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    Under The Microscope

    (February 7, 2002) -The web is eight years old, just like us. Over that time, the American Newspaper Industry has invested Billions of dollars trying to figure out how to deal with the threat to their core businesses. For the most part, the efforts have failed. There are quiet small successes at the Washington Post, Knight-Ridder, The Wall Street Journal and at The New York Times. They fail to seize the real potential of the web, however.

    In a new article from the Harvard Business School,  Read All About It! Newspapers Lose Web War, Clark Gilbert discuses the implications of 'disruptive technology" on the newspaper business. An article based on Gilbert's doctoral research in this area received the Robert Litschert Best Doctoral Student Paper Award in the Academy of Management's Business Policy and Strategy Division.

    Essentially, Gilbert makes the case that the newspapers effectively identified the fact that there was a threat but mis-identified its implications for current markets and the markets created by the new technology. In other words, the newspapers failed because they treated the web as a threat rather than an opportunity. It must be awful to be a HBS case study in market failure.

    It would be a straightforward story if all that was lost was the classified advertising business. Solidly eroding to the point of embarrassment, jobs, cars, houses and stuff have migrated to more effective outlets like our industry and E-Bay. Unfortunately, the newspaper's loss is even greater. Editorial attention has been drained to small outlets like ours who are passionate about serving a small but important audience with focus and innovation. The newspapers wanted the web to be a new kind of paper. It turned out to be a new kind of audience.

    We continue to bet that, over the next ten years, the newspapers will emerge victorious. That surprising notion comes from a combination of our underlying faith in the institutions, the depths of their pocketbooks and the fact that there are observable instances of success when a profit center actually cares about its audience. Mechanical acquisitions will solve some of the problem from a sheer ownership perspective (though the track record in managing those acquisitions is dismal currently). Some progress will come from the repeated making of mistakes. Ultimately, however, the newspapers success depends on rediscovering their passion for the people they serve. 

    The degree to which arrogance blinds the current round of players from seeing opportunity and engaging the new markets is a continuation of the internal perception that there is something to defend. That, in a nutshell, is why the few successes involve relatively independent operations. That freedom isn't always enough as customers and suppliers of newspaper backed operations will testify. Arrogance, as a cultural inheritance from the newspapers, makes many of the experiments onerous failures in the eyes of the market. The most consistent solution to an arrogance problem is time in the offices of customers and suppliers doing their jobs. That's the only way to understand what the day to day consequences of dealing with the people who are at the front lines of the newspaper's defense strategy.

    As is the case in any battle, defense involves fighting the last war. Offensive strategy is focused on gain and opportunity. The newspapers will start to accrue momentum once they go on the offense.

    - John Sumser


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