Deseret News’ Transformation to a Worldwide Information Business

What can your Business Learn from its Strategy?

By Paul Beebe

March 12, 2014

The need for bold innovation in the face of disruptions that redefine entire industries is greater today than ever before. Because of groundbreaking advances in technology, the pace of industry life cycles is accelerating. When Christensen first thought of studying disruptive innovation, one of his Harvard colleagues suggested that he look at the disk drive industry because each new generation of drives replaced larger devices with less storage capacity. The first drives could only be found inside the protective confines of a data center. Later generations moved into factories, offices and homes. Today they are ubiquitous.

Perhaps more important to Utah business managers, disruption is now happening everywhere. It isn’t a problem confined to large businesses. Small law firms have been affected by the spread of legal contract software that removes the need for professional advice. Tax preparation software like TurboTax is siphoning customers from accounting firms.

Disruption is not limited to for-profit companies. Higher education is being challenged by online universities. Government, health insurance companies and patients are pushing hospitals to develop new products and treatments that improve healthcare outcomes while driving down costs.

Nor is disruption limited to established businesses. Startups that might have struggled in the past are getting financial support from disruptive venture capitalists eager to get in on the ground floor of new industries.

“You have an entire ecosystem of funding a new industry life cycle that didn’t exist as fluidly even in the 1980s and 1990s as it does today,” Gilbert says.

Although they are often ignored or discounted, the warning signs of disruption are often in plain sight. A company’s core products become increasingly commodified. Investments in innovation produce little change in consumption, as when Kodak spent large sums in the 1990s to improve the quality of its film products but consumers were unwilling to pay higher prices for the improvements. New products introduced by outsiders seem inferior or have smaller profit margins. Their customers are different.

As an academic who had studied disruption and had worked with Christensen at Harvard, Gilbert could easily see the forces that were undermining the Deseret News. More importantly, perhaps, he had strong sense of what could revive the paper and spark a new era of audience and revenue growth.

It was clear in 2009 when Gilbert arrived at the Deseret News that a new strategy was necessary. The changes he implemented were sweeping. They focused on rebranding the paper in a way that would appeal to a broader reading public while simultaneously inventing a new digital business—DDM. Crucial, though, to the strategy’s success was to set the Deseret News and DDM apart from each other. Each has its own management, content creators and sales force.

That rule applies to any business fighting disruption. Gilbert insists that separating the core business from the new business unit is crucial. If they are kept together, the new business inevitably will suffer from neglect.

It is hard to argue that Gilbert is wrong. Four years after it was established, DDM is now bigger than KSL-TV on a revenue basis and almost as large as the print business. On a profit basis, digital is bigger than both, he says.

“The reason we’ve had 40 percent growth for four straight years is because we set up a separate group, set up a separate sales team, and that’s allowed [DDM] to grow on an unprecedented pace,” Gilbert says.

Still, after years of speaking across the country, he has concluded that separation is a step most managers don’t want to take. While they acknowledge Gilbert’s accomplishments, they believe their businesses are different, he says.

“I’d speak at big newspaper industry conferences and say, ‘you have to have a separate group.’ And they would say, ‘No you don’t. We’ve got journalists. They are smart. We’ve got sales people. They know the market. Why duplicate the cost structure?’

“And I’d say, ‘Go for it. Maybe you are different from everyone else. But the last 50 people who jumped off that cliff all died. So, you know, I’m going to go with gravity here. But maybe you can defy it,’” Gilbert says.

“It’s such a recurring and common [comment],” he says.

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