by Melinda Gipson
Gipson is NAA's director of new-media business analysis.

There’s a lot of management by fear in the newspaper industry these days. Workers for Internet businesses generally have traveled from being kings of the Earth a few short months ago to feeling as though they have targets painted on their backs.

The inevitable result of paranoia is retrenchment, a reaction that could carry with it the seeds of our destruction, or at least our diminishment by more energized and optimistic competitors.

Clark Gilbert, a doctoral candidate at the Harvard School of Business, has spent 18 months analyzing the newspaper industry’s response to the Internet. He sees the ’Net as a classic disruptive technology. Newspaper publishers, unlike many established players, have responded aggressively to the ’Net, but their response often has been to replicate the print business in digital form. Gilbert explains, “Fear of cannibalization has caused many newspaper companies to spend all their time and effort around the area of the Internet that overlaps with the traditional print business.” But many companies in other fields have learned that technologies with the power to change everything create new, untapped markets with an initially different set of customers and applications.

Gilbert notes in his analysis on the Digital Edge (www.digitaledge.org/monthly/2001_02/HBSmain.html) that the overlap between lists of online and print advertisers is “amazingly low.” Online readers not only differ from traditional print readers, but they also access the product differently. They place importance on applications and content that exploit the interactive and utility features of the Internet. They do things they couldn’t do in print, and that creates an opportunity.

Picture two overlapping circles. One represents the print business, and the other, Internet-related businesses. “Newspapers have focused all their efforts on the piece that overlaps, when the real opportunity is the white space. By focusing on the overlap, they have merely replaced print with a product that will cannibalize existing business without finding the real opportunity that is growing around the new medium,” Gilbert explains.

Managers who worry about what they could lose are the first to respond to innovative technology that could substantially alter their markets. But those who throw up fortresses around their existing businesses are destined to fall short. Conversely, those who send fresh troops out to conquer new horizons, without constraints on cannibalizing existing business lines, will gain a foothold in the emerging market.

Gilbert’s study reveals that Web sites operated independently from the core newspaper are more likely to innovate and to experience higher revenue and greater site traffic and usage by their target audiences than properties where the Internet effort is integrated with the print operation. But success depends on more than just putting the Web guys and gals in another building. If the person running the show remains motivated by protecting the print product rather than plumbing new market potential, the effort will lag behind those where the manager is steaming full speed ahead into the unknown. The more intrepid explorer has to rely on what cannot be seen and be in position when opportunities appear.

That is usually the case with disruptive technology. Innovations that move markets start out slow, drawing new customers who may not have been able to afford the old way of doing things. It can take a decade or even longer before such technologies move “up market,” drawing more profitable clients away from entrenched suppliers. The emerging market may eventually tap into existing business, but its real sweet spot is more than likely in the blind spot of the established players. Says Gilbert, “The mainframe-computer market never disappeared with minicomputers, but minicomputers eventually took the growth out of the old market while creating an entirely new business.”

Gilbert will continue the discussion at NAA’s Annual Convention May 1 in Toronto and Connections July 22 in Washington D.C.

[ Presstime Magazine ]