One of the most remarkable things for me as an entrepreneur over the past eight years since starting TheLadders has been watching the reaction of the entrenched incumbents to our business model.
The chart below shows the U.S. newspaper industry’s Help Wanted Classified Ad revenue from 2000 to 2010.
For the younger folks, help-wanted ads used to be how you got a job prior to the rise of the internet. It was kind of like a Craigslist printed on newspaper and delivered to people’s doors each day.
(In case you think I’m being facetious with the explanation, in my “CEO Welcome” of new employees at TheLadders I always ask how many people have ever looked for a job in the newspaper – over the past eight years the number of hands going up has dropped from 75% of the two dozen people in the room, to usually only 1 or 2 each time.)
So it may be no surprise that new industries and new technologies and new business models defeat old industries and old technologies and old business models. But the surprising lesson for me over the past decade hasn’t been that the big guys, the incumbents, the old order, can’t beat you.
The big surprise has been that they don’t want to.
With all of their cash and resources, the newspapers sensed back in the ’90s that the internet was going to change their business. They correctly foresaw that it would change their news gathering, their reporting, their advertising, and even their local classified ads.
In October 1995, the six most important newspapers in the country joined together to launch CareerPath.com in order to provide “electronic access… to the help-wanted advertisements printed in the six newspapers.” CareerPath was an early entrant and was one of the predecessor companies to CareerBuilder.
So how did the newspapers lose the industry? How did the chart above occur? With far more resources than any start-up, with century-old brand names, and with the foresight to predict what was happening to their business, how did the newspapers give away a $10 billion revenue stream? Why didn’t change their business model, their organizational structure and their people in order to capitalise on the coming Internet revolution?
The answer is that they didn’t want to.
The truth is contained in this kernel from the 1995 article: “Among other concerns, analysts say newspapers’ electronic advertising could eventually compete against the papers’ own print advertising.”
And competing with your own business is uncomfortable. It means the executives, organisation and processes associated with the old way have to be let go, pushed out of the way, and cut out of the picture. And a whole new group of people, who aren’t current employees, have to be recruited, trained, and given positions of power in your company.
In my decade in this industry, I’ve seen it time and time again: newspaper executives knew what had to be done to compete successfully in the future but were afraid to upset the people responsible for the past. It was a lack of courage, not a lack of clarity.
As Ronald Reagan said, “There are no easy answers, but there are simple answers.” The newspapers knew the simple path to success, but took the easy path to failure.