Centre of Excellence.

This approach allows the survival of the relevant parts of the legacy business while giving the growth business time to establish itself.

Sooner or later, your company will probably need to transform itself in response to market shifts, groundbreaking technologies, or disruptive start-ups. Some strategists suggest doing this quickly and aggressively, by making a clean break from the past and turning your firm into something entirely new. In our experience, though, organizations built for legacy markets rarely pull this off. It can take years for an innovative initiative to become large enough to replace the revenue an incumbent has lost to disruption. And if your company completely abandons its old model, it throws away any advantage it still has.

We propose an approach that’s both more practical to implement and more sustainable. It rests on two insights:

First, major transformations need to be two different efforts happening in parallel. "Transformation A" should reposition the core business, adapting its current business model to the altered marketplace. "Transformation B" should create a separate, disruptive business to develop the innovations that will become the source of future growth.

Second, the key to making both transformations work is to establish a new organizational process we call a "capabilities exchange," through which the parallel efforts can share select resources without changing the mission or operations of either.

Dividing the effort in two allows leaders to develop a new strategy for the core that doesn’t need to make up for all the business lost to disruption. It also gives the innovative new operation the time it needs to grow. What one transformation effort could rarely accomplish alone, two together have a better chance of achieving.

IBM and Apple both took this dual-transformation approach. In the mid-1990s, IBM reconceived its mainframe business, shifting from proprietary systems to servers running software based on open standards. At the same time, it built a separate Global Services organization that became the source of its future growth. In the late 1990s, Apple repositioned its struggling PC business, trimming offerings and focusing on design. Shortly afterward, it launched the iPod and opened the iTunes store, which led to phenomenal growth.

More recently, we’ve seen the dual-track process unfolding at Barnes & Noble as the retailer reacted to the severe disruption of e-books, and at Xerox in response to the slow erosion of its core copier business. We will touch on the lessons Xerox and B&N have learned as we describe how the process works. But we’ll focus primarily on the case in which one of our authors (Clark Gilbert) developed and tested our approach: the Deseret News, which embarked on a dual transformation in response to the upheaval caused by the internet.

A Seismic Disruption

Founded in 1850 by Mormon pioneers, the Salt Lake City–based Deseret News thrived for 150 years under the traditional newspaper model: For a monthly fee, subscribers received on their doorsteps a daily paper filled with articles on a wide range of subjects—local and national news, arts, sports, entertainment, and more. Local advertisers paid to reach this audience through display ads, classifieds, and separate coupon inserts.

Incumbents most commonly experience disruption as a drop in revenue. At the Deseret News that drop began gradually and then became swift and deep. By 2008 internet upstarts were assaulting every part of its revenue base. Craigslist, Monster.com, and AutoTrader.com siphoned off classified revenues. Google’s search-term advertising competed for display-ad dollars. Free news websites like the Huffington Post, smart-phones, and social media sites diverted readers’ time and attention, drying up subscription dollars. Since advertising prices are pegged to circulation, declining readership hit all revenue streams at once. From 2008 to 2010, the Deseret News lost nearly 30% of its print display-ad revenues and an eye-popping 70% of print classified revenues.

The same forces were at work throughout the industry, as more than a dozen big-city newspapers closed their doors. The Rocky Mountain News, founded just nine years after the Deseret News in Denver, was shuttered by its parent, E.W. Scripps, in 2009. That was the year that Gilbert, a former Harvard Business School professor who had done research on market disruptions, came to the Deseret organization.

Dire as the situation was, it wasn’t hopeless. An assault on a business model doesn’t mean it’s entirely worthless. If the existing model could be adjusted to become self-sustaining, while innovative ways could be found to exploit the opportunities in the new digital landscape, the Deseret News could get back on course.

That’s how the members of the company’s leadership team saw it when they launched two distinct efforts. On the first floor of the Salt Lake City headquarters, they set out to re-conceive the print operation. On the fifth floor they set up a new organization, Deseret Digital Media, to take over the company’s websites and focus exclusively on web publishing.

designed by: bluetinweb

We use cookies to provide you with a better service.
By continuing to use our site, you are agreeing to the use of cookies as set in our policy. I understand