SpectatorBytes

Digital media companies would benefit from embracing technological innovation and taking proactive measures to avoid falling victim to the innovator’s dilemma. The Innovator’s Dilemma is the title of a book by Clayton Christensen in which he studies why successful market leading companies fail when faced with disruptive-innovations (i.e., simpler, cheaper, less functional products/services) in the marketplace.

One of the most compelling (and terrifying) aspects of the digital media and technology industry is the rapid pace of innovation. Every year we witness the launch of game-changing products and services. In some cases, these products capture the mainstream imagination (I don’t need to name these) while others garner the love of a smaller subset of enthusiasts. Consumers can continuously switch or update their portfolio of preferred digital products and services.

In recent years, the pace of innovation has accelerated thanks to the proliferation of competitors, rapidly declining production costs, and the establishment of standards in many areas of the industry. This trend is creating a challenge for most digital players who appear to be struggling to keep their products and services relevant with consumers in an even more competitive marketplace.
Those players who appear to be succeeding (or at least not struggling) have done so by making product and service innovation a core capability. They realize that driving innovation is essential to protect and grow their business in the long-term.

Facebook’s recent redesign illustrates the importance of making and what it takes to make innovation a core capability in the digital marketplace. In a much-publicized maneuver, Facebook completely redesigned their “homepage” experience around a real-time news feed of social activity. Some have described the new design as Facebook’s effort to adopt some of the most compelling aspects of the Twitter experience. A change of this magnitude in the user experience of a product as popular as Facebook is not for the faint of heart. It can alienate users and slow the arrival of new users.

Although this move has invited criticism across the Web from both industry pundits and users, I believe Facebook’s willingness to change its user experience in such a dramatic fashion deserves some praise. Despite its success in attracting new users, Facebook pushed forward to “innovate” its user experience to better serve an emerging consumer behavior, which Twitter seems to have unleashed. Perhaps, Facebook fears that unless their user experience evolves as fast as the market, it would be tacitly allowing the competition to chip away at its users’ attention and engagement long-term. So, regardless of the ultimate outcome of the redesign, the willingness and ability to adapt to changes in consumer behavior and consumption could prove to be one of Facebook’s primary competitive advantages. Many other companies in the space would be unwilling to take a chance such as this.

Some may argue (and probably rightly so) that Facebook was able to take this aggressive step because they do not have revenues that could be impacted by the change. If they had real dollars at risk, it is possible that they would not have taken such a step. This may very well be the case.  Unfortunately, I have seen several companies choose near-term monetization over product innovation, who have suffered for it in the long-term. In this scenario, the quest for monetization becomes a competitive disadvantage.

This has made me think that technology-driven cultures, such as Facebook, may have an edge in driving business innovation relative to their less-engineering driven counterparts. These cultures tend to put the mechanisms in place to foster and reward innovation.  In my experience, engineers are wired to drive innovation much more than traditional business managers. This “innovation” capability is particularly valuable for digital media where consumer behavior and business models are still taking shape.

This aggressive approach to innovation is a capability that media companies need to consider developing/matching. One way of doing so is to increasingly embrace engineering talent as a “core” part of their digital efforts (rather than a peripheral cost center). This implies creating product teams and organizations that effectively mix business and technology talent. It also implies putting in place product managers who have the ability to effectively collaborate with/lead engineering teams. Ideally, management would include leaders with “hybrid” experience in both technology and business. Another way of doing this is to create an environment where acquisitions are effectively leveraged to drive innovation. This approach requires a culture and organizational infrastructure which allow for external innovation to be easily plugged-in.

Doing so would help create an environment where their digital teams would increasingly focus on delivering new products and services that consistently meet the evolving needs of their customers and audiences. Fostering innovation within their own ranks would allow media companies to have a better shot at being able to compete on more equal terms with their “pure” technology counterparts.

There is no dilemma here: companies playing in digital media need to be innovators. However, this is clearly not an easy task.