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Three Media Execs on Why Industry Cannot Innovate

Over the weekend, I unleashed one of those long rants that sometimes sweep over me when I've been driving in the hot California sun for too long, without access to a creative outlet to let off steam. The result this time was: Why No Disruptive Models Emerge Inside Media.
It turns out that this piece resonated with a number of deeply experienced, successful industry execs who have been emailing me or adding comments to the post ever since. Here is a summary/sampling of what they are saying.

From Richard Gingras, CEO,
"I'd suggest there is a long history of industries that have been disrupted by new technology and could have responded to the challenge earlier but did not. There is I believe a simple reason why it's nearly impossible to disrupt yourself. It's akin to eating your own young. Think of newspapers in the mid to late 90's when Craigslist popped (up). Could they have responded with a similar approach to classifieds -- e.g. give away the personal classifieds and keep charging businesses?

"Technically, yes, BUT that would have meant sacrificing existing classified revenue! Far easier said than done, especially since at that point they were all public companies and had the street to answer to. As you know, I'm not one to be shy about criticizing old media's response to the web but it's very hard to sincerely play out that scenario and not come to the same conclusion they did, not matter how short-sighted that was. They couldn't eat their own young!"

From Nick DiGiacomo, Co-Founder, Vanno.
"Having worked in/with big media companies and digital media startups, I would argue that the formers' failure to disrupt their own businesses is less due to a lack of imagination and more to the incentive structure. Rare is the startup idea that hasn't already been envisioned somewhere in a big company - particularly those known for strategy (e.g. Disney). And many of the people in these big companies are as smart and imaginative as any entrepreneur.

"But the bottom line is that once you have something to conserve - you act conservatively. This means when presented with a choice between high success probability and relatively low return vs. low success probability and very high return, big companies almost always choose the former. It's actually what their shareholders want them to do - keep the farm producing a 3% over inflation return vs. betting the farm.

"Another point you raised, David, deserves expansion. It's one thing for a big company (or an entire industry) to die out for lack of vision and innovation. What's worse is when the company or industry works to actively impede change/progress.

"I saw that happen firsthand in the music industry in its response to online music in the mid/late-90s. The music industry controlled a food-chain that consisted of a boring part (distribution) and a creative part (finding and managing talent). The Internet was clearly going to disrupt the distribution, and the industry's instinctive reaction was to go all out - mostly via the RIAA and IFPI - to use legal and technical means to prevent this. The were doomed to failure, and they knew it.

"What's really interesting - and little discussed - is the fact that attempts to use the Internet/Web to usurp the talent side of the business - i.e. find and exploit the hits and hitmakers - failed miserably...I think there's a huge lesson here for the newspapers. By fighting to hold on to distribution, they're trying to defend the low ground, and will inevitably be overrun. But the high ground they own - finding and managing the content creators - is an art that will not be easily mastered by Web/social media types. The fact is that the entire social news/blog food chain (from Blodgett to Huffington) would collapse if the core world-class content creators (reporters and journalists) stopped producing. Exactly the way the entire music industry would shut down if the hitmakers didn't exist. Indie bands and topical blogs are nice, but they're not Michael Jackson or the NYT.

"The big challenge, then, for the newspaper industry is to profitably defend their content high-ground while letting go of the distribution without a) going out of business and/or b) resorting to the nuclear option of getting a permanent legal foundation to control/limit linking.

From Thomas White, Host, Business Matters.

"I find a great way to look at this question comes from Clayton Christensen's 1997 book, The Innovator's Dilemma. You can see how the ways of success of one business model are held onto something consciously and sometime unconsciously in organizations that have been market leaders. Unless their leaders are ready to accept the possible complete destruction of the status quo, real innovation isn't possible.

"I know how hard it is to let go of what appears to be working. Great leaders know this trap and are constantly challenging their organization to question every assumption.

"My view is that there has been a lack of great leaders in the traditional media industry. Most folks in executive positions are great politicians and perhaps good managers. What they aren't is leaders who are willing to be courageous and inspire greatness in those around them."

My thanks to these three and so many other media insiders for amplifying and expanding my point of view here at Bnet as I attempt to chart an unknown path to the new business models that may sustain our industry going forward.