What blocks news organisations from innovating: The Innovator's Dilemma and internal boundaries that become barriers

In preparing for a talk to master’s students at the University of Central Lancashire this week, I will discuss my motivations for the research I did during my master’s in innovation management and leadership. I wanted to understand why, despite perceiving the disruptive possibilities in digital media, traditional news organisations failed to adapt. For years, I had subscribed to Clay Christensen’s disruption theory that he outlined in The Innovator’s Dilemma. He pointed out that incumbent leaders in many industries have failed not because they didn’t recognise new technologies but because they “failed to value them correctly”. The ROI seems too low. It was the classic trading print dollars for digital pennies argument. However, disruptive innovators continue to experiment and move up the value chain.

The common argument has been that the “original sin” of digital journalism was giving away our content for free, something we never did before. However, this ignores the economics of newspapers, especially in the US, where I come from. When I was studying journalism at university, our professors told us that 80% of newspaper revenue came from advertising. The 20% of revenue from subscriptions, didn’t pay our salaries, it only paid for paper, printing and distribution. Advertising was our main revenue stream, and we failed to understand how digital media would disrupt those value networks. Digital news organisations did pivot to deal with the threat from digital classifieds with vertical-focused businesses around cars - Cars.com in the US and The Guardian’s AutoTrader - or real estate. However, the development of entirely new ad models, ads targeted by search intent or based on activity on social networks, have radically remade ad markets. It was a classic example of disruptive innovation in which upstarts found the right application and then entered the higher-value markets. For years, Google and Meta have been growing by cannibalising ad revenue from non-digital markets, print and broadcast.

For publishers operating at a certain scale, their response was to grow even bigger. This drove M&A activity as publishers tried to scale their audience to compete against Google and Facebook It got to such a point that a major UK publisher, Trinity-Mirror, even rebranded itself as Reach. This strategy has not succeeded for several reasons:

1. For publishers like Gannett, their acquisitions left them with unsustainable levels of debt.

2. Reporting is an expensive business, and especially for publishers with local news properties, scaling is much more expensive than for a digital business like Google.

3. Scaling the business didn’t fundamentally answer the issue of non-competitive ad products.

When media folks speak about the duopoly of Google and Meta, it is a rather superficial analysis of how these companies changed the value networks of advertising. As Clay Christensen pointed out, upstarts experiment by trial and error to find a model that eventually scales. John Battell covers the journey that Google took to find its business model in his seminal book on the history of the search giant. He called Google the “database of intentions”, and they have used those intentions to remake marketing and advertising. It is so clear how Google and Meta disrupted the value networks of traditional media when you hear about how Temu and Shein spent billions of dollars to advertise with the two companies last year.

After developing disruption theory, Clay Christensen went on to create a process in which companies can uncover the unmet needs of their customers to respond to disruptive innovation: jobs to be done. In a Harvard Business Review article describing how focusing on jobs to be done could achieve this, he wrote:

• Most managers have based decisions on quantitative-data-based correlations

• We need to know what the customer is trying to accomplish. The customer’s jobs to be done.

• “When we buy a product, we essentially “hire” it to help us do a job.”

• “(D)isruption theory doesn’t tell you how to create products and services that customers want to buy. Jobs-to-be-done theory does.“

As I wrote recently, Seth Lewis, Alf Hermida and Samantha Lorenzo wrote about how the jobs-to-be-done (JTBD) framework could be applied to local journalism. It is a paper well worth reading. This is the kind of audience research that is so desperately needed (and frankly, I’d like to do).

Internal boundaries, barriers to innovation and burn out

However, in my master’s research, I focused on another barrier to innovation: Internal boundaries and the boundary-spanning work of product managers. As David Skok said in the report with Clay Christensen about innovation in journalism, Be the Disruptor:

Product managers operate across these internal boundaries of editorial, commercial and technical operations, but that boundary-spanning work has its own set of challenges. Of the 17 product managers and product-oriented managers I interviewed, five had left positions or the industry entirely. My research looked at what had affected their sense of professional well-being so profoundly. Also, of the five, four were women.

This is a scene setter, and I’ll be writing more about this in the coming weeks and months.

Now onto the links from the past week. INMA has a huge range of pieces from their recent subscription summit in New York. This piece has good details about how Hearst is using data to optimise its pricing. The data has allowed them to identify and target in-market audiences to drive subs, and they are also creating some interesting products that allow them to connect with subscribers at multiple price points.

And the piece has details on how the Irish Times has leaned into newsletters, push notifications and events to keep their connections with readers.

Following the non-profit news organisation trend in the US, a local news publisher in Guildford has just become the first outlet to attain charitable status.

Here is another data point of how the platforms remade the value networks of media. Facebook Marketplace has become the go-to place for young users to buy things. This would have been the newspaper classifieds years ago. Gen Z may not use Facebook to post social updates - they have TikTok and Instagram for that - but they still use the venerable network to find cheap stuff.

AI revolution continues to roll through the media

As one commentator put it, last year media experimented with AI, and now they are starting to deploy it. And they can’t move fast enough as developments in the field are announced at a furious pace.

LMA is partnering with AI companies to help its members adopt these technologies quickly, with applications across editorial and commercial operations.

A thoughtful piece in the Press Gazette explaining to publishers what hill they should choose to die on when it comes to LLMs scraping their content. Archival content isn’t of as much value as their current news content. It is one of those harsh truths that news, by definition, has a short shelf life. However, AI can’t do reporting. Most parts of that will still require journalists, and that is what news organisations should be defending.

Google’s Search Generative Experience promises to deliver information that people want without the need to go off to a site to find that out. It is one of the things that is keeping publishers up at night, and now AdWeek has put a dollar figure on exactly how much Google’s SGE may cost media. Ouch.

Gen Z is using TikTok to search, not Google, but the search giant and others are fighting to remain relevant by introducing AI into their products. The disruptors are being disrupted.

Thomson Reuters shows that some of the major media players are looking to invest in AI. It is one way that well-heeled media players can try to cash in on the technology.