“Across industries, only 9% of disrupted organisations ever recover,” found Clark Gilbert and Clayton M Christensen in recent research into innovation in digitally disrupted markets.
“Of those, 100% created a separate digital unit to take on the disruption. Not one company […] succeeded trying to develop digital inside the existing company.”
Gilbert is a former Harvard Business School professor who now runs the Deseret News and Deseret Digital Media in Utah, and Christensen is, of course, the author of The Innovator's Dilemma, a book as relevant now as when it was written in 1997.
You might be tempted to argue that because Gilbert is in the news business his findings don’t apply to books. But the parallels between news and books are close: both produce easily digitised content, both have legacy costs, both struggle with commercial innovation, and both have been slow to adapt to technology. Indeed, I believe the news industry is a much closer parallel to books than the oft-cited music industry.
Gilbert's six principles for how media companies must deal with disruption
1. Create a separate digital unit
Gilbert’s first finding, that only companies which created separate digital units survive disruption, is the one that he gets most push-back on. But, he says, the evidence is so compelling that to argue against it is “like arguing against gravity”. However, while having a separate digital unit is essential to survival, by itself it is not sufficient to guarantee success.
2. Transform your legacy business
The second of Gilbert’s principles is that companies must transform the legacy business as well, adding new revenue streams and developing new markets. I think Osprey and Angry Robot are great examples of how to explore new products and revenue streams such as subscriptions and memberships. But there are a lot of core business transformations that publishers also need to address, including improved author accounting, better collaboration tools and practices, and the improvement of digital understanding across not just one imprint but entire houses. There are also editorial innovations to come, not just around the potential for technology to create new storytelling platforms, but also around how authors are developed through canny use of short stories and novellas.
3. Legacy transformation: Get smaller and better
Gilbert’s third principle is that legacy transformation involves getting smaller and getting better. Many publishers have already shed a lot of editorial staff, moving from an employee to a freelance model, but that’s not enough. Publishers also need to understand their market in more detail, and that means readers not retailers. They need to connect with readers and form the kinds of deep relationships that the likes of Amazon simply can’t manage.
4. Create new businesses and marketplaces
Says Gilbert: “This new unit has separate staff, a separate physical space, a separate balance sheet of profit and loss, its own management structure and distinct content and product teams. Because this unit will be centered on digital, the content produced is different, appealing to the strengths and user behavior inherent to web-based platforms.”
Here, publishers should learn a lesson that most in journalism have yet to grasp: In order to be successful you need to hire in domain expertise, which means hiring people from outside of your industry. You want to really understand social? Hire someone who has been working on social for years, not a Facebook power user who happens to work in publishing. You want to rethink accounts as an author service? Hire in someone with an unparalleled understanding of Xero and CRM.
Journalism has always been tribal and that means that many news organisations have missed out on learning from domain experts because they couldn’t believe that someone from outside of journalism might have something relevant to say. Every industry likes to think that they are so special that no one from the outside world could possibly teach them anything. That is fundamentally wrong and it’s the kind of thinking that kills businesses.
What’s more, even publishing insiders who have a phenomenal grasp of digital may end up still thinking within existing paradigms, cleaving to industry norms despite their best efforts. The same happened in journalism and it’s very hard to combat because we aren’t always aware of our own inbuilt biases and assumptions. To paraphrase journalist Steve Yelvington, human mothers only give birth to alien babies on SyFy.
5. Keep legacy and digital units separate
Gilbert’s fifth principle is that the relationship between the transforming legacy business and the new digital business must be aggressively managed so that the two sides “meet solely to share resources and overall vision, not to combine into a hybrid model”. Allowing the legacy organisation too close a relationship with the new disruptive business will result in legacy “suck[ing] the life out of” the new business.
“[T]op managers have to take great care to let each organisation work independently. The legacy transformation will be the better for it, and so will be the new and frankly disruptive entity. If a spirit of competition rises between the two entities, Gilbert encourages fostering it so that each side becomes better at its core mission. Let the legacy organization make the traditional product great while the new business unit solely targets new opportunities that the traditional unit might even consider competitors. Ultimately it takes discipline and courage to keep the units separate. But it’s absolutely critical, Gilbert stresses. It is a point he makes repeatedly.”
6. Don't underestimate the magnitude of the disruption
Finally, Gilbert says that “magnitude of the disruption cannot be ignored”, and that’s just as true for books as it is for news. The publishing industry has multiple challenges facing it and is simply not going to triumph by nibbling around the edges with digital-only imprints, outsourced workforces and collapsing advances for midlist authors.
Now this is not to say that disruption is happening so fast that we’re all immediately doomed. As Tom Coates said in 2006 about the pace of change in the media (original emphasis):
“These changes are happening, they’re definitely happening, but they’re happening at a reasonable, comprehendible pace. There are opportunities, of course, and you have to be fast to be the first mover, but you don’t die if you’re not the first mover – you only die if you don’t adapt.
“My sense of these media organisations that use this argument of incredibly rapid technology change is that they’re screaming that they’re being pursued by a snail and yet they cannot get away! ‘The snail! The snail!’, they cry. ‘How can we possibly escape!?. The problem being that the snail’s been moving closer for the last twenty years one way or another and they just weren’t paying attention.”
What Gilbert and Christensen's findings do say is that it is not enough to dabble, to make adjustments here and there, to have a digital-only imprint that’s in all other ways a carbon copy of a print imprint. Now is the time for publishers to truly reinvent their own business because the only way to survive disruption is to disrupt yourself.