Growing New Crops

September 9, 2008 · Comments

roots Many companies are trying to find that next new hit. The bigger or older or more successful the company, it seems, the more difficult this experience truly is. Innovation from within is something that seems to be in a drought in America (at least). It feels (and I’m not going by data here, as much as observation) as if bigger companies are struggling to come up with the next transformative thing, while newer companies are eating their shorts in the interim.

I’m thinking about media companies a great deal as I say this. Tom Steinert-Threlkeld wrote a piece about how older media organizations are having a rough time figuring out the new stuff. Here’s a quote:

The Fourth Estate hasn’t done that great a job of creating a Fifth Estate, on the Internet. Name one breakout online site or service created from within an established media company.

Beyond this, there’s a lot to absorb, and it’s worth checking out. I pulled that one quote to say that it is interesting to consider.

Consumer Reports or Consumerist? (hat tip Paul Gillin for this idea)
People or Perez Hilton?
Newsweek or the Huffington Post?

I’m not one of those “kill all the old newspapers” types. I think there’s a lot a company can do. But it’s HOW one gets there that I’m starting to wonder about.

If I Did It

I’d make an “escape pod” model, something like this:

  • Pick a small core team, half insiders, half raw new outsiders.
  • Stake them a startup seed round.
  • Let them go a few months on that.
  • No corporate oversight, only report backs. It’s spend/try/live-or-die.
  • Assess. Good? Then raise an A round or give them more corporate assets.
  • Revise revenue targets.
  • Observe. Kill, or green light.

cherries I’m starting to think this is the way to incubate ANY property in this newer media environment, and I’m curious as to your take on the above model, and/or whether you think traditional media organizations CAN put new crops into the ground without pulling up the roots to check how they are growing?

What do you think?

Photo credit, lexdenn and sage.

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  • Thoughts about "incubating" in the newer media environment is a topic I think has been underexplored. Tons of presentations, articles on such extolling the millions interacting this web2.0 way and the millions doing it that way. Practically nothing on atomic beginnings. The chronicles of infancy of networks are absent. We need an archeological angle.

    It's germane to me, for whom the Twitter network in my profession as a municipal administrator in my local (Nova Scotia) does not yet exist. I am one sperm in a wiggle-search for my first egg. I'm "pre-incubation".

    Great stuff, Chris, really, ah, well, errrm, "fertile".

    bob ashley, cao
    Town of Berwick, Nova Scotia Canada
    @bashley
  • Rock on, Bob. How cool is it that Berwick has you on the prowl thinking it over. I think we'll get more into that methodology in coming years. Easier to cull the plants.
  • Micromanaging is an issue that faces newspapers' management. Because we can control every little aspect of newspaper production, we assume that we can control every aspect of the web properties. While it's possible to have control over all of it, often you'll need more than one trusted person to be making those decisions. A lot of newspapers and newspaper vendors that provide some online services have an problem seeing the difference between being a newspaper with a website and a news organization that has two products, one print and one digital.

    It's this micromanagement and refrigerator magnet mentality towards the digital offerings of newspapers that force them to ignore the larger issues, like the need for a different business model for each of those products.

    While your idea seems like a good one, managers know that while the print might be the more respected medium between the two (to the general public, not us) the print version is the one seen by more people. Because of that, most managers are unwilling to let go of the digital edition to someone who isn't deeply rooted in print, and there are so little people who are deeply rooted in print and get the online side of things enough to lead a team.

    I can expand a bit more, but not until the end of the month. Hope it helps.
  • @Rob - what if newspapers wake up and realize that they're not in the printing-of-news business? Have they, yet?

    (And we can wait, if that's safer).
  • I spent 10 years at Penton Media until last year. I think your suggestion is bold, and is hard for an established media company to accept -- especially on the B2B side. Many of the B2B media companies, like Penton, are owned and/or run by financial types who could care less about anything except a few quarterly statistics. So the importance of 2.0, the fact they're getting their shorts eaten, the fact they may not exist if they don't adapt better -- all don't matter in the boardrooms.
    There are certainly media companies that have done better than others, both B2B and B2C. Yet when the whole culture of the company -- from audience generation to editorial to sales -- is built on old media experience, it certainly takes work and a unique approach to come up with winning strategy in the new media environment.
    I can see them pulling up the roots and replanting multiple times. Taking back some of the fertilizer, maybe replacing some fresh, fertile dirt with some sand. And expecting it to work all along.
  • I'd love to talk more about it. Maybe sometime around October 1st. I really don't think that they have realized they are not in the printing business anymore. If they had, they would have an online circulation manager and other positions that mirror their print counter parts.
  • @Glenn- but let me ask you this: do simple numbers help? If you break off X in R&D and then return X+10%, is that a win? If yes, then figure out X to try new things AWAY FROM THE MOTHER SHIP.

    I think it's not the whole 2.0 thing. It's business risk aversion in a time where businesses must innovate or die.

    Frankly, I'm okay with the die.
  • brantc
    I came from TV and wanted to build the next Revision 3, built a site www.stationx.tv and started a show all on bootstrap. made a model, pitched to VC and was told I had a good idea but what could I do on my own without money. That became www.beerutopia.com is it a blog, vlog, magazine? I do not know the definition yet but we are having some success and starting to sell sponsors. So I am not trying for VC anymore, we are just rolling up our sleeves and going to work!
  • Great post, super thought-provoking as usual. I attribute it to the general corporate culture. As companies grow, it becomes less about the products or the innovation and more about the shares and the bottom line. They're less likely to take risks and rethink their business. It becomes growth by acquisition, not evolution. Sad scenario, but I've experienced it in other industries as well.
  • When I was at Knight Ridder New Media in the late 90's, we had an inside VC, Peter Rip, who looked at a lot of internal innovation initiatives, and couple years ago wrote a brilliant post about the experience:

    http://earlystagevc.typepad.com/earlystagevc/20...

    Most pertinent:

    "The Internet offers the opportunity for new entrants to build worldwide scale businesses with relatively little investment. But crushes the residual value of shareholder equity invested in obsolete local, physical cost structures. What looks like a great return on equity business for a new entrant looks like a balance sheet disaster for the incumbent."

    "This epiphany hit home in a staff meeting when it became clear that the top line impact of all of a successful New Media effort at KRI might have the scale of one medium-sized newspaper property."

    So Peter argues it's a capitalization issue. At some point there must be a balance-- newspaper valuations will gradually erode enough to make the numbers work.

    But Peter Drucker (Innovation & Entrepreneurship) and Clayton Christianson (Innovator's Dilemma) say it's also a matter of attention. Even a potential home run is too small at first to get managers in the legacy business to pay attention or sacrifice resources needed to fulfill existing profitable demand.

    So if you're serious about launching a new venture, the legacy business has to cut a check and let the new team get away (physically, P&L, everything).
  • Fascinating thinking, if not requiring a major culture shift.

    A question though with this move.. A lot of salesfolks at these publications will tell you their online properties trade print dollars for digital cents.

    Although I agree that this shift is not just coming but here, there's a lot more than just editorial/content that need to be brought onboard.
  • Do newspapers know they're being marginalized? Most do. They're just not sure what to do about it. Aritifact: San Diego Union Tribune sent a staffer to FASTforward '07 in San Diego to learn more about Enterprise 2.0. Had great deep conversations with that individual.

    It's kinda like the issue I saw at MCI. The entire engine of MCI cashflow was held up by the telemarketing centers. It was a finely tuned engine. But it was losing speed (incentives based on 'sign-ups' soon turned into revolving doors of returning customers). Changing the model, however was so precarious that the wheels would start falling off and the business couldn't survive that much change.

    That's the beauty of 2.0. It's about doing lots of small stuff, but you have to start. NOW!
  • I think the biggest think it comes down to is control. I work in for a telecommunications company and when it comes to innovating something new it's really hard to gain traction because they want VP's and Directors to have direct control and won't let the innovators innovate. It's hard to get them to part ways with any money because they want to know the exact ROI and if you can't prove it to be favorable then they won't sign off on it. So for them a live or die mentality doesn't work because they want something that will definitely live (even though a lot of their VP backed projects die).

    To me this falls back into the whole reason why so many of the Fortune 500 don't use social media at all or even to the extent that they could (compared to the inc. 500 who have a fairly high %). That reason is control, the company would have to give up a little control over it's employees, funding given, etc. The whole idea of someone else having control over a project (especially a "non management" emloyee) scares most large companies to death. They feel they can't afford the "we've got nothing to loose" mentality and if something fails it will reflect badly on them, instead of spinning it as "well at least we tried".

    I agree with your model and think that if more companies adopted this model we would see some great things come about not in just "old media" but in any company that dug back into the original entrepreneurial spirit that created them and took the chance to create something new.
  • I agree with Jason, except I'd offer "organizational culture" may have broader relevance than "corporate culture". Both the private and public sectors share a pathology (psychosis?) of stultifying bureaucracy. Daniel Boone, the individual, blazes trails in the wide open frontier, but his organized followers build fiefdoms and fortresses. Preparedness for change is a survival mechanism for Daniel Boone, just as its polar opposite--resistance to change--marks the organization's preservation instinct. Empires, private or public, depend on an unmoving gravitational center. That's why I work for a small town--we manage to retain a residue of the guerilla's flexibility.
  • I don't think you can just blame culture and bad bureaucratic people... if you manage a legacy business and your incentives rest on finding another $5-50M in incremental revenue, you simply can't spend time thinking about innovative things.

    At Knight Ridder we had plenty of smart, innovative people, but the opportunities (e.g. Newshound, an early subscription based version of Google Alerts/Filtrbox/Vibemetrix/Meltwater/CustomScoop), just couldn't move the needle fast enough.

    Probably the biggest mistake was to not spin out the new media ventures as completely as possible.
  • Let me amend what I just wrote...

    replace: "you simply can’t spend time thinking about innovative things."

    with this: "you simply can’t spend time thinking about innovative things that have a 5-10 year harvest horizon and don't help you get your next bonus."
  • One site comes to mind: Hulu.

    Beyond that, at least a lot of these big companies you speak of are at least trying now; albeit, mostly by just devouring the companies (e.g. CBS bought last.fm, etc. etc.).
  • Today the WSJ talks about AOL's attempt to be relevant and grow a new crop, so to speak. Granted, they probably should rotate their crops because AOL has sucked all the life giving nutrients out of their current situation but I digress. This is the classic meeting of old world media (Time Warner) and "supposed" new media (AOL). The ensuing train wreck has been seen and heard around the world. Chris, I think your "system" is on in theory but the true wild card in any of this is relationships. How well do the insiders and outsiders play together and will egos take a great idea on paper and just make it an exercise in power and ego. Sounds kinda dark, I know that. Cold hard reality is though that it's the people that make it work. There have been some bad plans that have been able to 'evolve" due to strong leadership and that would be required to pull off your model effectively. Oh and how many times have GREAT plans / ideas been completely derailed by egomaniacs and power mongers? Unfortunately most people "turn" when they have some power so there needs to be testing of the team before there is testing of the idea. This is obviously just one man's opinion.
  • It's a great opinion, Frank. Do humans ruin things? All the time. Look at the planet.

    But should we try?
  • I believe it was Tom Peters who said it's easier to kill and organization than to change it. There seem to be few established orgs that are capable of radical, breakout change. Part of it might be that they're not managed to it (held accountable for it). But I think you need a bit of a "punk"/radical attitude to break away from the pack. Ultimately, that's not typically condoned or fostered within even the more entrepreneurial organizations.
  • If you don't really REALLY mean it, its just window dressing. When I worked for Voyager years ago, Bob Stein was a wonder at creating an environment of innovation. (and complete chaos too :>) But what I remember about what works is this. 1) Leadership from the very tippy top supported it wholeheartedly because they believed in it, not something to kinda sorta play around with maybe crap.
    2) It was actually okay to have huge turnover, but that evolved into relationships that continued. Bob would bring in these young kids from NYU or wherever, set them lose, and then after a couple years they went off and created their own thing, but strong connections remained.
    3) Stay friends and support them in their new adventures - you don't have to own them, to have beneficial relationships and value - eg partners.
    okay that's my 3 cents.
  • A lot of companies are very traditional and for them to change won't happen overnight. Some companies are developing new ways like Hulu or HBO and how they are integrating a new online TV show. We are beginning to see more media companies collaborating with online teams to produce more innovative and quality content. I think things will pick up even more over the next few years.

    Craig
    www.budgetpulse.com
  • Chris,

    We should always try. We just need to make sure that when we try we do things with meaning and intention. It's when we do the "live and let live" thing that it quickly gets messy.
  • I agree with Josh and Bob. Managers desire control as it is their way to claim responsibility and prove their function is needed. Bigger the company, usually larger the hierarchy.
    This of course impacts the organisational culture.

    Shareholders also have their word to say and many are prone to risk aversion when considering innovation.

    On the other hand the intention behind this innovation is extremely important and must resonate in the company (and out)as pure.

    With today's economical situation, people may think twice before deciding to jump into an innovative but risky business. One can easily lose his job.

    In any case, companies will soon realize that they will have to invest differently in their branding strategy. By engaging their employees and other stakeholders larger firms might create smaller and yet better managed projects.
    The "escape pod" is an interesting model, but I believe the team will need more nurturing than just cash and a scorecard.

    With ZackBrandit, I didn't think twice.
    Me & my team followed your philosophy and started small.
    Time will tell if we made the right decision.
    In the meantime I invite you to check our blog http://blog.zackbrandit.com
    where we talk about brand engagement.
  • Old Media vs. New Media: it's all media. And while NYTimes, WSJ and People and so many other "old media" types have already done what you suggest (and many have lost lots of $$ doing it), Chris, it still comes down to this: timely content. A piece of that timely content is participation by readers/users. But not at the expense of timeliness and good content. Take a look @ what's happening with our current political scene: rumors and muck raking all over the internet from both parties @ all sorts of sites and blog. Where does someone go for the timely and *good* content? What's a user to do? Who do they trust? Peace (as always)!
  • Love the seed reference (and I'm working to put a head shot in twitter profile, I listened). During lunch yesterday Paul discussed how middle management causes constipation for the next new thing. I'd put a lot of effort in creating the escape pod teams to provide full range variety of types and strengths. I'd also be upfront and make clear to the group why each was chosen, so they can see themselves in a community model, not a corporate model, giving them the best opportunity to hit the ground running.

    I think the incentive of revenue sharing, signing for a clear "lay" to use the whaling terminology, and to have all aspects of of the financial eventualities placed on the table in full view, would optimize term performance.
  • As a recent MSM evacuee, this post is spot-on from my perspective. I would have loved it if my former employer had gotten this "radical" instead of trying to force things to fit online because they fit in print. Two different media, two different audiences with different expectation, needs and demands.

    Yes, timely content is key whether it's Old Media or New Media. But the delivery and display are dramatically different and too few in Old Media grasp that. Yes, part of it is about control. You can't control a forum, a blog site, story comments, community calendar submissions. It's your community, your readers/users, God love 'em, and in this day, they want their say. Provide a platform where they can interact and they'll stay around. Otherwise, they'll set up their Google news alerts and stop by your site only when something grabs their attention.
  • This is a nice theory but who needs the established media companies to incubate anything?

    Entrepreneurs backed by the venture community have filled the gap just fine with plenty of promising startups.

    Yes, the media companies should be doing it themselves (instead of hoping desperately that the Internet would somehow go away...) but they also have the luxury of being fast-followers and using their deep pockets to acquire the best startups.

    My whole career has been based on (profitably) helping this transition. Media companies and startups need each other.

    Market-based evolution at work.
  • cirena
    Large corporations incubating techno upstarts isn't a new idea...but its not always successful. In 2000, I worked for a large media conglomerate in Germany that was trying to do its own version of MyPoints, or online bonus program. We had just set everything up, selected prizes, had a marketing strategy and all, and corporate decided to buy a (at the time) successful start-up in the same field. Sometimes its easier and cheaper to buy the new technology or service than to develop it in-house.
  • deny.poerhdiyanto
    Yup, I agree with you mate, but it's a high risk step to take,
    what do you think?
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