General management

How news organisations can harness startup-power

These are some thoughts on how news organisations (and specifically those which have a background as newspaper companies) might create new opportunities for themselves. In particular I want to focus on why and how those opportunities might come from outside the organisations themselves.

The thinking behind this piece has sprung from two articles: the first is by David Carr, in the New York Times, in which he seeks an iTunes-like saviour for the news industry, and the second is Jemima Kiss’s thought-provoking response on guardian.co.uk.

What I’m going to present isn’t new, by the way — it’s about being open and encouraging innovation. But what I do hope to add to conversation is the idea that we don’t have to have all the answers ourselves, and that we can — and should — encourage others to work with us. I’m also adding some practical actions to take.

Here’s the structure of what follows:

Background reading

David Carr’s article in the New York Times is headlined “Let’s invent an iTunes for news” but that’s rather misleading. He’s actually calling for a way to charge for news content, pointing out that Apple has done this very effectively through the iTunes Store (although he never uses that phrase — he conflates iTunes, the desktop software launched in 2001, with the iTunes Store, the online shop launched two years later and accessed via that iTunes software). He does refer to one or two gadgets which could be an iPod for news (“Now all we need is a business model”), but the underlying point of the article is that content needs to be charged for one way or another.

Jemima Kiss picks up on the gadgets theme and dispenses with it quite quickly — “I think newspapers are wrong to put too much effort into pursuing degradable devices with a very limited potential audience.” Instead she says news organisations can find salvation within, and urges them to “start thinking like startups”.

Both David and Jemima refer to the “newspaper” industry, which is understandable but puts us in a limiting mindset. The companies they are referring to have gone to great lengths to diversify themselves into other media (most notably various digital media) with some genuine successes and we should embrace that. I’m going to refer to it as the news industry, although that’s arguably too broad. We’re all referring to the same thing: the-industry-which-used-to-be-the-newspaper-industry-but-now-reaches-across-many-media-including-paper industry.

A brief look at the music and news industries

The music and news industries do have similarities, which is why David has compared them, Jemima has followed, and others have done so, too. Both are facing declining sales, and many people in each industry hold the rise of the internet as partly or wholly to blame. In both cases their core product is content, and they are both facing the atomisation of this product — from albums to tracks, and from newspapers to articles — as the internet becomes more ubiquitous.

But they differ in the way they have faced the growth of digital media.

Figures from the RIAA show the US music industry in near-consistent decline since 1999, after years of near-consistent growth before. This 1999 point is more-or-less when digital music took off and sharing became easier on the web. The music industry tried to lock down its customers’ new-found freedoms, but unsuccessfully. Only when the iTunes Store arrived did some kind of calm prevail.

In the news industry DMGT’s annual report of 2007 shows a steady decline in UK circulation since 1994/5. From the US the Pew Research Center shows a steady decline in total sales of daily newspapers going back to 1990. In both cases the charts don’t go back further. But unlike the music industry we cannot blame this on the rise of the internet. These downturns started before what-was-then-newspaper content was widely available digitally.

So the music industry might point to the internet as the source of its troubles, but for the news industry the internet was just something that was going on at the same time. Furthermore each industry has met the challenge of the internet differently: the music industry has tried hard to prevent copying of its content, while the news industry has made some efforts in that direction, but has largely let its content go in the hope of rewards elsewhere.

As a consequence the music industry has an uneasy relationship with the internet, and still finds it difficult to get on there. By contrast, in the internet the news industry has another means to market, one in which it hasn’t made enemies. The internet could be the source of the innovation and upturn that it needs.

So if this innovation is to be found, where might the news industry look?

Why not look internally?

Why can’t news organisations look internally to find a revitalisation for their business models? Well, of course they can, and should, and do. Looking internally and externally for new opportunities are not mutually exclusive, and to not look internally would be a dereliction of duty. That’s why most commercial companies have a a special team dedicated to this — Business Development — aside from the responsibility of each of its employees every day to push the organisation forward.

But seeking solutions internally won’t maximise its dose of innovation. That’s because people inside organistions are most likely to see opportunities through the prism of their work in the organisation: we people who work in large organisations spend 8, 10, 12 hours of every day in these places, and the problems we’re driven to solve are generally those that relate to our daily work, and the particular people and processes we encounter there. Even the Business Development team is tasked with creating innovative opportunities that fit in with the company’s known strengths and current structure, and what it can practically achieve today — radical ideas beyond this are going to be difficult to handle. In general a company will value people who make the company better; it will not be very interested in people who have a great idea that does not easily fit with what it does.

Additionally, I think the rallying cry of “think like a startup” — as positive as it is — is particularly difficult to act on in a large organisation. That’s primarily because large organisations attract people who want to work in large organisations. They are subeditors who thrive on subediting and don’t want to have to produce business models; they are A&R people who love nurturing new bands and don’t want to sell sponsorship deals; they are marketing people who love planning marketing campaigns and don’t want to negotiate office leasing. They are not generally people who thrive on doing it all themselves, which is the driving force of a startup founder. They are people who thrive on achieving wonderful things by being a specialised part of a much greater whole.

Finally, business success stories are themselves unusual, so casting a net into the internal talent pool of one particular company is unnecessarily limiting. By all means we should look to home to find a success story, but we shouldn’t only do that.

To repeat, none of this is to say that innovation cannot be found internally, but we shouldn’t seek it there exclusively.

Let’s briefly compare internal and external success stories…

An example of an internally-generated idea

Jemima uses the example of the technology blog AllThingsD.com as an internally-generated idea, so let’s look at that in more detail.

The site describes itself as “the online extension of the prestigious D: All Things Digital conference” which started in 2003. Its “creators and executive producers” Walt Mossberg and Kara Swisher drove that for four years before launching the blog in April 2007 — or rather, before being able to launch the blog in April 2007, because the site is under the umbrella of the Wall Street Journal.

In ordinary circumstances such move would have been detrimental to WSJ since AllThingsD.com seems to be taking support and infrastructure from the bigger organisation whenever it wants, and yet retaining independence (on stories, production processes and technologies) when the ways of WSJ don’t suit it. WSJ would only have allowed this if there was some clear upside for itself, and of course it’s the conference, which we can readily expect to be a real moneyspinner. Walt and Kara spent four years proving they had a viable revenue stream before they got the support to expand into their own independent blog.

The conference-extended-into-a-website is an internally-generated line of business from WSJ and its parent, Dow Jones, and conference organisation is very much part of their daily business. Dow Jones organises quite a lot of conferences throughout any one year — on finance, economics, and environmental issues among others — and therefore will have a dedicated team of conference organisers to bring each one together. Guardian News & Media has a similar line of business.

None of this is to talk down the conference or the website, which are beacons in the tech industry. But it is an attempt to show their lineage as an outcome of Dow Jones’ daily operational machinery, and the key revenue-generating part of that machinery (conference organisation) is a well-established part of the company. The conference and website will be highly valued by Dow Jones and WSJ, and the kind of business unit that any company would be grateful for. But I suspect that if this kind of business unit was going to be the key innovation that reversed the news industry’s fortunes then we would have discovered that by now.

Now let’s take a look at…

An example of an externally-generated idea

David looks to the iTunes Store as an example of an industry saviour, so let’s consider that.

The iTunes Store revolutionised and arguably saved — or at least slowed the death of — the music industry, yet it was an innovation that came from Steve Jobs, a man outside the industry. It came at a time when music sales were first declining and it’s not as if the industry didn’t have its own ideas to deal with the rise of digital music — but those internally-generated ideas turned out to be quite misjudged.

The iTunes Store gave consumers more freedom over their ownship and use of music. It was never likely to come from inside the industry because, as David pointedly says, “Mr. Jobs saw music as […] an ancillary software business to generate sales of the iPods and iPhones. That’s not a perspective that flattered people in the music business”. We can readily imagine what reaction might have been received by a hapless music company executive if they’d have originally suggested the idea to their boss.

It took an outsider to devise the most workable innovation.

How to harness startup-power

Individual news organisations will continue to discover and exploit profitable seams from within their own structures. But they also need to be able to identify and exploit innovation from outside.

(By the way, I’ve called external innovation “startup-power” in the title here and above mostly in an attempt to be eye-catching. However it does largely capture the idea, and it does chime usefully with Jemima’s call to arms, so it’s not entirely superficial.)

For a long time the music industry tried to fight consumers’ desire to have more freedom with their digital music, and it did this by trying to create new business models entirely on its own terms. It only started successfully getting to grips with digital music when an outsider entered the game, and that outsider is taking a pretty healthy cut of the revenue. The music industry might have been able to dictate better terms if it had more to bring to the table earlier.

The news industry needs to put itself in a better position than the music industry did. I’d say there are three steps which will enable this to happen.

  1. Create opportunities for external innovators;
  2. Recognise and make contact with those innovators when they come along;
  3. Be in a position to best exploit the innovations.

Those are pretty obvious, but they still need careful consideration, because there’s still room to handle them poorly. Let’s take a look…

Harnessing innovation 1: Create opportunities

Creating opportunities for innovators means presenting what you do in multiple ways of accessibility. For news organisations the obvious example is RSS, which in some sense is less consumer-friendly than nicely designed web pages, but makes the raw material (articles) more accessible, and hence provides more opportunities to anyone else building their digital venture.

But large news organisations tend to provide only summaries in RSS, which parallels music companies’ early paranoia of digital music piracy and prevents external innovation. This puts the content out there, but only a bit — the news organisation is still holding it tight to its chest, still not trusting anyone external, and not giving anyone else the chance to innovate.

RSS is not the only means to create opportunities. The New York Times has released a number of APIs which are simply yet more raw materials for external innovators. Their terms of use prevent commercial use without prior agreement, which means that anyone can experiment and those who have a commercial proposition can work out an agreement with the Times.

Finally, let’s not think that content is the only thing news organisations do. They also provide advertising services (so there’s scope to open that, too) and much else besides. Perhaps everything an organisation does has scope for opening itself up to innovation if just enough imagination is applied.

Harnessing innovation 2: Talk to the innovators

Recognising and making contact with the innovators is a fairly obvious next step, but it’s rather different in the online world from the offline world. Experimentation is easier with digital assets than with physical ones: it can happen anywhere in the world, and due to the way digital media can be copied and distributed it can happen largely without the originator knowing.

Allowing the use of one’s assets or services without the knowledge of the originating organisation might seem daunting, and akin to giving away the assets or services. An obvious action would be to allow registration ahead of use, which means a channel of dialogue is opened immediately. The Times has used this approach with its APIs. But that option has its drawbacks, mainly that it creates a barrier to entry. Given that a small proportion of experiments will lead to something useful there’s a strong argument to remove that barrier, however small it may be, so as to maximise successes.

The alternative to enforcing dialogue is to make it so enticing that innovators will want to enter into it voluntarily. This means creating a forum or other environment that is sufficiently useful for innovators to make the active choice to speak to you. And it also means making yourself available in other ways — at other people’s conferences, seminars, and so on.

The dialogue of course has another direct benefit, which is that you get to understand how people really are innovating with what you offer. It provides you with an opportunity to change and improve what you offer so as to generate more opportunities for more innovators.

Harnessing innovation 3: Exploit innovation

In theory the third step is trivial — after creating the opportunities and speaking to the people who are using them it should be easy for both parties to get to a win-win on making something of lasting value.

However, when it comes to a large news organisation interacting with a very small organisation, such as a startup, the large organisation can easily act far too slowly. It will have committees and contracts and steering groups to go through. But startups worry about cashflow and have sufficiently few staff to be able to deploy them quickly if other opportunities present themselves in the interim. If the large news organisation cannot become fleet of foot then it stands to miss those opportunties as the innovators lose patience and pursue other interests.

This can be a difficult culture change for large organisations. Unfortunately it’s rarely possible to know just how valuable a lost opportunity might otherwise have been. But if a large company were to consistently fail to exploit external innovation then it might be a death by a thousand cuts.

Wrapping up

News organisations already have internal mechanisms to create and exploit ideas so I’ve spent some time trying to set out why internal innovation shouldn’t be considered to the exclusion of external innovation, and outlined a little of how external innovation might be developed.

I think this idea of developing external innovation might be particular to the digital times we live in, and not just because many might think we’re running out of our own ideas. Instead I think it’s a consequence our newly-networked world, where so much data and services are readily available globally, and so many ideas can be tried and discarded in such a short space of time. Previously the limitations of geography and physical objects meant businesses had to focus almost entirely on exploiting known opportunities for themselves. But in a digital world it’s easier than ever to create opportunities for others, and the rewards of creating those opportunties for external innovators is more immediate.

That historical economic perspective, however, is something that others would be better placed to evaluate. For now, those of us in news organisations probably need to focus on the more immediate concern of making innovation happen. Looking externally for ideas is not about waiting for someone to come by on a white horse and presenting a road to a happy ending; it’s not about hoping we get lucky. It’s up to us — we make our own luck.

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