Will YouTube be the USAToday or Wall Street Journal or New York Times of 2015 or 2020? According to Mediapost.com "YouTubes Secret Citizen Journalism Plot Exposed." Referring to a SFWeekly article by Eve Batey "YouTube Explains Top Secret 'News Experiment' to Local Media, But Doesn't Really" the reporting is that YouTube plans to hire groups of citizens in major cities, starting in San Francisco, to report news events via YouTube. Could this replace the local newspaper? Or maybe even the local evening news?
Americans are so used to freedom of speech that it's easy to forget what the concept launched in the USA. 200 years ago anybody who could access a printing press, of any size, could produce a newspaper. That as revolutionary. "Citizen journalism" was the norm, and there were literally thousands of newspapers. That situation remained very true well into the 1900s. Eventually acquisitions led to consolidation and a dramatic reduction in the number of newspapers.
The decline in the number of newspapers was aided by consumer journalism preferences shifting, in part, to radio and television. As radio and television journalism was born the limitation was "bandwidth" and therefore access. Thus, from the beginning there was government control over the number of stations. That scenario very different from the founding of newspapers, as there were limited channels from the beginning. But that didn't mean that the desire for video journalism was lower.
What will journalism be in 2020? We know that most major city newspapers are on the brink of failure, with bankruptcies (such as Tribune Corporation, owner of The Chicago Tribune and The Los Angeles Tkimes as well as others) not uncommon. As newspaper pages have shrunk, the internet has allowed the return of "citizen journalism" as bloggers and reporters have emerged able to tell a story, and with very low cost access to potential readers. Having internet access is possibly cheaper, and certainly easier, than operating a printing press in the era of Benjamin Franklin, or even a local newspaper of 1900. By numbers there is no doubt many more "citizen journalists" than "professional journalists" working at American newspapers today.
So why couldn't YouTube take advantage of a preference for video, and link together the armies of independent "journalists?"
I can't help but recall the television program Max Headroom from 20 years ago – where it was perceived that real-time information on practically all topics would be reported on millions of televisions everywhere – televisions which could not be turned off by law. Wasn't Max simply an avatar, running around what we could now consider the web, popping up on computer – rather than television – screens? Today I can create my own Max Headroom avatar to search the web for real-time content – mostly text. Why couldn't YouTube give me a tool to do the same thing with video?
Many people are bemoaning the decline of traditional journalism. But is this a bad thing? Given all the screaming about today's "media bias" it would seem that citizen journalism could become a great equalizer. If YouTube and Google can help give me the tools to search for what's interesting to me that would seem to be a very good thing. And if in the process they sell some ads so that the content can grow, that doesn't seem like a bad thing either.
In the movie Network, made some 30 years ago, the thesis was put forward that news would become entertainment – and less "news". With the growth of Fox News, MSNBC News and the number of broadcast minutes given to television news magazines like Nightline, one could reasonably claim that the movie was surprisingly foretelling. Today, getting up to the minute news is even hard on a channel like CNN. It's not at all unclear that providing a platform for citizen journalists, via YouTube and Google searches of the web, is a bad thing at all.
Are you prepared? Are you learning how to use these new tools? Are you prepared to change your learning behavior? Your advertising programs? Could you be a citizen journalist? It certainly looks clearer every year that journalism in 2020 will look substantially different than it does in 2010.
How should you select a new CEO? Loyalty? Historical management of an existing business? Understanding of company or industry heritage? Most of those criteria are rear view focused, even if dominant. Wouldn't the most important criteria for a new CEO be understanding growth markets and ability to drive growth?
Are you familiar with the acronym BRIC? It stands for Brazil, Russia, India & China. Four rapidly growing markets. If you aren't familiar, you really need to be. Because your future may well be determined by your ability to compete there – rather than your ability to compete in the USA. Those markets are growing, and they are rapidly becoming dominant in not only production capability, but in their demand requirements for products as well. Soon they won't only be places you consider for low cost resources – but places you need to sell if you want to succeed. The emerging middle class, with money to spend, is rapidly shifting to BRIC countries from the USA and Europe.
According to Crain's Chicago Business, in "Baker & McKenzie Elects New Leader" this $2.1B law firm just selected as its new CEO the head of its Brazilian operations. Uncharacteristic for most American businesses, yet such an obviously smart move. Already only 675 of 3,850 company lawyers – less than 20% – are in the USA! It's a global economy, and Baker & McKenzie are moving where the growth is!
Compare this with McDonald's, which could have put the leader of Chipotle's in charge – but instead sold Chipotles, with its very high growth, and kept putting long-term McDonald's employees in the top job. Or imagine the difference if GM's Board of Directors had put the head of EDS or Hughes Aircraft, subsidiaries of GM in the 1980s, in the top GM job 25 years ago. By continuously putting an "auto" executive in the top job GM ended up selling off the high growth subsidiaries, gutted the value out of Saturn, and ended up in bankruptcy court!
There is no more important job for an organization's leader than growth. Growth can cover a multitude of sins. Missed sales, lost customers, pricing issues, faulty products — all can be forgotten if you keep driving growth. Just look at Google's Schmidt and Apple's Jobs. Hats off to the Management Board at Baker & McKenzie for moving forward and putting the growth market leader into the top job. More companies should be so unconventional.
Maybe this will be another Disruption that will help Baker & McKenzie grow even faster than its competitors! Disrupting the Status Quo is an important part of growth. Recently Tom Parrish created a podcast interview, published on his EnterpriseLeadershipo.org blog, of us discussing the need to Disrupt in order to grow. Give it a listen for ideas on using Disruptions to grow in your organization!
I get the most heat when I talk about spending less time listening customers. But I'm not joking. To grow revenues and profits you have to go far beyond asking your customers – who are more likely to hold you back from growth than accelerate it.
BusinessInsider.com makes this point loudly in an Henry Blodgett article "Ignore the Scream's — Facebook's Aggressive Approach is Why It Will Soon Become the Most Popular Site in the World." Given how many people use Facebook, it's hard to remember that the site is only 6 years old. What we've also mostly forgotten is that Facebook wasn't even first. It followed the popular, and well financed after acquisition by News Corp, MySpace.com. Lots of companies got into social networking. But now the marketplace is dominated by Facebook – which will soon be the web's most popular site (as it closes in on Google.)
Facebook did not win by asking users/customers what they wanted. To the contrary, Facebook's leaders took the approach of offering what they perceived would be steps forward – and then letting the market react. Frequently a VERY loud contingent would be VERY upset. Screaming loudly they hated the change. But with each advancement, Facebook grew users and the site's success. Facebook didn't ask users what they wanted, nor did they ask users for permission to do new things. Facebook went into the market, and using its scenarios about the future Facebook's leaders drove toward what they expected to be a more popular site. They did it, and learned from their experience.
Too many businesses spend way too much time trying to make small advances, and miss the big shifts. Microsoft is a great example. As it launches Office 2010, Microsoft isn't trying to bring in new users to grow its base – like Facebook is doing. Instead it is trying to preserve its installed base. Nonetheless, some "loss" is a given. You can't preserve forever. If you don't bring in new customers, you can't grow because you have to replace lost ones and find incremental new ones. But what do we see in Microsoft's offerings (such as Office 2010 and System 7) that is designed to bring in new users?
Meanwhile, Google is offering more powerful and cheaper Cloud-based solutions, as Apple and Google grow the demand for mobile devices (like iPhone and iPad) that don't use Microsoft products. The big shifts are all away from Microsoft, while Microsoft's efforts at preservation are leaving these alternatives with limited competition.
Today Bnet Australia posted a podcast interview I did with Phil Dobbie, sponsored by CBS, last week. In "Disrupt To Win" we discuss the big difference between Apple and Google as compared to Microsoft. The growing companies use scenarios to develop new solutions which will appeal to new users. They keep expanding the marketplace. As new users adopt new solutions, eventually it becomes mainstream – further accelerating growth. Growth doesn't come from trying to Defend the old platform or user base, but from launching new solutions which grow the market leading to conversion and even greater growth.
Facebook is now a phenomenon, growing in 6 years from obscurity to the second largest global user base. Because, like Apple and Google, the leadership did not ask customers what they wanted (which was what MySpace.com did). Rather, they studied competitors and emerging markets to create new solutions – without worrying about cannibalization or moving faster than customers would recommend. And the leadership has been willing to overlook vocal user minorities in order to appeal to new users, thus driving more growth. You can't expect customers to deliver great growth, that has to come from aggressive scenario planning, deep competitive analysis and a willingness to Disrupt your organization and the marketplace.
Being an entrepreneur is not a part-time job. People who try starting businesses "between jobs" rarely succeed. It takes time, resources, careful listening to the marketplace and adroit adaptability to emerging needs to be a successful entrepreneur. But, as Harvard Business Review points out in "The Danger of Part Time Business Builders" too often existing companies relegate new business development to a part-time activity.
That's why creating and maintaining White Space is the 4th step of The Phoenix Principle. When you have a scenario plan, and you know how you will effectively compete you attack Lock-in to open doors for doing something new – and then you dedicate resources to doing the new thing. Growth requiresdedicated resources. One of the biggest reasons new projects fail is we expect them to get done using 15% of Frank in finance, 20% of Rebecca in real estate, 30% of Michelle in marketing, etc. Even if Larry is a dedicated leader for the growth project, how can he hope to succeed when most of the time the people on his project have their heads into doing more to manage or improve the existing Success Formula!
The majority of innovation at Proctor & Gamble is variations and derivatives, designed to Defend & Extend an old brand. Sustaining innovations meant to maintain revenues, or grow them slightly. A traditional, large organization is usually pretty good at that activity – as exemplified at places like Kraft and P&G. But these same organizations usually fail when it comes to entering new businesses because they try to "matrix" the resources for start-up; "leveraging" existing staff. These ad hoc teams, even as a task force, aren't able to really listen to new, emerging customers or challenge old Success Formula Lock-ins – so they almost always spend money, produce mediocre (at best) results and simply drift into oblivion.
Harvard Business Review discusses how P&G succeeded by using White Space in "How P&G Quietly Launched a Disruptive Innovation." By dedicating people to the project, and allowing them to violate previous Lock-ins, the Align Probiotic product team was able to identify new customers, cater to their needs, and build a solid business. Initially P&G used a traditional approach, and almost killed the product. But when a far-sighted leader decided to give a dedicated team the resources, and Permission to do what they needed to do without holding closely to P&G Lock-ins, the product became a big success.
If you'd like to hear more about how you can create and use White Space to help your organization succeed, I invite you to 2 upcoming events where I'm the keynote speaker. Next week, on May 18th, I'll be kicking off theInnovation Summit in Grand Rapids, MI. Click on the link to register for this event. On June 9 I'll be the keynote speaker at the CIO Magazine Perspectives event in Chicago. Click on the link to register for that event. All organizations, and functions within organizations, benefit from understanding how White Space is important to growth – so come along and listen to how you can apply these concepts in 2010!
"What business are you in?" is one of the most common business questions asked. People usually want a simple answer, like "I make widgets" or "I provide widget services." A simple answer allows people to easily cubbyhole the business, and remember what it does. And many think it provides for a well run business – through a simple focus – sort of like the Kentucky Fried Chicken ad "We only do chicken, and we do chicken right." Because the business's Identity is easy to understand employees can focus on Defending that Identity.
But in reality when your Identity is tightly tied to a product or service bad things happen when demand for that item wanes — or demand turns flat while supply is ample (or possibly growing). Competitors start trading punishing blows back and forth, and profits wane as competition intensifies. Business leaders start acting like gladiators trapped in a coliseum pit, undertaking ever more dangerous actions to survive amidst punishing competitiveness. Many don't survive. As results are increasingly threatened, the business's Identity is under attack, and the tendency to Defend that Identity is extremely strong. Such defense usually grows, even as results continue deteriorating.
There is an alternative. Instead of trying to always be what you always were, you can do something different. Think about Hewlett Packard. HP started as an instrumentation company, making electronic tools, such as oscilliscopes, for engineers. But as the market shifted, HP's leaders have moved the company into new business – allowing the company to keep growing.
By entering new businesses, some organically and some via acquisition, HP has been able to continue growing sales and profits. By letting each of these businesses do whatever they need to do to succeed, by giving them permission to do what the market demands and providing these new businesses with resources, HP has been able to compete in old businesses, while developing new businesses toward which the Success Formula can migrate. Thus, HP has become a company with a less simple Identity – but it also has been able to continue years of profitable growth.
Too often, opening these White Space projects for growth causes the traditional business to feel threatened. Those in the old Success Formula will often say that the company is "abandoning its past" and "walking away from a very profitable business." Like the old story of Homer, this is a "siren's song" – very dangerously pulling you toward the rocks which can sink your ship – because each month profitabiilty is becoming more and more threatened. While it might have been a profitable business in the past, as growth slows profitability is less and less likely in the future. As sales growth slows it is important the business do its best to develop a new Success Formula so it can maintain growth.
"Has Apple Forgotten the Mac?" is a recent PCWorld article. The authors point out that as Apple's revenues have transitioned toward new businesses, such as music and now mobile computing/telephony, the Mac business receives less attention and resources. Those who support the Mac business question if Apple should spend more resources on what has recently returned to profitability.
This is the kind of internal threat that can be very risky. While the Mac is a great product, with a loyal following, and regained profitability – we can see that in the future there will be less and less need for such desktop and laptop products. Apple is migrating toward the new mobile future – and as a result it must reduce the resources on the Mac business. Each year, more resource needs to be allocated toward the new, faster growing businesses, and less invested in the slower growing traditional computing products.
Apple's Identity was once all Mac. And that nearly bankrupted the company – as it almost ran out of cash back at the century's turn. Only by overcoming its Identity as a single product company, and rapidly moving into White Space with new products in new markets, was Apple able to regain its profitable growth path.
HP and Apple both show us that an Identity, created early in the lifecycle, is very powerful. But inevitably markets shift, and the results possible from a simple, easy to understand identity will decline.Only by overcoming that original Identity via entering new markets – and using White Space to evolve the Success Formula, can a business hope to have long-term revenue and profit growth.
The “White Space” approach to innovation helps
to cut the time and cost of deploying new technologies.
That's the title of my first column, published yesterday, for CIOMagazine. The four steps of The Phoenix Principle are as valuable inside a function as they are for running an entire business. And for IT shops, the value of using White Space to implement new technologies and solutions is extremely valuable.
This article overviews how world class IT shops avoid getting stuck with most of their budget tied up supporting legacy (and aging) solutions by using White Space to keep their technology base, and user support, ahead of competition. And the more they use White Space, the better they get at leading their companies to faster market reaction and superior rates of return.
Give it a read, you'll find it valuable for any function hoping to be an industry leader.
Here's a one minute video on the value of White Space – and how leading companies like Google master this capability:
"CraigsList is for hookers." That's what the General Manager at the Los Angeles Times told me in 2005. In a meeting to discuss the newspaper's future profitability I pointed out that 1/3 of his newspaper's revenues came from Classified ads, and I had asked him if he was concerned about CraigsList.com. As you can tell, he was not.
At the same time, I asked him if he was concerned about on-line ads and the Google placement engine undermining his display ad business. He assured me that the internet was all for bloggers and no reputable news reader would pay much attention to on-line news. So no, he wasn't worried about internet competition to the newspaper sucking away this advertiser base. He just needed to keep old customers focused on the value of newspaper ads. In less than 6 months GM removed 70% of its newspaper ads – shifting all the money to on-line advertising – leading the auto pack on-line. And movie companies moved nearly 75% of their newspaper ad budget to on-line, while more than half of real-estate ads went on-line. Those happen to be the top 3 sources of display ad revenue for newspapers.
Today Tribune Corporation is in bankruptcy, and classified ads have dropped to a trickle for all major newspapers. Meanwhile, things are going pretty well at CraigsList and Google:
As can be seen, revenues per employee are phenomenal at CraigsList, and extremely good at Google. Much better than at the Tribune Company newspapers such as the Los Angeles Times and Chicago Tribune – despite them shedding a high percentage of employees over the last 7 years!
According to Gavin O'Malley, at OnlineMediaDaily of MediaPost.com in "CraigsList Revenues Soar: But Problems Loom" revenues at CraigsList may exceed $4M/employee/year! Margins he asserts are in the range of 75-80%! And revenues, while still small at about $125M, are growing at 25%/year (for what everyone thinks of as "free.") Albeit, this is a small business. But what if Tribune Company had paid attention back 5 years ago and invested hard in creating the world's best CraigsList – rather than ignoring it? What would the possible revenues be today? And margins? And impact on Tribune Company growth in revenues and profits?
Most companies do only a surface analysis of competition. They are so busy listening to, and reacting to, big customers it's all they can do to keep operations going and make the marginal changes to keep big customers happy. As a result, maybe they look at 2 or 3 of their most similar competitors (like other newspapers in the local market for our example.) And that will be cursory, examining total revenues, perhaps margins (if public and data is available) and a quick glimpse at impact on existing customers and any new products recently launched. But overall, very little attention is paid to competition.
And practically none is paid to "fringe" competitors. Those with different business models. Polaroid ignored digital camera manufacturers (despite licensing them technology) until Polaroid went bankrupt. Digital Equipment(DEC) ignored AutoCad – calling their CAD/CAM products "toys." Wang and Lanier said no big company would use a PC, rather than an integrated centralized system, for corporate word processing so they discounted Apple and Microsoft. Motorola largely ignored Apple in mobile phones, even after doing a joint venture with them to create and launch the RoKR. Failure lists are strewn with companies that simply ignored "fringe" competitors – saying they didn't understand the industry, the customers and how "the business works."
Large or small size is not important when studying competition, it's the ability to change how customers buy that is important. As we've seen in the case of companies like Google, Apple, eBay and Amazon we can see that fringe competitors can grow extremely fast. They can alter the competitive landscape quicker than almost any traditional corporate planning group will give them credit. Just ask the folks at Sears or Home Depot about he impact of Amazon and other on-line retailers (do you think either of those traditional retailers have anywhere near $1M revenue/employee like Amazon?) Or ask Merrill Lynch about the impact of Schwab, eTrade and ScotTrade.
The second step in The Phoenix Principle is to obsess about competition. When you're "the big gun" in the industry it can be incredibly easy to ignore fringe competitors. But do so at your risk. When profits are something like $2M to $3M per employee (as in the case of CraigsList) there is a lot of resource to invest in growth. And strong indications that the business is able to very profitably grow! Ignoring "fringe" competition – especially because you are focused on existing large customers who are Locked-In to your Success Formula – leaves you remarkably vulnerable to rapid market shifts and a really fast demise.
Many of us remember the first Apple vs. Microsoft battle. Apple pioneered much of the personal computer business, and led the innovation curve for years with its implementation of the mouse and on-screen graphics. But eventually Microsoft successfully copied the innovations with Windows, and went on to drive Apple to the brink of bankruptcy at the turn of the millenium. At that time, it was inconceivable that Apple would ever challenge Microsoft for sales domination.
But the impact of a decade of Defend & Extend Management has left Microsoft with little to no growth. Its growth in operating systems now looks like it has been a single quarter event, with the OS7 launch which has done little to drive new PC sales. Meanwhile, office automation products actually saw a net decline in revenue year-over-year last quarter. Signs of a growth stall are imminent for Microsoft – and we all know that fewer than 8% of companies ever consistently grow at a mere 2% once revenues stall for 2 consecutive quarters.
It's not often we see a big company stall, and then falter. But I've been predicting this for months through this blog. Microsoft has been working at Defending its "base" but it has done too little trying to enter new markets and find growth. As people shift to mobile devices – from the smartphone to ereaders – Microsoft simply is seeing its "base" in the PC market threatened. How many PCs will be purchased in 2015? Versus how many smartphones or iPads (there will be 12million iPads sold in 2010 alone).
This inability to maintain growth translates into serious value deterioration for investors.
We now can see that Apple is entering new markets, and gaining revenue at 20-40% per year by moving beyond Defending the Mac. Because Microsoft has not done something similar, preferring Defend & Extend Management applied to old markets rather than applying The Phoenix Principle and getting into new markets aggressively, not only is its revenue superiority threatened, but Microsoft most likely will have a lower market capitalization than Apple within a few months
If it seems like I'm beating this horse — well it's not often we see the kind of changes happen to competitors in such short time as we're seeing happen to Microsoft and Apple. It takes more than a little courage to predict the demise of a behemoth (see "Microsoft's Dismal Future" at Forbes.com) that has had near-monopolistic power in a market the way Microsoft has.
More importantly, more companies are behaving like Microsoft in 2008-2010 than acting like Apple. And that is a shame. Until management teams reverse their thinking, how can we expect America to successfully return to high industrial growth rates and job creation?
There is little about Microsoft to excite investors. I'd go so far to say that there's little more exciting about Microsoft than there is at General Motors, or AIG. These companies are huge, and were once great, but unending defense of their outdated Success Formulas is leaving them extremely vulnerable to decline and failure.
In the end, you have to ask yourself – do you want to be Microsoft in 3 years, or Apple? Do you want to be working hard to maintain revenues and valuation – or growing and driving higher value? I think most of us know which is better. It's time we start
using scenario planning to develop future plans
obsess about competitors so we learn better ways to compete
implement Disruptions to move our businesses into growth markets and
use White Space teams to help us update into new Success Formulas.
Companies that follow these 4 steps of The Phoenix Principle can expect to have a great 2011. They can perform like Apple, Google, Cisco Systems, Virgin, Nike, Johnson & Johnson. For everyone else, we can expect growth stalls and, well, …..
Apple's most recent earnings surprised almost everyone, to the topside. At SeekingAlpha.com "Apple Soars: Is this a Great Country or What" the author points out that all analysts are now calling for Apple's equity value to continue increasing. Most expect prices to achieve $330 – $350/share. Right now Apple is worth about $235B. At $330/share it is worth $300B. Microsoft is worth $273B. That means within the next few months the expectation among investors is that Apple's value will eclipse Microsoft's.
Why? Because Apple has much faster growing revenue sources than Microsoft. Despite a plethora of products, Microsoft still depends for sales and profits on PC operating system and office automation products. And that market simply isn't growing. Even Microsoft optimists are depending upon a "PC replacement cycle" to drive more sales rather than any real growth in demand.
While Microsoft has spent the last decade Defending & Extending (D&E Management) its PC business, its value has been flat. Meanwhile, Apple has developed other revenue sources:
In 2000 Apple relied on Mac sales. But now, it has 2 businesses that are as large as the computer business. While defending the Mac business has maintained its sales, using White Space to launch other businesses has more than tripled Apple's revenue. Today the iPod/iTunes business is as large as the Mac business, and the iPhone business is as large as well. Both are growing. And with estimates that already a million iPads have been sold – with some estimates of reaching 6 million units in 2010 – who knows how big the publishing business could become for Apple.
As SeekingAlpha.com points out in "Everybody Loves Apple but Who's Left to Buy It" there are ample reasons to forecast substantial revenue and profit growth for Apple – causing it to lure many more investors to own the stock. Not only hardware sales are going up, but in both the music and smartphone business Apple has the envious draw of pulling follow-on download sales – songs, videos, and apps. Thus, each device pulls a series of ongoing revenue bites.
Readers should also note how fast this has happened. What has happened to your business in the last decade? In the last 3 years? As we can see, Apple created a $20B/year business since 2007 just in the iPhone. Another $16B/year business in iPod/iTunes during the last decade. That's over $36B/year of revenue from new sources, all organic (no acquisitions) in under 10 years. And that's the power of White Space. Instead of planning how to defend an understood and predictable market (like Microsoft) Apple studied new market needs, then launched a product and gave the team Permission to do what it took to succeed – unencumbered by the history of the Mac, or Apple or any of the Lock-ins that were part of the old Success Formula. This White Space teams then spawned revenue streams that are envied by everyone.
My recent Forbes column (Microsoft's Dismal Future) portended this week's earnings announcement and the changing fortunes of these two companies. Lacking White Space, Microsoft is an uninteresting company with limited growth forecasts and negligible value growth. By using White Space Apple is growing much faster, and will soon have a higher value than "the world's largest software company."
Effective use of scenario planning, competitor analysis, disruptions and White Space can launch growth in any company. You don't need a "hot economy" to generate growth. And Apple has been demonstrating this quarter after quarter for nearly a decade – with several more good quarters coming.
News Corp. executives (and shareholders) need to be worried. Really worried. While they are busy trying to Defend their newspaper approach, including the planned move to charge everyone a subscription fee to access the Wall Street Journal on-line, there is a competitor ready to eliminate them. Of course, if you've read the WSJ for years you may think this sounds ridiculous. This competitor is vying to do the same to the Financial Times, a newspaper much more popular in Europe than the USA, which already charges for on-line access. But this competitor is serious, and just might pull it off.
According to BusinessInsider.com, "Bloomberg Redesigns Web Site as it Tries to Kill Journal." Hiring an executive from Yahoo, Bloomberg News is "pulling the gloves off" and preparing to take on old-line competitors as it steers a course to being #1. And the odds are looking good for its success.
The market for business news has been shifting for years. Once this market was dominated by two delivery mechanisms. One was very expensive, costing thousands or hundreds of dollars per month, driving information to terminals sitting at desks of traders and brokers. The other was a daily reporting of business news through the traditional business newspapers mentioned above. Both businesses were very profitable.
But today, almost everyone can get almost everything the expensive terminals had simply by scanning the web. And if you can get news real-time, why wait until tomorrow? News Corp. bought Dow Jones and has been trying to Defend the terminal business, in the face of intense Bloomberg competition for traders desks and much lower cost competition for everyone else. In an effort to shore up the P&L at Wall Street Journal the company has announced it will reverse all industry trends and start charging for WSJ content on-line. They still haven't figured out how to effectively take advantage of Marketwatch.com as a viable delivery mechanism for WSJ content. An admission they don't know how to develop a robust advertising model on the web and mobile devices that will support the publication.
Don't forget, News Corp. was early to the on-line world with its acquisition of MySpace.com. But instead of letting the people who run MySpace.com do what they needed to do to become Facebook – or possibly to become the next Marketwatch.com – News Corp. leaders interceded. They helped "manage" MySpace and applied News Corp. Success Formula parameters to it. MySpace was not allowed to operate as a White Space project. Now MySpace is a narrow site mostly for musicians and artists – missing the big opportunities in social media, business/financial news or even traditional news dissemination. Had it been given permission to do whatever it needed to succeed, permission to create a new Success Formula, who knows what MySpace might have become?
Today's marketplace will not produce acceptable returns for the old Success Formula. But the value of good business news is growing, as all investors want to know what traders know as fast as they know it. And that is where Bloomberg.com is headed. It is squarely directed at building a new business that is advertiser supported which will deliver the right news to the right place fast enough to capture those who want business news.
Bloomberg is now running 2 separate businesses. They continue to allow the terminal business to work hard as possible at defending its turf. Simultaneously they have established a White Space project that is designed to eventually obsolete the old business. In the process they will cannibalize the terminal business. But they also will very likely drive less agile competitors Dow Jones and Financial Times out of business. In the process they could capture significant ad dollars while learning how to dominate the mobile device market as well as the traditional web.
When markets shift, nobody can win by trying to Defend the old. Customers move on, and they abandon old solutions. Returns decline. The winner has to use Disruptions to overcome old Lock-ins to do whatever is necessary to profitably grow! (like having a web site that looked like an old terminal screen with amber text on a black background) and establish White Space with permission to do what is necessary to succeed! Even recognizing this may create cannibalization – but in the process learning how to earn high rates of return while crushing competitors.
Kudos to the management at Bloomberg. They are going for the jugular in the business news marketplace, and doing so by moving where the market is headed – while other competitors are trying to Defend & Extend old ways of doing business. It may not take Bloomberg long to create serious damage to the old institutions in business and financial news.
