The Newspaper Industry and ‘Strategic Drift’

How strategic drift affected the newspaper industry – In March 2013, the publisher of the Irish Examiner, Thomas Crosbie Holdings, was put into receivership by its bankers. The Examiner is a Cork institution – it can trace its history back to the 1840s – and is a significant employer in the city.

The news was all the more shocking given that group had been achieving record sales in the mid noughties, and had been engaged in an expansion programme, acquiring a raft of newspaper and radio assets (Keane 2007). Ireland’s property bubble burst in 2007, yet even in late 2008 TCH was still in acquisition mode (Keane 2008).

This looks like ‘strategic drift’, the gradual divergence of a company’s strategy from the environment in which it operates. Like many Irish businesses, TCH had failed to recognise that what looked like a mere slowdown in the property market was, in fact, the beginning of an economic collapse that would eventually lead to the nationalisation of most of the banking system and the country entering an EU/IMF bailout programme. In retrospect, we can see that the company’s strategy was diverging from the reality of the economic environment in which it was operating.

While the deteriorating economic situation was something that TCH shared with the rest of the Irish economy, the newspaper industry was experiencing another more serious form of strategic drift: the failure to adapt their business model to the digital age.

I remember discussing this with a manager from a leading newspaper at a business breakfast about ten years ago. He conceded that the online channel should be explored and described a couple of digital initiatives that the paper was involved in, but he was skeptical that it would ever be a major part of his company’s business. There was no sense that online should be at the core of the news publishing industry.

This fits the pattern of ‘disruptive innovation’ described by Clayton Christensen: Incumbents initially ignore the new entrants because their products and technology seem to be inferior and are not perceived to be a threat. This competitive response creates an opening for the disruptors, allowing them to get established in the market. As the technology improves, the new entrants begin to challenge the established companies and may eventually make the incumbents obsolete.

It could be argued that the boom-time economy masked the need for strategic change at TCH: Why change your strategy when you’re achieving record sales? And the task of transforming a print business into a digital media organisation should not be underestimated: sales of the printed product may be cannibalised by the online offering; the skills and practices in newspaper production built up over generations may not be well suited to the digital age (core competencies become core rigidities); relationships with customers, suppliers and employees may be strained during the transition.

Yet, some mainstream newspapers are making this transition. A good example is Guardian News & Media which now generates almost 30% of its revenue from digital channels (Sweney 2013). Andrew Miller, chief executive at the Guardian Media Group, explained that his company had committed to digital earlier than its peers and is now reaping the benefits.

If strategic drift is left unchecked, it ultimately requires urgent ‘transformational’ change to avoid the death of the organisation. Much of the Irish newspaper industry is now engaged in urgent transformational change.

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