The secret to new product development in the Digital Age: Start small, fail early, fail often

I’m going to let you in on a secret. Not one online newspaper today makes the top 25 online engagement ranking in its own market. Why does this matter? Because it means that no local user visits often enough and stays long enough to provide the foundation for a new business. Unwilling and unable to adapt to the radically different product and marketing sensibilities of digital media, newspapers made a fatal choice. They decided to use the Internet to support and extend their newspapers – instead of using it to replace them. They were feeding vitamins to a flagging horse instead of buying a truck.

Not one newspaper built a new digital product disentangled from the parent newspaper, born on the web and in total control of its own destiny. Not one.

The essential challenge was to build a product in demand that people needed, that would not be possible without the Internet. But by the time digital competitors arrived, newspapers had become the great incrementalists, inexperienced in innovation and ill-equipped culturally to handle an era of transformational, discontinuous change. So the Internet opportunity was reduced to nothing more than lower-cost distribution of the existing product. The Internet seemed like the answer to every publisher’s dream: No ink, no paper, no trucks, no delivery force and no risk – just digits. Too easy.

The online newspaper was never a business

Trouble is, local Internet users have consistently demonstrated by their usage that they find online editions of their newspaper to be of little value. An online newspaper on its own lacks sufficient scale and quality in product mix to keep an audience around for long – and strangely, newspaper companies have known of that audience weakness for a very long time. Fifteen years ago, at an International Newspaper Marketing Association meeting in 2000, the Nielsen audience measurement company reported on a study of the monthly consumption of online newspapers. The average visit frequency was just 2.75 times a month, or once every 10 days or so. Average time spent was just over 10 minutes. The numbers today are almost identical, despite the growth of broadband and mobile consumption. It’s impossible to build a viable and competitive digital business off an audience platform like this. It’s uncompetitive with other options that local advertisers have access to – and it’s too weak to drive new subscriptions.

Click to expand image. Taken from

Click to expand image. Taken from “Breaking the Story,” coming soon

The media business is no different from any other business. If nobody likes what you have to offer, you can’t survive.

There are three reasons why companies tend to hold too long to a flawed new product. First, its sponsors can be so vested in their original idea they refuse to believe what the market is telling them. The typical rationale offered up when their new venture doesn’t work as planned is that “we’re too early.” You’re never too early. The fact is that the market doesn’t like what you’re offering. You need to accept that, come to understand it, and then adapt.

Second, most companies have zero tolerance for the increased risk that comes with genuine innovation. It is a rare company that will ding today’s earnings for a bigger return tomorrow, taking capital away from mature, well-performing businesses and reinvesting it in faster-growing but lower-margin alternatives. It is even more rare to find a company that will put a process in place to take today’s risk and multiply it in order to get to a substantial long term strategic advantage. When Cox Enterprises launched autotrader.com, it set it free to go attack the automotive classifieds franchise of newspapers around the country, including that of its own newspapers. A lot of little voices inside and outside the company said we were nuts. The market value of autotrader.com today is somewhere north of $8 billion, far more than the collapsing value of the company’s newspapers.

Third, holding too long to a flawed product is a signal that a company hasn’t learned the most fundamental lesson about new product development: Start small, fail early, fail often. Failure is essential to the innovation process. No matter how artful the strategy or how accomplished the plan, the fact is that most new ventures begin life destined to fail. All the elaborate cost-benefit analyses, 50-tab spreadsheets and splendidly-rendered linear trend graphs in the world don’t guarantee success – and all the hard work in the world won’t make a misfiring product successful. Successful new products, even product extensions, are shaped out of organic need and interest, not out of stubborn effort and force of will. When you jump into a new business, you jump in to resolve the risk or exploit the hunch, not to prove that your initial market and product strategy was correct.

That means you have to commit with sufficient investment and staying power to gain insight and market understanding but along with that you must also be flexible, willing to reassess and change course, bobbing and weaving in response to what you’re learning. It’s never a straight line. There is never one single secret to strategic success and even if there was, nobody is smart enough to find it on their own. That’s why dart-throwing monkeys out-perform expert prognosticators every time. Experts are trapped within the bias of their own experience. Look for absolute certainty in their judgment. That’s always a sign of self-doubt.

Strategies for new product development and long term growth always come from early experimentation. The vision you’re looking for is always tantalizingly just out of reach. When the shape of it does eventually become clear enough to guide heavier focus and investment, you’ll realize that much of what you’ve finally learned was not part of your initial supposition. So the key is making the call to participate, jumping in, then following up with expedition, absolute intellectual honesty and a determination to hang in there for the long haul.

J.P. Morgan put it nicely. “Go as far as you can see.” He said. “When you get there, you’ll be able to see farther.”

Like a lot of companies, newspapers weren’t interested in seeing farther. They could not imagine that their online newspapers would be rejected so overwhelmingly. When they were, they chose to look the other way. That denial has been fatal.

Posted by Peter M. Winter

Peter is a traditional media veteran and a digital media pioneer. He is an active angel investor and occasional consultant. He advises established companies on cultural regeneration and also consults to digital start-ups, helping them incorporate management process without sacrificing speed. He holds five technology patents. Peter is an award-winning public speaker and writer. His new book "Cowboys and Cannibals," will be published in 2017 - it is the ultimate insider account of the battle to find a digital future for newspapers when the Internet came to town. He blogs on media and leadership at BlastofWinter.com and publishes his unconventional ideas about management on his LinkedIn page. His collection of short stories can be found on Medium.com, at Peter Winter's Life of Fiction

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