Christensen versus Porter and The New York Times
The New York Times is running a brilliant article today about the Harvard Business School and the emerging Internet technologies that might destroy its business model. In it, the authors turn to two HBS professors, Clay Christensen and Michael Porter, for views on how the School should transition to the digital age. Christensen, characteristically, argues that HBS exists at the high end of the market, and will eventually be destroyed unless it sets-up a separate digital operation to compete against the new companies seeking to disrupt its model. Instead, Harvard has elected to set-up a complementary business, one that is designed specifically not to disrupt the existing model. Their online approach, called HBX, is a kind of elite “Pre-MBA” seeking to teach liberal arts majors the basics of business. About this effort, Christensen says:
“What they’re doing is, in my language, a sustaining innovation,” akin to Kodak introducing better film, circa 2005. “It’s not truly disruptive.”
The HBX approach was championed by another HBS professor, Michael Porter, also very famous but less frequently mentioned by those living through disruptive innovation. Porter argues:
“I think the big risk in any new technology is to believe the technology is the strategy. Just because 200,000 people sign up doesn’t mean it’s a good idea.” Though Professor Porter published “Strategy and the Internet” in the Harvard Business Review in 2001, before the advent of MOOCs, the article makes his sternest warning about the perils of online recklessness: “A destructive, zero-sum form of competition has been set in motion that confuses the acquisition of customers with the building of profitability.”
The Dean, Nitin Nohria, seems to have sided squarely with Porter. He tells The Times:
“I do not believe our M.B.A. program is at risk.” He concluded that disruption is not always “all or nothing,” and cited the businesses of music and retailing as examples. “In the music business, all record stores are gone,” he said, while in retailing, “it’s not like Amazon has eliminated everything; after those debates, my feeling was that we’re going to be more in that category.”
This argument played out throughout our Riptide interviews. Almost everyone we interviewed mentioned Clay Christensen and his ideas when discussing their own experiences with digital journalism. Interestingly, no one mentioned Porter, and in hindsight and with the benefit of this article, I wish they had. As Nohria states, it really isn’t “all or nothing.” But that naturally begs the question: are newspapers more like record stores or retailers?
The Riptide hypothesis is: Both. As we suggested repeatedly, the journalism is greatly sustained by the web and associated digital technologies. Never before have so many people around the world experienced, and enjoyed, New York Times storytelling. But the advertising is like record stores. Classified advertising, and – increasingly – high-end display have experienced a “dollars to pennies,” value destruction, to quote Jeff Zucker. That’s what makes the business of quality journalistic transformation so difficult to manage. You are managing both disruptive and sustaining situations at the same time.
Ultimately, The Times, the FT and the Wall Street Journal seem to have chosen the Michael Porter path. They’ve created high-end, sustaining extensions of their core models and priced them to largely complement one another. This is in sharp contrast to the “digital first” methodology followed by CEO John Paton at Digital First Media. Admittedly, the road is much tougher for large metros like Paton’s, stuck in their local markets and unable to attain the kind of global scale of the New York Times. But in the end, either The Times and others following the sustaining path will be like the specialty retailers able to thrive among the behemoths, or like record stores, pulled under by the Riptide.