting for a knight in shining armor.  While acquisitions can be good for shareholders, they are no picnic. If you're in Finance, Sales, Marketing, HR or other "non core" areas, your position is a good candidate for elimination if there is an acquisition. 

While you should not panic if one or two of the items above conditions are true, these may be symptomatic of bigger issues.  These are warning signs.

Consider using these questions as a score card that you check a few times a year.  And if more than half are true, it may be time to pack your parachute.

Whatever you do, don't jump without a plan.  I'll cover that topic in the next post.

Zack Urlocker is a software executive and regular blogger on open source technology at TheOpenForce and InfoWorld and about music at GuitarVibe. 

** Other Sources **

Podcasts: Career Coach Alan Kearns, author of Get The Right Job Right Now, has a series of career-oriented podcasts. 

Podcast 2: The Cranky Middle Manager (website, mp3 download 31 min) looks at how middle managers can execute disruptive innovation without damaging their careers.

Fortune magazine writes about how the Washington Post is responding to disruption.  The bottom line: If CEO Donald Graham can't figure this out, no one can.  The good news for the Post is they've hedged their strategy. While  competitors were doubling down by buying money-losing newspapers in order to gain share, the Post investing in and acquired companies with far greater growth prospects.  I'm amazed that more companies that are disrupted don't do what the Post has done to reinvent themselves and get out of dying businesses.

More of Michael Bedard's art is is featured in his book Sitting Ducks.  Examples of his work are also available on line at his blog.

*Update* More Than You Know: Book Reviews, Podcasts

Our interview with author Michael Mauboussin last October proved popular. To introduce readers to Mauboussin's new book, More Than You Know: Finding Financial Wisdom in Unconventional Places  (NEW: Expanded and Updated 2007 Edition) Here are several resources:

**New Update: Podcast interview with Author Michael Mauboussin on NPR's Science Friday show Aug. 17, 2007, 16:49 min. (Download mp3, Science Friday website.)

**Best Business Books of the Year, BusinessWeek: "Finally, a fun read that draws insights from a wide range of scholarly disciplines."

Book Excerpt: Chapter 1: Be The House

Not Book Excerpts, But Close:
On Streaks: Perception, Probability, and Skill, from the Consilient Observer, Mauboussin's newsletter at CSFB, Vol. 2, Issue 8, April 2003.
The Janitor's Dream: Why Listening to Individuals Can Be Hazardous to Your Wealth, from the Consilient Observer, Vol.1, Issue 18, June 2002.

Podcasts and broadcast interviews:

• Good: NPR's Money Matters show (4:37): A quick hit.
• Better: WrittenVoices.com in either WMA or MP3 format (16:39)
• Best: The Invisible Hand Podcast Episode 21 (41:00): A thoughtful and thorough interview by Chris Gondek, who brings an investment and management point of view to draw out a good discussion with the author.

Book Reviews:
BusinessWeek: **** "The Good: Draws investing wisdom from many disciplines, from cognitive science to fractal math. The Bad: Brief essay chapters at times allow for too little discussion of complex matters.The Bottom Line: Its insights sparkle--and it's even a fun read.

Bloomberg News: "Mauboussin is at his best when exploring investment psychology. Humans, like zebras dodging lions, have innate physiological responses to threats: Our blood pressure rises; our short-term memory improves... As an adjunct professor at Columbia Business School, Mauboussin maintains an academic aloofness throughout. Nowhere do we learn how Legg Mason might have applied these highbrow concepts to the gritty business of buying and selling."

Other info:

• Author interview by Columbia University press
  
• Author interview by The Motley Fool
  
• Book description and table of contents by the Global Investor Bookshop
• Expectations Investing Mauboussin's first book, with Alfred Rappaport. A related website includes excerpts.

M&A Deal from Hell: Alcatel + Lucent Bombs Again

  More bad news from telecom maker Alcatel-Lucent this morning: The third earnings warning so far this year.

The Wall Street Journal says the company is facing increasing competitive pressure from Ericsson and from emerging Chinese companies Huwawei and ZTE.

Clearly the merger of Alcatel and Lucent has proved a bust, which is what we warned back when reports of a pending merger emerged in early 2006 in one of our first investment-oriented postings.

"If you merge two non-disrupting companies, each saddled with commoditized products in non-growth markets, do you get a better company as a result?"

Why most mergers fail:

• They don't create new services or products
• They don't create new customers
• They focus management on financial engineering or deal-making rather than customers

How to boost your chances of merger success (pdf) using a disruptive approach.

**Other views**
Denial is a CEO's worst enemy:  Alcatel-Lucent CEO Pat Russo, interviewed by WSJ: "We're seeing a bit of softness... that may or may not have something to do with what's  going on in the U.S. economy: homestarts, home buildings... It has nothing to do with the merger."

This article in Industrial Distribution magazine says there are five rules of successful M&A based on management guru Peter Drucker's writings.

NY Times: Alcatel-Lucent tumbles on outlook

Disruption Investing Part II: A little goes a long way

Would you invest in a company with inferior and incompatible products, marginal customers and a strange business model?



Those are among the characteristics of BlackBerry maker Research in Motion back in early 1999 when its stock was trading at under $2 split-adjusted vs. a recent high of $85.

Spotting the patterns of disruptive competition can put investors ahead of the stock market because most investors are not looking for these patterns.

Let's look at another case in which we identified similar disruption patterns ahead of the market:

McDonald's vs. Starbucks, which we published in March 2007 based on anti-marketer Paul Paetz's ideas.

The results surprised me by showing a little disruption goes a long way in the stock market -- and delivers outsized returns faster than expected.

Read the full article published in The Financial Post (pdf)

Financial Post archive

This article is an excerpt from The Disruption Group's latest newsletter. Sign up for our newsletters here.

Video: Two Case Studies In Competitive Disruption

Setting out to create the next great thing? Some crucial lessons from successful competitive disruptors are discussed in this video (7:54 min) in which I look at some case studies:

• RIM's BlackBerry: Why Nokia and Ericsson dismissed RIM's BlackBerry as an ugly toy for a niche market;
• Why Metro International's 'inferior' tabloid newspaper attracts 20 million daily readers;
• How declining profits of the New York Times prove that successful competitive disruption does not emerge from superior quality products or large resources.

This is the third of three video excerpts from the Conference Board's change management conference, held earlier this year.

• Part 1: The benefits of competitive disruption: New revenue growth; Higher margins; Faster time to market.
• Part 2: Should we cannibalize our business? Two management tools to disrupt markets.
• Part 3: Two case studies in competitive disruption: RIM's BlackBerry and Metro International.

Check out The Disruption Group's video playlist which includes news interviews on competitive disruption and an interview with Harvard Prof. Clayton Christensen on the Charlie Rose show.