Explain “disruptive technology” and “architectural innovation” as it relates to this case.
In this module, we learned that everything is in a state of constant change. This is a challenge of strategic management, as the industry environment is driven by technology, consumer needs, politics, economic conditions, and many other influences. Consider these influences as you analyze the following case.
Case 11: New York Times: Adapting to the Digital Revolution p. 492 (in the textbook)
To support the case analysis read Chapter 8 and the assigned reading.
Remember that a case study is a puzzle to be solved, so before reading and answering the specific case questions, develop your proposed solution by following these five steps:
Read the case study to identify the key issues and underlying issues. These issues are the principles and concepts of the course module which apply to the situation described in the case study.
Record the facts from the case study which are relevant to the principles and concepts of the module. The case may have extraneous information not relevant to the current course module. Your ability to differentiate between relevant and irrelevant information is an important aspect of case analysis, as it will inform the focus of your answers.
Describe in some detail the actions that would address or correct the situation.
Consider how you would support your solution with examples from experience or current real-life examples or cases from textbooks.
Complete this initial analysis and then read the discussion questions. Typically, you will already have the answers to the questions but with a broader consideration. At this point, you can add the details and/or analytical tools required to solve the case.
Case Study Questions:
What was the nature and sources of organizational inertia in this case?
Explain “disruptive technology” and “architectural innovation” as it relates to this case.
Evaluate the role of organizational ambidexterity, crisis management, capability development, dynamic capabilities, and knowledge management in this case.
What general lessons for the management of strategic change did you gain from this case and how do they apply to the current state of this industry?
Case 11 The New York Times: Adapting to the Digital Revolution
On January 1, 2018, 37-year-old A.G. Sulzberger succeeded his father, Arthur Ochs Sulzberger, as chairman of the New York Times Company (NYT). He is the sixth member of the Ochs/Sulzberger family to lead the newspaper since it was purchased by Adolph Ochs in 1896. Yet, this apparent reverence for family tradition was not matched by conservatism in the company’s strategy and operational management. Indeed, A.G. Sulzberger was the primary architect of the digital strategy that had shaken the “Gray Lady”—as the Times was affectionately known—to her very foundations. In 2012, the prospects for the New York Times Company (NYT) were bleak. In common with most of the world’s newspaper companies, revenues were in steep decline and the company was losing money. Most commentators were pessimistic about the company’s future. Henry Blodget of Business Insider predicted a continuing decline in the company’s revenues as news readership and advertising moved online.1 Eric Jackson of Ironfre Capital LLC predicted that declining advertising revenues, rising pension costs, and limits on further cuts in operating costs, would mean that the NYT would be unable to continue as a standalone business.2 For over a decade, the NYT had been experimenting with different online business models, while at the same time selling assets and cutting costs. However, growth in revenues from digital advertising had failed to cover the shrinking revenues from print advertising, while cost cutting was limited by NYT’s commitment to comprehensive, high-quality journalism. The appointment of Mark Thompson, formerly director-general of the British Broadcasting Corporation, as CEO at the end of 2012 marked the beginning of a profound strategic shift. In May 2014, a working party chaired by A.G. Sulzberger issued a report titled “Innovation,” which provided a searing and penetrating analysis of the NYT’s weaknesses in adapting to the new world of digital media.3 The report created a frestorm both within the NYT and in the newspaper industry more widely and was the trigger for a total overhaul of the company’s strategy. In 2017, the NYT had its “best revenue growth in many years, driven by strong digital subscription revenues, which increased by over $100 million year-over-year.”4 The turnaround was refected in the NYT’s share price, which more than doubled in the two years leading up to March 2018 (see Figure 1). However, as A.G. Sulzberger prepared for his frst annual shareholders’ meeting as board chairman, he wondered about the sustainability of the NYT’s upturn in performance. Had the NYT fnally cracked the problem of how to reconcile its traditional commitment to quality journalism with the requirements of the digital age, or did the massive rise in the number of digital subscriptions simple refect the “Trump
bump”—the quest for unbiased, authoritative journalism in a time when the current US President was challenging the norms of objectivity and truth? The US Newspaper Industry The US newspaper industry—like that of most other countries—had been in decline for over two decades. The reason was competition from online media, both for news readership and for advertising. Although print newspapers had diversifed into online news provision, they had encountered powerful competition in this feld from other suppliers of digital news content—including online newspapers such as the Huffngton Post, Daily Beast, and BuzzFeed—as well as TV news suppliers with their own websites (ABC, CNN, and Fox), and online news aggregators such as Google News and LexisNexis. Table 1 shows the leading US news websites. The ability of all news websites to generate advertising revenues was constrained by the dominance of Google and Facebook over online advertising and by the powerful mobile platform owners—notably Apple and Google (Android). As a result, the decline in print readership (Figure 2) translated into an even steeper decline in advertising revenues for printed newspapers (Figure 3), which was only partly compensated for by the shift from print to digital advertising (Figure 4). The shift from print to online readership favored both national and international newspapers at the expense of the vast majority of US newspapers, which served local markets—individual cities and metropolitan regions. Only three newspapers could claim to be national (or even international) in their distribution: USA Today, the Wall Street Journal, and the New York Times. Table 2 shows the print circulations of the largest US newspapers. For newspapers to survive, they needed to reduce costs to match their shrinking revenues. Independent news gathering had been the major casualty—newsroom staffs had been cut drastically and most newspapers relied upon agencies such as Reuters,
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