Distruptive innovation

Morris Kaplan

Morris Kaplan is a guest blogger.

Morris Kaplan, one-time stockbroker and venture capitalist, brings his finance skills and recent experience as a business journalist and writer to IT, with a special interest in telecoms and how communications is being transformed by technology.

Traditional media – and therefore related industries including telecommunications - is experiencing the impact of what the esteemed Professor Clayton Christensen referred to a ‘disruptive innovation’. Dr Christensen, a business professor at Harvard coined the phrase which he says “describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves ‘up market’, eventually displacing established competitors.”

What’s an example? Well Apple’s iPod comes to mind, displacing Sony’s Walkman and music CDs in one ‘fell swoop’ and thus displacing many established players in the music industry. Most kids today don’t know any other way to buy music than by iTunes. Locally, Seek.com.au while not the first internet jobs board by any means, displaced the “rivers of gold” (another “coined” term; this one being attributed to Rupert Murdoch referring to the classifieds revenue streams of The Age and The Sydney Morning Herald) as a result of its ‘disruptive innovation’. Ironically, Fairfax was offered a stake early in the piece by Seek but turned their noses up at the opportunity. That’s the nature of disruptive innovation; innovators are often confronted by resistance and a lack of belief.

Recent moves in the media space, in particular the investments by a number of billionaires into the 10 Network (a free to air television operator) and the move by the WA billionaire Kerry Stokes (controller of The Seven Network) to gain control of WAN, the Western Australian Newspaper group (which he described as a “sunset industry”) are indications of an industry experiencing disruptive innovation. Think too of the move by the venerable (print) newspaper group The New York Times which last week announced it was (finally) constructing a series of pay walls around its digital content in response to moves by News Corp, The Guardian and the Wall Street Journal (owned by News Corp).

Meanwhile we are seeing the early moves by the book publishing industry to catch up with the reality that the ‘disruptive innovation’ of the internet is finally hitting home. A series of failures at the retail end of the food chain (Borders failing in three countries: UK, USA and Australia) and the emergence of mutli-disciplined and contemporary firms offering e-Book services including a rapidly expanding e-reader offering, is changing consumer habits. Publishers and authors, once caught in a kind of paternalistic dance (read: authors with no power), are destined to be thrown into the maelstrom of an industry under the influence of disruptive innovation.

All up, we are going to see an acceleration in communications mobility as smart phones and e-readers become ubiquitous. Social media is already showing the way as innovators such as deal-of-the-day Groupon and location-based service provider FourSquare rapidly expand their footprints. The battle between publishers to attract consumers reading news on their mobile devices is set to intensify, as emerging devices such as the iPad become more relevant for the publishers both of news as well as books.

Business owners as well as telecoms operators still sitting on the fence could well keep an eye on the forthcoming London Book Fair which will no doubt have some interesting conversations.

Tags: disruptive innovation, news, books, publishers

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