Innovation in a time of crisis: Finding The Prohibitive Factor

This is the short introductory speech I held at a round table discussion I participated in earlier today.  The topic was "Innovation in a time of crisis", more specifically how online media can keep on innovating in today's economic climate.  I usually don't blog here in english, neither do I usually write down what I'm going to say at such an event as today.  But since this introduction had to be in english, I felt that it was safer to be well prepared than to ad lib the whole thing.  The language barrier is funny that way.  Anyway, I post this here because I think it's relevant for the readers of this blog and because I think it in some way is a follow-up of my (norwegian only) post Apokalypse nå? Om katedraler, aviser og universets sentrum.  A Google translated english version of that post can be found here.  Anyway: Here's my introductory remarks from today:

Introductory remarks, "Innovation in a time of crisis", NONA panel debate 18.09.2009:

I’ve heard that there are going to be several people I know in the audience today. Those of you that know me will know that I’m mostly an optimistic person. So I *could* use this opportunity to boast about our achievements. But for the sake of a good discussion afterwards, I thought I’d use this introduction to be more pessimistic and personal and maybe even cynical than I use to be in settings like these. Hopefully I won’t become too private and you won’t become too embarrassed. So here we go:

Unlike most of you I represent the money side of newspapers. I’m here as the CEO of VG Multimedia, a position I’ve had for a little over a year now. The ten previous years, however, I worked as a developer or as the head of development in VG Multimedia. Most of that time I spent helping innovate what was basically a new editorial platform.

It’s safe to say that the last year has been radically different than the ten previous years. It was not only the promotion itself that made it different: My promotion happened almost simultaneously with the outbreak of the financial crisis. Looking back now, I think the credit crunch speeded the inevitable transformation of VG Multimedia. That is, a transformation from a company doing new stuff, to a company that’s mostly concerned with day to day operations. I believe that many of you can tell similar tales from your own companies.

It’s nothing wrong with that transformation in itself. It had to happen eventually. The problem – if it is a problem – is just that the speed of this transformation has been staggering. It’s been a little like having Ty Pennington over for an Extreme Makeover you really didn’t ask for. So when I was asked to join this panel and discuss “Innovation in a time of crisis”, it was an excellent opportunity for me to reflect on what innovation really means.

Dictionaries define innovation as “a new method, idea or product”. We’ve done a lot of that in the past. The act of going online is in itself our biggest innovation; the introduction of computer supported journalism, such as applications based on tax data, TV listings, etc., is another; a third is the defining differentiation from printed newspaper by introducing services never associated with newspapers in the first place -- a dieting club, an online youth community, or the combination of video and text.

But my claim today is that almost none of us are innovating in the traditional sense of the word anymore. The unstable ad market has forced us to focus more inwards and concentrate on doing what we already do. But better. This means that our products still evolve, but with one exception in our case, *not* trough radical and innovative mutation.

Very few of us are looking outside the traditional editorial landscape to find the next big thing; the thing we haven’t thought about yet. We’ve been industrialized overnight. What we do now is traditional product development. Perhaps that’s innovating too, but not as clear and definitive as before: Now we’re strengthening rather than boldly going where no one has gone before.

We have done a lot of product development last year, perhaps more than ever. In no particular order and not meant as an exhaustive list: our transmission of the death sentencing in Congo was one great achievement; the launch of our fashion site “Min Mote” another; the extreme success of the animated web TV series “Fanthomas” a third.

But all these product developments came by trough seemingly minor adjustments. What we do now is combining lots of great tools mostly provided by others: CoverItLive for combining Twitter and in-article commenting of happenings; technology from Move Networks for large live video transmissions; web services from UserVoice for managing feedback; WordPress for the fashion site. These are standardized tools in a toolbox now. Our work has transformed from creating these tools ourselves to become the best in combining off the shelf components accessible to anyone with a computer and an internet line.

Again there’s nothing wrong in that. It’s probably the right thing to do. Money is one obvious limiting factor, given the ad market today. The problem is that I’ve started wondering whether we’re starting to forget the future now. Can we stay relevant?

I very seldom hear anyone from the traditional media companies reflecting about what kept us great and prospering for so many years before online. To be honest it was not innovation, at least not by itself. It was *control*. The heavy investments needed in presses or the shortage of frequencies was a limiting factor that kept the majority from starting their own newspapers or TV stations. Compared to online today, those factors alone kept competition at a marginal level. But online the story is quite different. What’s the limiting factor here? What do the real innovative companies control?

They control their technology. But no media company I know of – including my own – has been willing to acknowledge this. At least not to the extent that they define themselves as technology companies as well as media companies. What we do are piecing together off the shelf components. Sometimes than *can* lead to innovation, but most of the time that particular activity is called carpentering.

But look to Google, Facebook and Twitter. Seemingly simple applications, powered by such heavy technology investments, that the cost of emulation in itself prohibits successful competition. None of them defines themselves as media companies. The company that *did* define itself as a media company – Yahoo – is struggling.

What we have to do, is to evolve our ad models to further withstand pressure from Google. We have to be able to continue finance quality journalism. We have to be innovating products that get readers to read what they didn’t know they wanted to in the first place. We have to become *more* relevant for users and increase time spent on our sites. We have to know more about them. And most of what we have to do, haven’t been done before.

But today, when print is in the middle of the end, we may very well find that online we’ve been forgetting to establish the prohibitive factor that will make us live long and prosper for a hundred new years. Instead of raising the pirate flag, moving off campus and declaring the old product dying – this is what Steve Jobs did when he created the Macintosh – the rational CEO reflex in times like this will be to hang on and continue doing what we do best: Improving one small step at a time.

Is that the right way to move forward. I'm not sure.  That's why I look forward to the discussion ahead.

NOTE

In the interest of full diclosure: I misspoke at the panel debate and compared what happened to An Extreme Makeover with Ryan Seacrest.  I of course meant Ty Pennington.

Comments

[Thomas]

Veldig bra reflektert og skrevet.

[Anders Brenna]

Takk for et bra innlegg, både her og på paneldebatten.

Du gikk rett etterpå, så jeg fikk ikke presisert at jeg på ingen måte trodde at spørsmålet mitt om "nettavisene må gjennom en kanibaliserende disruption" var så enkelt som du mente det hørtes ut som.

Jeg vet godt at både svaret og spørsmålet er komplisert, og jeg spurte fordi jeg er usikker på begge. :-)

Selv om du ikke hadde svaret (du helte mot nei), så kom du med input som jeg skal sende hjernecellene mine når de våkner igjen. Takk!

Mvh
Anders Brenna
Nettsjef
Teknisk Ukeblad

PS! Jeg har ingen anelse om hvem Ryan Seacrest eller Ty Pennington er.

[Jo Christian Oterhals]

Det er mulig det var mer enn ett spørsmål om disruptiv innovasjon, og at jeg i dag ikke husker akkurat ditt. Jeg mener at ett av spørsmålene gikk på hvorvidt det var sånn at aviser *ikke* kunne bedrive disruptiv innovasjon, og at det bare ville skje alle andre steder.

Jeg tror akkurat det spørsmålet er enkelt, om ikke svaret er det. Disruptiv innovasjon kan skje overalt, og det er ingenting i veien for at det ikke skal kunne skje innenfor etablere mediekonsern også.

Men for hver virkelig suksessrike innovasjon på nettet i dag, er det sikkert hundre som mislykkes (sannsynligvis tar jeg for lite i). Fordelen -- og problemet -- innenfor veletablerte strukturer som våre, er at vi har gode metoder for å måle gevinst og tap. Selv om ingen er så naive at man tror man ikke må tape på noe av det man prøver seg på, så vil man forsøke å holde tap-til-gevinstratioen så lav som mulig. Dette er ikke unikt for mediebransjen, jeg tror det er noe som gjelder for alle etablerte industrier. Disruptiv innovasjon kan altså skje innenfor etablerte industrier, men en påstand kan være at sjansen for det er mindre fordi risikoviljen naturlig nok er mindre: Vi utforsker færre alternative spor.

Innenfor venture- og angelkapitalbransjen ser man det ikke slik. Jeg tror det var du som nevnte Y! Combinator (som etter mine begreper ikke er venturekapitaliser, men snarere en slags angel-investorer eller alternativt en slags gjerrig ventureselskap). De investerer maks 50.000 dollar i et prosjekt. De investerer i *mange*. Om de investerer i 50 konsepter, håper de at kanskje et av dem gir 100 til 1000-gangeren tilbake. Det ene er veier opp for alle de andre. Men det er et helt annet mindset; risikoviljen er en helt annen. Og de er forbløffende mye mer teknologifokuserte enn det mediebransjen er også. Men så er venturekapitalisme noe helt annet enn det du og jeg driver med til daglig :-)

PS! Jeg husker du blogget mye om hvordan du ikke hadde TV, og så blogget om hvordan du anskaffet TV. Ditt PS tyder på at du ennå ikke har fått fjernsynet til å slå over på TV3 :-) Les mer om Ty Pennington her. Ryan Seacrest leder på sin side American Idol, noe som vanskelig er sammenlignbart med innholdet i paneldebatten i går.

[Anders Brenna]

Vi er på bølgelengde, og ut fra hva jeg kan forstå er eventuelle uenigheter på detaljnivå.

Det stemmer at jeg kjøpte TV i romjulen. På tross av svært lave forventninger, ble de ikke innfridd. Regner med at jeg har TV3, men skal være ærlig nok til å innrømme at jeg ikke gidder å sjekke, og at jeg heller ikke gidder å google disse folka.

Skal jeg først kaste bort tiden min på noe, så foretrekker jeg å gjøre det gjennom uvesentlige kommentarer i nettdebatten. :-)

[Pernille Tranberg]

Hi. I am head of editorial development at Berlingske Media in Denmark (with a lot of big newspapers and websites) and your blog is really interesting. One big problem for 'media companies' is that we still compete more with each other than with our real competitors: Google, Facebook, Twitter etc. So, if we 'media companies' don't go together to innovate I believe that our best survival will be to join a big technology company. We don't have the money nor the techonology expertice to beat them. So let's join them. Unless we - e.g. in Scandinvia - could do something together. Let's say we all believe in a 'Kindle-device'. Why don't we provivde the best Kindle-device in Scandinavia filled with our respective content and let the customers chose themselves what content they want to buy? We could to go together and innovate, so our content will keep the value - in stead of now: Everybody giving it away for free, so the customer will pay for ring tones to their mobiles and not really good journalism!

[Jo Christian Oterhals]

Pernille:
In the following comment, it may sound as if I disagree with everything you wrote. I don't. You have some interesting thoughts here. But I'd like to problematize a little around what you say.

I know what you mean by saying that we compete too much against each other. I do think, however, that our products would suffer if we forgot that our fellow online newspapers are competitors too. As for competing against Google and YouTube: It depends on what you mean. If you mean competing on their turf, I disagree. We can never beat them. But if you mean that we compete against them about people's time spent, I agree. But we have to fight for that time by providing different kinds of products.

When it comes to collaborating as a industry - I see what you mean. But how do you propose we do that without being considered a cartel? To be honest I don't think cartels or cooperation will do the trick. It may sound cynical, but perhaps it would be better for this industry if only a few strong players survived and got *real* strong? I strongly doubt that there are enough money going round to support the number of online newspapers that exist today. Clay Shirky claims that only monopolies (or entities believing they're monopolies) innovate, so maybe reducing the number of news outlets would actually lead to something good?

As for keeping the value of content: Have content *ever* had any value? My claim is that throughout history, we've only paid for transportation and the physical media, not for the content itself. Think of it: The skalds got paid for their performance. The reason the icelandic sagas didn't get more widespread was not for the lack of popularity or the price of the content, but the outrageous price of calf skins (to write on). When you buy a newspaper in the store, the perception is that you pay for the paper more than you pay for the content. When you subscribe, you pay for transportation as well. When you buy cable-tv, you buy the cable and the signals, not the shows in themselves (channel packages helps maintain this perception). Etc.

So you really have an impossible task ahead of you, when you try to sell content online. Because the habit of not paying for content is not ten years old and an online only phenomenon. It's hundreds of years old. Online, I feel that I've paid both for the transportation *and* the physical media already. So paying for content on top of that is really trying to learn audiences a habit they never, ever feel they've had -- even in the analog world.

(I actually also believe that the notion of copyright is a modern idea and a historically a paranthesis in man's history. But that's a subject for a very different blog post)