Harvard Business School professor Clay Christensen’s theory of disruptive innovation is a model we should all understand. Christensen’s book on the subject, The Innovator’s Dilemma, is the only business book that “deeply influenced” Steve Jobs.
In this Nieman Report article, Christensen, in collaboration Nieman Fellow David Skok, applies his theory to the news industry and offers advice on how media can succeed in the future.
With history as our guide, it shouldn’t be a surprise when new entrants like The Huffington Post and BuzzFeed, which began life as news aggregators, begin their march up the value network. They may have started by collecting cute pictures of cats but they are now expanding into politics, transforming from aggregators into generators of original content, and even, in the case of The Huffington Post, winning a Pulitzer Prize for its reporting.
They are classic disruptors.
Disruption theory argues that a consistent pattern repeats itself from industry to industry. New entrants to a field establish a foothold at the low end and move up the value network—eating away at the customer base of incumbents—by using a scalable advantage and typically entering the market with a lower-margin profit formula.
It happened with Japanese automakers: They started with cheap subcompacts that were widely considered a joke. Now they make Lexuses that challenge the best of what Europe can offer.
It happened in the steel industry, where minimills began as a cheap, lower-quality alternative to established integrated mills, then moved their way up, pushing aside the industry’s giants.
In the news business, newcomers are doing the same thing: delivering a product that is faster and more personalized than that provided by the bigger, more established news organizations. The newcomers aren’t burdened by the expensive overheads of legacy organizations that are a function of life in the old world. Instead, they’ve invested in only those resources critical to survival in the new world. All the while, they have created new market demand by engaging new audiences.
Because new-market disruptors like The Huffington Post and BuzzFeed initially attract those who aren’t traditional consumers of a daily newspaper or evening newscast, incumbent organizations feel little pain or threat. The incumbents stay the course on content, competing along the traditional definition of “quality.” Once established at the market’s low end, the disruptors—by producing low-cost, personalized and, increasingly, original content—move into the space previously held by the incumbents.
It is not until the disruption is in its final stages that it truly erodes the position of the incumbents.