Picture perfect Perez: What would the CEO of Kodak do with US newspapers?

"We all know that there is at least one dark side to success. One tends first to get comfortable, then complacent and finally sloppy. What starts as a vision whose only objective is satisfying customer needs becomes an entity by itself and, if successful, an integral part of your way of life as a company or an industry. The more successful you become, the more interdependence gets created with the rest of the company. You develop strong self-defense antibodies, and the continuous evolution and improvement of the original vision begins to conflict with maintaining the status quo.

Thousands of examples abound, both with companies as with individuals and nations. It is not that you don’t realize that it is going on, it’s that the only real solution conflicts severely with the very core of your present, comfortable existence. To make it more complicated, there are many constituencies who will be judging you in the process."

This is interesting if not groundbreaking. it's a good solid explanation for why newspapers were ripe for disruption. I guess his words are inspired by his experience at Kodak, but he could as easily be talking about us.

Perez cites four factors that drive disruption:

1. Meaningful technology breakthrough
2. Significant supply chain management improvement
3. Valuable business model innovation.
4. Main ingredient: Notorious decadence.

(photo: 1000nerds.kodak.com)

Those who foresee the death of newspapers will point to this and say that the internet provides the technology breakthrough, the absence of paper and printing is about as significant a supply-chain improvement as you could wish for, and the business model innovation is the smashing of geography as the definition of customers, both readers and advertisers, and the provision of information on demand for free.

And they'd be right. Only a fool would argue that the internet hasn't been a disruptive force for a newspaper business model. The question though is how should we respond?

What Perez doesn't mention is that consideration of the near future of revenues and likely future competition might be a useful aid to decision making. Perez successfully moved Kodak into digital cameras before realizing that there wasn't any money in it. Perez was smart enough move on quickly after realizing the digital camera business was "crappy".

Now Kodak has focussed on using its technology and licensing it to others, putting its chips in other people's cameras as well as a number of other bets that establish Kodak in different parts of the Image business. What does hold true though is that Kodak is still selling something concrete to people who want to buy it. Kodak hasn't been foolish enough to try and be in the pixel business.

What we need as newspapers is for us to disrupt our own business before everyone else takes it piece by piece. When the Kodak film business collapsed, the company was saved by its hidden strengths, its ability to innovate in chemistry and electronics, a brand that could extend beyond film and paper. What are US newspapers' strengths? A large named daily customer base and distribution system! A credible brand that people broadly trust! An ability to select, edit and order information to make it easier to consume!

Do all these strengths point to a digital only future? Some do, but by no means all.

And unless you're excited by a world of inifinite competition for finite ad revenue, I'd always look at print innovation first if you can. Especially if the choice is between that and praying that my readers will gather en masse at my newspaper's website in an orderly fashion.

Newspapers as a primarily web business, to me, is the equivalent of Kodak's "crappy" digital camera business. We might be able to execute it brilliantly - as Kodak did with EasyShare - but even if we did, it cannot be our future.

So what should we be doing? WWPD? (What Would Perez Do?).

1. Meaningful technology breakthrough. Perez would look for a printing technology that dramatically reduces costs, something like the rejuvenated electric arc furnace that enabled mini steel mills to disrupt big steel. I haven't seen it yet, but it may not be traditional offset print manufacturers who come up with it. I wonder where there might be cheap spare printing capacity or technology that could be upgraded and adapted for newspaper production. Are we looking hard enough?
2. Supply chain improvement. Essentially this is about cutting out waste. I want to see us printing smaller newspapers with more that people want to read and less that they don't. This means breaking out of the one-size-fits-all model. Maybe we shift some of our capital costs to the consumer? We could talk to, well, Kodak about a free-to-the-customer home printer that produces a 16-page folded A3 newspaper every morning and for which they have to buy the newsprint and ink.
3. Valuable business model innovation. We've had free newspapers that lean more heavily on reach and advertising. Maybe the next model is highly restricted fixed-position advertising sold at low cost via the internet in auctions. Maybe we look for upgrades to our print and distribution systems so that advertisers can bid on specific consumers. I've had magazine ads directly addressed to me, I wonder how far we can personalize advertising to give better value to advertisers. I would even be happy with a paperless future if we were aggressively driving the adoption of "electronic paper", supplying the kit to customers, doing deals with cellphone companies to connect them up, offering them our newspapers and charging magazines and others to get access (a cable company business model?).

All of these ideas are flawed, but that's what you'd expect. There's something in all of them that a room full of our best people could explore interestingly if we didn't have them tuned in to the siren call of internet migration.

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