Disruption guru Clay Christensen says incumbent media players are making a classic mistake

Harvard Business School professor Clay Christensen, who has helped shape much of the thinking around technological disruption with his landmark book “The Innovator’s Dilemma,” has been taking a close look at the media industry recently — one of the markets that he believes is undergoing a fundamental disruption. In a panel session at the Nieman Foundation on Wednesday, he warned that many existing media entities are still thinking about what they do in the wrong way, just as other industries such as the telegraph and auto industry have in the past.

A key part of Christensen’s theory is that the incumbent players in a particular industry routinely fail to make the necessary changes to the way they do things, even when they can see the disruption occurring all around them. In almost every case, they see the disruptors as not worthy of their attention because they are operating at the low end of the market, and either don’t see that as important or are too committed to their existing business models.

Low-end competitors open up new markets

Existing players are often good at what the Harvard scholar calls “sustaining” innovation, but they are rarely good at disruptive innovation. The latter is the kind that transforms something that used to be complicated and expensive — and therefore available only to the wealthy or those with special skills — and makes it available to a much broader group of users.

So in telecom, he said, existing companies didn’t see the potential disruption from cheap flip-phones and ubiquitous cellular networks because they were too focused on large corporate customers, not individual users, and their businesses weren’t set up to take advantage of this new market:

“The flip-phone and wireless made it so affordable and accessible that people around the world could now have access to telecommunications, and in almost every part of the world, the people who were the pioneers were not the existing wire-line players because it didn’t fit their business models… I think you see this playing out in journalism too.”

Value is created in new places

Although Christensen didn’t mention them by name, the obvious low-end competitors in the media business are players like The Huffington Post and BuzzFeed — both of which started at the low end of the value chain but have been moving up steadily, a trend that Christensen’s theory also describes. The Harvard professor also made some positive comments about Forbes magazine, and what it has been able to do online compared with other traditional magazines such as Fortune and Newsweek.

“Compare Newsweek and Fortune on one side against Forbes on the other — the core business just got killed. McGraw-Hill sold Newsweek to Bloomberg for a dollar… but with Forbes, while the traditional magazine got commoditized, they’ve created different business models above and below that are very interesting.”

This is another key point in Christensen’s description of disruption: as one layer of what technologists call “the stack” of processes that make up a business becomes commoditized, it creates value in other layers that can be captured by new players. So in journalism, Christensen says, the job of accumulating and distributing information about the world — something newspapers like the New York Times used to have a monopoly on — has become commoditized:

“As disruption occurs, it commoditizes a layer in the stack, so what used to be a high value-added activity that was very profitable and others couldn’t replicate, now becomes cheap and easy and anyone can do it. It used to be that news and information was one of those layers in the stack — no one could play that game like the New York Times… but now everyone has access to more information than they could possibly use.”

Find other jobs that news consumers want done

The key to managing that disruption, Christensen says, is to find those other value-added businesses or markets or functions — “jobs to be done,” as he calls them — that news or journalism consumers are looking for. One example, he suggests, might be taking in all of the information people are deluged by and telling them what is true and what isn’t (something mainstream media outlets often fail to do, as I tried to describe in a recent post):

“Are there jobs for which there have not yet emerged viable competitors? I’m awash in information, but I need someone who will tell me what is true, and it’s not clear that anyone has really done that job yet — the New York Times thinks they’ve nailed that, but it’s not clear to me that they have.”

Christensen also warned — as he has in the past, including in the report that he co-wrote last fall with Nieman Fellow David Skok, entitled “Breaking News” — that many existing players in the media business are trying to innovate within their traditional corporate structure, and that this almost always fails. In answer to a question about the Boston Globe, he said the approach of having a separate site called Boston.com run by a separate team was smart.

When an audience member said the site was now being run from within the Globe newsroom, however, Christensen changed his mind, saying: “Oh my gosh, really? Then put on your helmet, because it will force Boston.com to conform itself to the newsroom. That’s the way it always works, Sorry about that.” The full audio stream of the interview is available at the Nieman Journalism Lab.