I’m with Steve Yelvington at the IFRA Asia workshop on citizen media. He’s one of the great minds trying to take journalism into the future, thinking about the business, thinking about the journalism and thinking about both print and the internet. He talked about the NewspaperNext project.

The American Press Institute wanted to try to figure out what was happening to the US newspaper industry and what they could do to meet some of the business challenges that the industry was facing. API has focused traditionally on newsroom training, but now it wanted to focus on the business of newspapers. They applied for a grant from the Knight Foundation and worked with Clayton Christensen of Innosight Consulting.

Steve Yelvington served on the 24-member advisory board for the year-long project. News companies including Morris Communications that Steve works for and Gannet are taking the results very seriously. He described the findings of the research and how newspapers could apply them.

The basic findings:

• Great incumbent companies consistently collapse in the face of disruptive technology.
• “Cramming” old products into new forms is the wrong approach so new companies with new approaches win.
• Products succeed by helping customers get done the jobs they already have been trying to do. (Newspapers are so all-purpose and flexible that they often fail in understanding what jobs they are meant to do. Classifieds? Sports pages to follow statistics of baseball? Money spent for static stock market listings when people get live data at their brokers’ site?)
• We can learn to spot opportunities for growth, not just wring our hands over losses. (Steve demo-ed Dodgeball, a social networking site focused on basic human needs. If you’re 22 years old, you’re not sitting at home. You’re out with your friends. To find where your friends are, you can track them via your mobile phone and the web. Newspaper shouldn’t put out a youth-oriented tabloid, they should look to filling the needs of youth.)
• Most market research misses the real opportunities.

Innosight Consulting was hired by a fast-food chain that wanted to sell more of its milk shakes. They used traditional market research and asked people what they wanted in the milk-shake. The research came up with lots of contradictory observations. Innosight, instead, hung out at a fast-food restaurant observing customers. Why do you buy a milkshake? What they discovered surprised them. There were two groups of customers buying milkshakes. In the morning, young, single people bought milkshakes between 7:30-8 am. They bought milkshakes and only a milkshake and left. In the late afternoon or morning, a family came in and bought a milkshake for their kids.

They began asking the customers why they bought milkshakes. The morning people were commuters with 30-40 minute trips to work. They wanted the milkshake to last. They couldn’t drink it fast and liked the thickness. The afternoon purchaser, the families, were parents trying to calm down and quiet unruly kids.

For the morning crowd, they created a milkshake with bits of fruit that was satisfying and would last. For the afternoon crowd, they created a smaller and thinner shake. By understanding the jobs that people are trying to do, they could better tailor the products.

• Too much capital can doom a project. When trying to develop something else, pull it off. Give it a separate profit and loss statement. Make sure managers understand the imperative.

Steve next compared sustaining versus disruptive innovation.

Sustaining: Better, premium price, new & improved, leap forward and complicated.

Disruptive: Different, lower price, good enough, leap down and simple.

Is blog software simple? Yes. Blog software has disrupted the business model of traditional content management software. The transistor radio is a disruptive innovation. When it came out, the radio was tiny, small and tinny. It wasn’t as good as the cabinet radios. But it was good enough. And you could take to the beach. It didn’t compete but created an entirely new market for radio.

Disruptors:

• Low end or new market that’s ‘beneath’ existing players.
• Starts with least profitable customers.
• Moves upmarket. (Steve said it comes up from underneath you and cuts off your legs.)
• Changes the rules of the market.
• Topples existing players.

Examples:

• Steel mini-mills
• Semiconductors, microprocessors
• Minicomputer, personal computers
• Desktop publishing
• Digital photography
• The Internet
• Linux
• MySQL

The bad news is that new entrants succeed at the expense of incumbents, and the very thing that make an incumbent successful lead to its failure including on focusing on your best customers, paying too much to your bottom line and focusing on continuous improvement.

We need to think of making things that are good enough and not overshooting. We’re taking too long to create ‘perfect ‘ systems that don’t meet needs. We over-invest, over-plan and then we stick with the bad business plan until it all collapses. Come up with a good idea and field test. Fail forward and fail cheaply. Failure is not a bad thing if we learn from our mistakes and correct. Be patient to scale. Impatient for profits.

Steve said that you can download an 85-page report from the Newspapernext site.