Disruptive vs. Sustaining Innovations

By: Gary Randazzo

A few years back I was invited by Harvard’s Clay Christensen to participate in a panel discussion on disruptive innovations impacting the newspaper industry. At the time, the Internet was beginning to have an impact, but it wasn’t yet clear what that impact would be.  

Christensen put forth that disruptive innovations occur when industries improve their products at a faster rate than those improvements can be found useful by a meaningful segment of the customer base. This allows a new company to come in with a “good enough” product at a lower price. Over time, the new company improves its product and takes more and more of the industry leader’s customers.  

This theory also introduces the concept of a sustaining innovation, which allows the industry leaders to better serve their customers.  

The structure of an organization can prevent an industry leader from successfully competing against an industry entrant with a disruptive innovation. The primary setback is that the demands of the industry leader’s most profitable customers prevent that company from focusing on innovations that target its other customers. Christensen suggests that industry leaders create spin-off organizations solely focused on competing in the realm of the disruptive innovation.  

However, if the innovation is sustaining rather than disruptive, a spin-off company is not recommended, because the innovation is intended to improve the ability to serve the needs of the current customer base.  

With this basic description of disruptive and sustaining innovations, it is interesting to consider the impact of the Internet on the newspaper business and how the industry reacted. More importantly, I think there are answers for how newspapers can move forward.  

First, consider the impact of the Internet on the newspaper industry:

•  The Internet allowed the very profitable classified business to quickly move to a more technologically advanced format.

•  It targeted customers through links and keyword searches.

•  It allowed smaller advertisers to rotate ads at a lower cost.

Newspapers didn’t improve their products beyond the levels needed by their customers. Rather, there were pent-up demands from customers who were waiting for a new platform that better served their needs.  

The Internet was and is a sustaining innovation. That is, if the innovations had been introduced by the newspaper industry, the customer base would have quickly adopted the programs.  

So why did newspapers miss the boat?  

In response to the Internet, most newspapers set up a separate organization to operate their website, and many of those remain a separate entity today. These new organizations created their own programming, content, and ad programs. To jump-start advertising, the website was given a share of the print revenue, making it difficult to determine the success of the website programs.  

In other words, newspapers treated the Internet as a disruptive innovation, when in fact it is a sustaining innovation. By treating a sustaining technology as a disruptive technology and creating a separate structure, the industry leader impedes its own ability to serve its customers and opens opportunities for competitors to enter the market.  

So what should newspapers do now? They should integrate the Web functions with the newspaper. It should not be a separate entity. Find ways to understand the jobs advertisers and readers are hiring newspapers to do, and use all of the available technology to create a symbiotic array of products to do those jobs.  

Gary Randazzo is the founder of GWR Research and has served as a senior executive at the San Francisco Chronicle and the Houston Chronicle and has also led small and large businesses as CEO, COO, and CFO.