Wednesday, 13 April 2016

Is your business at the risk of "destruction"?

Is your industry experiencing long term downtrend which could suddenly turn into a destructive whirlwind? Look at print media as a cautionary tale 

What do the following names have in common? –Larry Page, Segei Brin, Mark Zuckerberg; Reid Hoffman? They are successful digital media entrepreneurs – the first two as founders of Google, the second a co founder of Facebook and the third, the founder of LinkedIn. They are kingpins in their respective digital and social medic space and they are the new ‘establishment’ of corporate America. There’s a not so subtle lesson for all business owners here: they were all still at school 15 years ago.

The point being that some industries are being destroyed ‘as we speak’.  In the world of media and publishing old business models are not being eroded they’re being destroyed. The Sydney Morning Herald and the venerable The Age have seen their newsprint papers suffer 18 percent declines (in sales) in just 12 months (to end December). That probably means about a 25% decline in top line revenues. Few business models could sustain that kind of decline. The rules are being re-written in real time.

Old business models

There are manifold effects of the destruction of old business models – apart from the obvious ‘losses”. In media, the convergence of technologies and media has led to an explosion of start-ups because first of all it is much easier to start a business today online than ever before and second because convergence itself is creating opportunities which even a year or two or go were not even on the radar. And speed of convergence shows no sign of letting up any time soon. Indeed recent data suggest that Australian broadband users will see bandwidth and speeds multiply 10-fold or more over the next few years, once again booting up convergence of technology and media.

This would resonate for experts like Clayton Christensen who have written scholarly works on why innovation often catches old-technology industries off-guard.

Christensen literally wrote the book on disruption, so it’s worth paying attention to him when he talks about where the disruption fuelled by the web is going to strike next. The Harvard business professor and author of The Innovator’s Dilemma notes that some industries that are “either in a state of disruptive crisis or will be soon,” and the professor has said also that “Journalism, certainly, and publishing broadly. Anything supported by advertising. That all of this is being disrupted is now beyond question.” What are the clues that precede “destruction”:
  • Creative destruction occurs when something new kills something older
  • Some industries will take longer but most will be affected by the web

Print media is one category but personal computers are another great example. The industry, led by Microsoft and Intel, destroyed many mainframe computer companies, but in doing so, entrepreneurs created one of the most important inventions of this century.   

Christensen goes on to describe what has happened to the newspaper and traditional media business; where he has said that many newspapers were lulled into a false sense of security and then “very quickly, all of a sudden, you go off the cliff.”

Business decision makers should pinch themselves every day to ensure they remain awake to technological shifts and their potential impacts on their industry.

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