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Paper #03-018
Beyond Resource Allocation: Towards a Process Model of Response to Disruptive Change
Clark G. Gilbert
Copyright © 2002 Clark Gilbert
Working papers are in draft form. This working paper is distributed for purposes of comment and discussion only. It may not be reproduced without permission of the copyright holder. Copies of working papers are available from the author.
Beyond Resource Allocation: Towards a Process Model of Response
Clark G. Gilbert Graduate School of Business Administration
Harvard University South Hall #217
Boston, MA 02163
Tel: (617) 496-2783 Fax: (617) 495-3817
Beyond Resource Allocation: Towards a Process Model of Response to Disruptive Change
The challenge of innovation in response to external change lies at the heart of firm sustainability. While external shifts can take many forms, the particular problem of disruptive change has proved particularly problematic for incumbent firms. Previous research has described the challenge as one of resource commitment. But what happens when firms do commit sufficient resources? Does overcoming the problem of commitment imply effective incumbent response? Grounding the research in a series of case study experiments, I inductively build toward a model of firm response. There is evidence that the challenges of resource commitment described in the literature do exist and, uninterrupted, will act to starve the new business of the necessary resources for development. However, a strong sense of threat to the core organization can act as a catalyst to motivate resources that would otherwise be denied. Unfortunately, the same threat motivated mechanism that is required to trigger resources also leads to aggressive rigidity around the established market and product. This finding is supported by research in the threat rigidity literature. Finally, there are copying mechanisms that allow firms to de-couple the resource motivating benefits of threatened response from its rigidity producing behaviors. Separating the new business from the core organization allows managers the independence necessary to frame their efforts as an independent opportunity from the established business, relaxing the response rigidity and allowing the venture to innovate in a market that values the unique attributes of the new technology. Keywords: Strategic change, threat, opportunity, resource allocation, disruptive
technology
INTRODUCTION
The challenge of innovation in response to external change lies at the heart of firm
sustainability. While external shifts can take many forms, the particular problem of
disruptive change has proved particularly problematic for incumbent firms (Christensen,
1997). Disruption occurs not when new technologies attack established markets head-on,
but when the initial attributes of the emerging technologies cause them to be valued only
in emerging markets, prior to invading established markets (Christensen and Bower,
1996; Foster, 1985). This type of market shift has led to the decline of established
leaders and the rise of new entrants across a range of industries, including: disk drives,
computers, transportation systems, excavation equipment, accounting software, and retail
distribution (Christensen and Rosenbloom, 1995; Christensen, 1997; Cooper and
Schendel, 1976). Previous research has described the challenge of incumbent firms as a
problem of resource commitment. Christensen and Bower explain, “The inability of
some successful firms to allocate sufficient resources [italics added] to technologies that
initially cannot find application in mainstream markets, but later invade them, lies at the
root of the failure of many once-successful firms” (1996, p. 198). Because firms commit
resources to the needs of the mainstream markets, resource allocation mechanisms act to
starve disruptive innovation of the resources required to generate sufficient response. But
what happens when firms do commit sufficient resources? Does overcoming the problem
of commitment imply effective incumbent response?
The recent response of Kodak to digital imaging is worth consideration. As with
other disruptive technologies, the early products built around digital imaging did not
initially meet the performance criteria demanded by Kodak’s mainstream customers in
4
their established chemical film markets. Theory would predict that Kodak would starve
the new imaging technology of the resources required for its development. However,
unlike the previously observed models of firm response, Kodak aggressively allocated
resources to the new technology. Between 1996 and 1998, Kodak spent over $2 billion
on digital imaging and nearly half of its budgeted R&D resources. Unfortunately, rather
than finding markets that would value the unique attributes of the new technology,
Kodak’s response was to force the product into its existing markets, installing over 2000
digital kiosks through its established retail network. Kodak’s focus on its established
market occurred despite the fact that new entrants were rapidly developing applications
for an emerging market around home usage and development. Kodak had recognized the
threat of disruption and overcome the problem of resource commitment, but had
aggressively crammed the new technology into its established markets.
This paper is motivated around three research questions that relate to this response
phenomenon. First, what allows firms to overcome the challenges of resource
commitment in response to disruptive change? Second, when firms do respond, what
drives the observed rigid behavior where disruptive technologies are aggressively
crammed into existing markets? Third, are there mechanisms to relax this rigidity that
will allow the firm to innovate along the demands of emerging markets? The
phenomenological nature of these questions led the inductive study outlined in this paper.
The setting for the research is the newspaper industry and firm response to digital
publishing. Like other disruptive innovations studied previously, the established markets
of newspaper companies initially undervalued digital publishing. But unlike the previous
research on disruptive technology, the industry responded quite aggressively.
5
Unfortunately, despite their intense commitment, many firms forced the new technology
into existing market models at the expense of innovating around a new market segment.
Applying a series of case study experiments, I inductively build toward a
grounded model of firm response. There is evidence that the challenges of resource
commitment described in the literature do exist and, uninterrupted, will act to starve the
new business of the necessary resources for development. However, a strong sense of
threat to the core organization can act as a catalyst to motivate resources that would
otherwise be denied. Unfortunately, the same threat motivated mechanism that is
required to trigger resources also leads to aggressive rigidity around the established
market and product. This finding is supported by research in the threat rigidity literature
(Dutton and Jackson, 1987; Staw, Sandelands, and Dutton, 1981). Finally, there are
copying mechanisms that allow firms to de-couple the resource motivating benefits of
threatened response from its rigidity producing behaviors. Separating the new business
from the core organization allows managers the independence necessary to frame their
efforts as an independent opportunity from the established business, relaxing the response
rigidity and allowing the venture to innovate around a market that values the unique
attributes of the new technology.
RESEARCH METHODOLOGY
The research employs a multi-case design, which allows what has been called a
“replication logic” whereby a set of cases are treated as a series of experiments, each case
serving to confirm or disconfirm inferences from another (Yin, 1994). The current study
provided an opportunity to observe and analyze a phenomenon previously inaccessible to
6
scientific investigation (Yin, 1994). There are numerous examples where organizational
phenomena have been examined productively using inductive case study research
(Burgelman, 1983a; Eisenhardt and Bourgeois, 1998; Gersick, 1988). The following
research employs a Type IV embedded, multi-case design (Yin, 1994). The primary unit
of analysis is the new venture and the embedded units are the sponsoring division and the
corporation itself. In total, eight new ventures launched in response to a new technology
were examined across eight different newspapers and four different corporate settings.
The eight newspapers are presented in Table 1 with relevant descriptive statistics.
Because of the sensitivity of the data, the names of these newspapers and their parent
organizations have been disguised.
I chose to examine the response of newspaper firms to digital publishing for two
reasons. First, the impact of electronic publishing on firms in the newspaper industry
generally fit the research questions described earlier. Online publishing technologies
tended not to find applications with established newspaper markets initially, but
threatened to eventually invade those markets as the technology evolved. Also, the
response of newspaper firms was different than many other industries studied previously
in the literature of disruptive technology—firms were able to respond quite aggressively
to the new technology, despite its initial lack of application in their mainstream markets.
The second reason I selected a single industry was more methodological—selecting firms
in a single industry allows the researcher to control for extraneous variation (Eisenhardt,
1989a). The selection of specific case sites was based on a theoretical sampling (Glaser
and Strauss, 1967; Yin, 1994) along a series of polar types that were likely to replicate or
extend the emerging theory (Pettigrew, 1988; Eisenhardt, 1989a). Thus four ventures
7
that were extremely innovative and four ventures that were extremely rigid were
identified for further examination.
Data Sources
Four main sources of data were collected: 1) open-ended interviews, 2) archival
documents, 3) direct observations, and 4) public documents. Yin suggests: “With
triangulation, the potential problems of construct validity also can be addressed because
the multiple sources of evidence essentially provide multiple measures of the same
phenomenon” (1994, p.92). Following the embedded nature of the study, data was
collected at the corporate level, the newspaper level, and the online venture level across
each of the sources of data (See Table 2).
Interviews. In total 51 in-depth, one to two hour long interviews were conducted.
These interviews included the senior executive at each level of the analysis: corporate,
the newspaper, and the online venture. Where possible, functional managers at the
newspaper and online venture level were also interviewed. At each level, semi-structured
interview templates were designed around issues such as: what motivated the manager to
commit to the digital media, how that had evolved over time, the relationship between the
print and online efforts, etc. (See Table 2). Where possible, efforts were made to
triangulate across multiple sources of information, using multiple informants and cross-
checking against other sources of data to avoid retrospective bias in the interviews. Strict
case study protocol was followed. All but a few interviews were recorded and
transcribed prior to their entry into a comprehensive case study database.
Archival Documents. One of the most useful sources of cross-checking against
informant recall was the use of archival documents. Nearly 30 different internal archival
8
documents were collected across five of the eight sites. These documents included:
online business plans, strategy proposals, internal memos, annual strategic planning
documents, customer lists, and various historical sales of collateral materials. These
archival documents served both as a valuable primary source of data and as a source of
triangulation on interviews and a check against retrospective bias. Most helpful were the
various business plans, starting as early as 1990, that discussed arguments over whether
or not to fund the online ventures.
Direct Observations. Direct observations served as another source of
triangulation, though they were used almost entirely as a means of observing real time
processes. Because of the timing of the study, this could only reveal processes post-
funding. During a one and a half year period from 2000-2001, I spent time directly
observing the following types of organizational events: reporting meetings between the
online venture and newspaper / corporate executives, planning meetings for the online
venture, the process of story creation for the newspaper and website, sales calls for both
the newspaper and online products, and other planning meetings. In total, 24 discrete
field events were observed and recorded into the case study database.
Public Documents. Finally, over 150 public documents were analyzed, including
press releases, annual reports, analyst research reports, and industry articles. These
external sources of data were useful in the triangulation effort to cross-validate other
sources of data. The public data also served as a useful source of identifying new
entrants into the digital information and publishing market and as a useful source of
comparisons to what was being observed in the newspaper online ventures.
9
Analysis of the Data
Inductive theory development from case data is a highly iterative process. Propositions
take form initially from early case analysis. The preliminary analysis came from a set of
matched pair, polar cases at The Beacon A and The Expositor A. I induced an initial set
of propositions by analyzing the case data and enfolding a set of relevant literatures using
methods for inductive theory development advocated by Eisenhardt (1989a) and Glaser
and Strauss (1967). After the development of an initial set of propositions, I then
returned to the case data from subsequent case sites to see if the emerging relationships
were confirmed or disconfirmed through a process of analytical replication (Yin, 1994).
Eisenhardt points out the difference between this process and more traditional deductive
hypothesis training:
The key difference is that each hypothesis is examined for each case, not for the aggregate cases. Thus, the underlying logic is replication, that is, the logic of treating a series of cases as a series of experiments with each case serving to confirm or disconfirm the hypotheses. Each case is analogous to an experiment, and multiple cases are analogous to multiple experiments. This contrasts with the sampling logic of traditional, within-experiment, hypothesis-testing research (1989a, p. 542).
To test whether the relationships identified in each proposition were confirmed or
disconfirmed, the data were arrayed following techniques for cross-case pattern
sequencing (Eisenhardt, 1989b) and tabular displays (Miles and Huberman, 1984).
Similar to deductive hypothesis testing, the propositions presented here fit well with the
evidence, though they did not always conform perfectly (Sutton and Callahan, 1987;
Eisenhardt, 1989a).
10
THE PROBLEM OF COMMITMNET
The resource allocation process articulated by Bower, Burgelman, and their colleagues
(Bower, 1970; Burgelman 1983a, 1983b; Noda and Bower, 1996) is a model designed to
map the way in which organizations decide to commit resources to a given proposal. An
important feature of the model is the process of building impetus, which Bower describes
as the “force that moves a project forward” (1970, p.67). Another way of understanding
this is to examine the set of considerations that a manager considers when he decides to
sponsor or commit to a new project. These might include career risk, likelihood of
success, and external pressures, such as capital markets and customer demands. Research
by Christensen and Bower (1996) added new insight to research on corporate innovation
by identifying what has been described as disruptive technology. Disruption occurs not
when new technologies attack established markets head-on, but when the initial attributes
of the emerging technologies cause them to be valued only in emerging markets, prior to
invading established markets. The author’s insight came largely from making linkages
between resource dependency theory (Pfeffer and Salancik, 1978) and resource allocation
research (Bower, 1970; Burgelman 1983a, 1983b). The linkage demonstrated that the
impetus required to motivate resources is largely determined by the customers in an
organization’s mainstream markets. “When the initial price/performance characteristics
of emerging technologies render them competitive only in emerging market segments,
and not with current customers, resource allocation mechanisms typically deny resources
to such technologies” (Christensen and Bower, 1996, p. 198).
I found a considerable amount of evidence initially confirming this earlier
research. However, one subtle change from earlier findings is the emphasis on the
11
condition that focuses on the source of the impetus in building toward commitment.
When impetus is built around a company’s leading customers and established markets,
we would expect to see similar results to earlier findings. This is consistent with the
results of Christensen and Bower (1996), but loosens the power of their linkage to
resource dependency theory (Pfeffer and Salancik, 1978). Formally stated:
Proposition 1: When the impetus for commitment is built predominantly around the demands of customers in a firm’s established markets, resource allocation mechanisms will deny resources to disruptive technology.
Table 3 summarizes the evidence from the field data for this proposition. In nearly every
case examined, business plans for online newspaper sites spent over two years in
proposal. Since it was unclear early how to make money in digital media and these
ventures did not appear as profitable when measured against the dominant models used
for the core newspaper business, these proposals stalled in the formal budgeting process.
The chairman and CEO of The Expositor Company explained his thinking: “My training
is in finance. And in the end, the only real value is cash and cash creation. You can’t
build a business just on potential or hope.” The vice president of Product Development at
The Expositor B explained how that philosophy spilled down into the resource allocation
metrics:
We had operating targets we had to meet . . . Even in business development, these units were expected to be profitable from day one. . . We proposed it to finance and they said, ‘Look. When we roll these up into our budgets we miss our targets.’ What that means is that most greenfield businesses don’t get invested in--unless they are very small, and the Internet is not very small.
When projects did get funding, it was because their budgeted forecasts promised to
generate the types of returns that would fit the resource allocation requirements of the
12
firm. The CFO at The Expositor B describe how proposals she reviewed frequently hid
costs:
I remember being the CFO and the first proposal came to me saying we will make money and I sent it back to them because I knew it would not. People were trying to figure out what they had to do to get it approved. The goal was to get a modest loss. . . You almost had to hide its costs so that it didn’t look as bad as it was.
At the Beacon Company, newspaper publishers actually did approve funding for their
new media businesses, but did so only once the forecasts showed these ventures breaking
even in short time horizons and returning EBITDA margins exactly in-line with the
targets already set for the core business.
Unfortunately even with financial commitment, resource allocation mechanisms
can reach far more broadly than just the financial budgeting process. Resource allocation
also includes the commitment of time and attention-based resources at the operating
levels of the organization. Because the new business did not fit the operating decision
rules and priorities of the functional print organization, managers consistently prioritized
time elsewhere. For example, the sales organization found that their leading customers in
the established newspaper advertising markets were not interested initially in online
media advertising.
An online sales rep at The Beacon A recalled the challenges print reps had selling
the online product, saying, “Print reps could sell the online product, but with varying
degrees of success. Their margins were higher on other products that were easier for
them to sell. Online was really just a novelty to them.” A print rep at The Press A
described his efforts, “I occasionally sell a bundled print and online package. There is no
standard package and it is hard to really know what the print advertisers would want.”
13
Data were gathered on five of the research sites concerning the customer overlap between
print and online. I asked managers to estimate how many of their top 25 advertisers
online were in the top 25 advertisers in the newspaper. Of a possible customer overlap of
125, there were only seven. The travel category at The Press A was a good example. Of
the top ten booking agents online, only four even advertised in print, and none were
major print accounts. Thus the largest clients in the newspaper were not those initially
advertising online. The net effect of these customer differences was that print reps
concluded that the Internet ad was a small, difficult, and unprofitable product to try to
sell.
Similar challenges occurred in the newsroom. Online users were often very
different than print readers and the way they engaged with the product was very different.
Consequently, print editors often viewed online content as low quality journalism. An
experience shared by the publisher at The Beacon A is indicative of the challenge online
managers faced getting commitment from the editorial staff of the newspaper:
I had trumpeted the new business to everyone and asked for their cooperation with the online group. One day I asked an online staff member how things were going and if the newspaper staff was helping out. He told me that he had recently asked for some help, and the response was, ‘Get the hell out of here, I’ve got a real newspaper to get out.’
Thus, when the impetus for commitment was built around customer demands in the
existing organization’s market, resources were denied to the disruptive business. I found
evidence for this at nearly every site in the sample. Even though websites were launched,
resources were scarce. And despite the modest funding, the operating organization
repeatedly diverted time and energy away from the new venture.
14
THREAT MOTIVATION AND IMPETUS
Though the initial stages of the resource allocation process appeared likely to deny
resource for the venture, a new source of impetus began to emerge that differed from
previous findings in Christensen and Bowers’ research (1996). The difference in impetus
was also accompanied with very different behavior patterns. Management scholars have
previously identified the role threat framing can play in creating action around a desired
response (Kotter, 1996). Hurst found that creating a sense of crisis can serve as a catalyst
for action (Hurst, 1995). Psychologists have also noted that response in the domains of
loss leads to an increased willingness to commit resources (Mittal and Ross, 1998;
Kahneman and Tversky, 1979). The data in my research showed evidence that a sense of
threat to the core organization can motivate commitment of resources, creating the
impetus necessary to break the cycle of resource dependency articulated by Christensen
and Bower (1996). Stated formally:
Proposition 2: When the impetus for commitment is built around a strong perception of threat to the core organization, resource allocation mechanisms will aggressively commit resources to disruptive technology.
I considered threat as a construct prior to coming to the field and was largely informed by
measurement of that construct. While no technique to collapse multiple indicators into a
single measure were used because of the complex nature of the field data (Eisenhardt,
1989a), the investigation was informed by three common characteristics associated threat
perception. Research in the social psychology literature recognizes threat perception as
displaying a negative focus, emphasis on loss, and sense a lack of control (Jackson and
Dutton, 1988; Dutton and Jackson, 1987). Evidence supporting the relationship between
threat perception, the process of building impetus, and a subsequent intensified
15
commitment is summarized in Table 4. Data indicate that a strong perception of threat
led to an increase in financial and organizational commitment behind the online ventures.
In some instances the concern was built around a loss to the classified products, including
employment, real estate, and auto listings. In other cases, the concern was more
generally placed around the entire business itself and a threat to the fundamental
readership and advertising market for a printed newspaper. The source of increased
perception of threat often came from external analysts. For example, a 1997 report by a
leading new media analyst argued that the Internet would drive many newspaper
organizations to extinction. The cover of the article featured the image of a fossilized set
of dinosaur bones. A 1998 research report entitled “Goodbye to Classifieds,” predicted a
$4.7 billion dollar annual displacement by 2003.
The sense of threat in the newspaper organizations built gradually at first, and at
slightly difference paces. By 1997 to 1998, most newspapers were thoroughly concerned
about the threat of online media, even though the customers in their mainstream markets
were still not viewing the media as a valuable advertising outlet. The director of
marketing at The Morning News B described the evolution at the newspapers:
“You felt like Chicken Little screaming ‘the sky is falling’, but after a while people started listening when they saw what the other competitors were doing. We made watch lists for TV, radio, vertical start-ups, telephone companies, and Citysearch. Citysearch was poaching people. . . . The publisher was unlike some in that he saw the threat.”
In all of the primary research sites but one, threat was the primary motivator
toward action. In each of these cases, there were various manifestations of threat
perception that were consistent with the construct as described in the social psychology
16
literature. For example, the CEO of The Press Company’s Internet group described how
his organization was motivated out of fear of loss:
McKinsey had come in and had done a rather startling analysis of the classified business . . . They predicted that 20-30 percent of our classified revenue would disappear by 1998. That raised enormous alarm bells in some people. I think the notion that people would start reading their newspapers on the screen was also quite prevalent. . . There were people who thought we would lose half of our circulation.
There was also a general concern that the future of this media was largely out of the
newspaper companies’ control. The publisher of The Beacon A expressed this fear:
“What if we do every damn thing we can think of and execute flawlessly and we still
don’t make it? We can slow it down, but we can’t stop it.” The potential for opportunity
was not completely absent, but the overall tone was generally defensive and negative.
In the seven of the cases where threat became the impetus for commitment,
financial and organizational commitment expanded with increasing concerns about the
threat of the Internet. Financial expenditures in the field sites expanded as much as 400
percent during the years that threat perceptions were building (See Table 4). The number
of employees allocated to these sites similarly expanded. For example, dedicated online
staff went from 5 to 40 during an 8 month period in 1998. Other sites also expanded their
dedicated online employees, many increasing their numbers to over 100 individuals.
However, the commitment of resources was not limited to dollars and personnel. There
was also an expanded commitment at the operating levels. As one sales manager at The
Beacon A described, “Look, it didn’t make any sense for us to try to sell this stuff, but we
were made to feel that if we didn’t work on it, it might come back to haunt us.”
Reporters were asked to summarize articles and stories before they were published in
print. Many were also encouraged to write follow-on stories just for the web.
17
Evidence for the linkage between expanded threat perception and expanded
commitment came not only from interview data and informant recollections, but also
from triangulation with independent archival data. For example, of the five business
plans that were obtained during the period of most rapid expansion, all five stated
categorically the threat of inaction. A 1997 business plans at The Beacon B suggested
that they would lose 15-20 percent of their print classified revenues if they did not
respond aggressively. Several documents from other newspapers pointed out that if the
newspapers didn’t cannibalize themselves, someone would. Unlike earlier proposals that
had emphasized financial returns and new market opportunities, arguments for increased
funding were now focused on the potential downside to the print business. This
expansion came despite increasing losses, typically greater than 100 percent of revenues.
The notable exception to threat as impetus was The Morning News A.
Nevertheless, the pattern exception was consistent for theoretically consistent reasons. In
the case of this newspaper, the Internet actually helped solve an existing organizational
problem and accordingly needed less threat motivation to generate response. Note that
The Morning News A was the only pure nationally distributed newspaper in the sample.
In this sense, the Internet offered some unique operational benefits that sustained the
existing business. The president and publisher described:
This was a wonderful opportunity from the start. If you are a national newspaper with a three percent penetration, all of a sudden you have an opportunity for virtually no cost to distribute the product . . . The Internet creates huge opportunities to deliver product in areas that were uneconomical before. . . Eighty percent of my costs are production and distribution. Now all of a sudden I have a solution. It is not a content play, but a major cost reducer and product expander.
18
The newspaper also had a limited classified product and was not strapped by the fear of
cannibalization like many of the other sites in the sample. In many ways, the Internet fit
with a set of sustaining needs for the print newspaper business and was accepted
accordingly.
THREAT LEADS TO RIGIDITY
Unfortunately, the data from the research show that the same threat-based mechanism
that is required to motivate resources also leads to aggressive rigidity around the
established market and product. Having shown evidence for Proposition 2, we can now
move to consider otherwise contradictory findings concerning the effect of threat framing
on decision-making. The conflict arises around the question of whether threat perception,
often measured as risk perception, leads to action or inaction. Mentioned earlier,
Kahneman and Tversky’s research on prospect theory suggests that individuals in the
domains of loss are more likely to be risk seeking (1979). Meanwhile, Staw, Sandelands,
and Dutton (1981) and later Dutton and Jackson (1987) show that individuals who are
threatened by losses respond rigidly and become risk averse. Research by Sitkin and
Pablo (1992) acknowledges this contradiction and suggests that part of the problem lies
in the fact that previous research has viewed threat-based action along single
determinants of behavior. They suggest that a model for this behavior, based on a more
complex set of determinants, is required. The data in this study support Sitkin and
Pablo’s suggestion, but add new insight into specifying the different determinants of
behavior. Namely, threat framing does lead to action through increased commitment (in
support of Kahneman and Tversky, 1979 and their colleagues), but that commitment is
19
rigidly deployed around a narrow set of previously learned behaviors (in support of Staw,
Sandelands, and Dutton, and Dutton and Jackson). Both streams of literatures measure
outcomes based on a change in behavior. But the former measures that action as a
change in basic resource commitment, while the later measures that action as a change in
basic organizational patterns and routines. For example, much of the research following
Kahneman and Tversky and their colleagues measures risky behavior not as a
“willingness to try something different or new” but rather as “willingness to spend
aggressively.”
Mittal and Ross created scenarios where they induced threat and opportunity
framing (1998). Framing was manipulated by creating a controlled questionnaire setting
in a lab with constructed introductory descriptive stories that were either threat or
opportunity focused. The study participants were then presented otherwise identical
scenarios and asked to select financial commitments, given a set of identical probability
scenarios. Participants who had been given the threat introductions had significantly
higher “willingness to spend” than participants who had been given the opportunity
introduction. Hartman and Nelson found similar results in their research (1996).
Kahneman and Tversky’s seminal study on risk showed that if issues were framed
as being in the domain of loss versus the domain of gain, individuals were much more
likely to commit financial resources, given otherwise identical outcome probabilities
(1984). The work of Staw, Sandelands, and Dutton (1981) and Dutton and Jackson
(1983) demonstrate that threat motivation leads an individual, group, or organization to
rely on previously proven response behavior with little altercation. The data in the
current research fuse these two previously contradictory literatures, showing that threat
20
creates active, even aggressive change in behavior when measured as resource
commitment, but intensely rigid behavior when measured as a change in basic work
patterns and routines.
To study the intermediate behavioral effects of threat motivation, I used
constructs that were consistent with those articulated in the existing literatures. Using
data observed in the field and sharpening those observations by enfolding literature on
threat rigidity, I was able to identify three intermediate behaviors associated with threat
perception that led to the rigidity observed. The intermediate behaviors examined and
confirmed in the data include: 1) a willingness to commit substantial resources, 2)
contraction of authority, and 3) focus on existing resources. For the first intermediate
behavior, a marked difference appeared between the data observed and the findings
discussed by Kahneman and Tversky (1979). The very process that leads to a change in
resource commitment also leads to rigidity around basic organizational patterns and
routines. This occurs because increased commitment down one path of response makes it
more difficult to move to another. The effect of this intermediate behavior can be stated
more formally as:
Proposition 3a: Threat perception creates an intermediate behavior that demonstrates a willingness to spend aggressively without changing initial response patterns.
Data presented previously in Table 4 show that threat indeed led to an increased
willingness to commit substantial resources. The data show that the aggressive pace of
commitment makes it more difficult to step back and change behavior. Firms in the
sample expanded their resource commitments at more than 100% per year during the
period of accelerated threat perception. Recall that The Morning News A had gone from
21
five to 40 people in less than eight months. Expenses at The Beacon B doubled, and then
nearly doubled again in 1997 and 1998, despite original forecasts for profitability by
1996. Whereas initial disappointments might have led a manager to step back and change
behavior, threat motivation caused managers to push harder on the same misdirected
paths. To paraphrase Santayana’s definition of a fanatic, it was like someone who had
doubled their speed when they had lost their direction. If initial behavior is similar to
traditional response patterns, even if only because that was the point of origin, then rapid
expansion of resources may serve only to reinforce and harden commitments around
those previously applied patterns. Evidence for Proposition 3a was found across nearly
every site in the sample (See Table 5).
The two other intermediate behaviors that led to rigidity as were observed in the
data were contraction of authority and focus on existing resources. There is support for
this finding in the literature on threat rigidity. For example, Staw, Sandelands, and Ross
found that threat situations were associated with “increased centralization of authority,
more extensive formalization, and standardization of procedures” (1981, p. 513).
Hermann also noted a contraction of authority associated with crisis situations (1963).
As decision-making becomes centralized, organizations and managers tend to focus on
what they know best, making it more difficult to include dissenting opinions (Janis,
1972). However, in non-threat situations, managers are much more likely to allow
authority to be delegated to the operating levels of an organization (Nutt, 1984; Mintzerg,
et al., 1976). Finally, because threat-induced behavior is focused around concern for loss,
attention and energy is focused around those resources that might be lost and not the
resources that might be gained, which are often new or different (Hartman and Nelson,
22
1996; Mittal and Ross, 1998; Dutton, 1992). The repeated focus on existing resources
runs counter to the literature on corporate innovation and entrepreneurship which
suggests managers pursue “opportunity, regardless of resources currently controlled”
(Stevenson and Jarillo, 1990, p. 23). The existence of these intermediate behaviors can
be stated more formally as:
Proposition 3b: Threat perception creates an intermediate behavior that demonstrates a contraction of authority, which serves to formalize initial response patterns. Proposition 3c: Threat perception creates an intermediate behavior that demonstrates a focus on existing resources, directing initial response patterns to center around the core business at the expense of innovating around the new business.
Evidence of the existence of these intermediate behaviors is again summarized in Table
5. For example, there was intense contraction of authority at The Beacon Company. The
vice president of technology and operations described, “It was very centralized in the
beginning, which was very uncharacteristic, because the culture is very much to let these
guys run their own businesses. . . We had a basic business model for every site. We
gave them money. We told them they could hire people, but we told them exactly how to
do it.” More critically, this aggressive response was focused around defending the
existing resources. One manager at The Press A described, “Cannibalization was a huge
concern for everyone initially, both of print subscriptions and the Lexis-Nexis type
vendors (archives) . . . We asked questions about readership overlap and whether they
would stop reading the paper when people registered on the site.” There was a real
concern in many of the ventures as to how their actions would impact the existing
resources of the paper. In some cases, this meant functional managers held onto the
control of the Internet activities that related to their responsibilities in the print
23
organization. For example, the president of The Expositor A Internet site explained that
“because the classified organization was so worried about defending the print classifieds
business, that group held onto the online business.” This focus on the newspaper was
powerful even when groups were told they had reasonable autonomy. The head of sales
for The Press Company’s Internet group explained, “On the one hand I should go do
whatever we need to do, but on the other hand there is concern about the paper.”
The data show that the combined effect of these three intermediate behaviors
leads to firm response that is aggressively rigid. The focus on existing resources prevents
initial patterns of behavior from innovating around the new opportunity, a behavior that is
hardened through aggressive commitment of resources and a contraction of authority.
Data showing the resultant rigidity are summarized in Table 6. In almost every instance,
threat motivated commitment led to an aggressive replication of the newspaper product
and business model. Seven of the eight research sites showed a product that was merely
an extension of the newspaper product. In these sites, greater than 75 percent of the
product came directly from the newspaper. As the publisher of The Beacon A described,
“We learned [from early involvement with new media] that there wasn’t very much
appetite for an ‘electronic’ newspaper . . . But that is exactly what we did with the
Internet.” Common features such as reader discussion boards, site searching tools,
breaking news from third party sources, community and special interest forums, and
many other content features that were being developed by many new entrant competitors
were largely missing from newspaper sites. Ironically, the technologies to develop these
products were largely available and relatively easy to deploy. The Chairman and CEO of
The Beacon Company described:
24
Where I think we missed the boat is that we saw it as an extension of the newspaper. In other words, something richer and deeper than the newspaper. . . But here was the real mistake. When the search companies came along in 1995, we didn't really pick up on the fact that this was really a way of getting all kinds of information. So when they were starting up search, we never really jumped on the bandwagon and our internet operations were really run by people who came out of the newsroom, so they were editors who tended to look at this more as a newspaper.
In most of these sites, the product looked and functioned exactly like the printed
newspaper. The CEO who was hired on to run The Press A business described,
“Remember that I had said to the CEO at the time that it made absolutely no sense to
replicate the newspaper on the internet. Then I saw the product and it was just that.”
The rigidity was expressed not only with the product but with the business model
used to pursue the venture. Using a panel set of five entrant competing firms, I compared
the income statement of the sites in the research sample. This analysis identified six new
categories of revenue associated with the new media that were different from those
categories built around a print newspaper. While the comparative set of entrants
averaged more than five new categories per site, most of the newspaper sites in the
sample captured only one (See Table 6). In many cases, these new categories of revenue
represented over 40 percent of the revenue streams of entrant firms, the bulk of which
was missing from the online newspaper comparisons. As the CEO of The Expositor
Company explained, “We couldn’t see any models that we were familiar with, nor any
we knew how to make money with.”
THE NOTABLE EXCEPTION TO THE PATTERN
25
The most notable exception to the pattern of rigidity was The Press B. In this case, the
Internet was still undervalued by the traditional resource allocation mechanisms of the
firm. And threat was also the impetus that eventually motivated action. In fact, in initial
proposals managers argued that “if we don’t cannibalize ourselves, someone else will.”
And just like the other firms, the early thought of The Press B newspaper management
was that the Internet product should be a “newspaper in electronic form.” However,
unlike other incumbents, The Press B did not follow those initial impulses to replicate the
newspaper. Senior management channeled their threat-induced call to action by first
looking outside for advice on the strategy, hiring a business executive from Silicon
Valley with background in new media to write their original business plan. Second, and
more importantly, they decided to setup the Internet business as a separate, wholly owned
subsidiary and hired senior management with new media experience. They soon
developed a separate brand name so that it would not be viewed as an “electronic version
of the newspaper.” The Press B also set up a separate sales force that would price and
sell online ads independently. Finally, the Internet group moved out of their newspaper
offices and setup more than a mile away from the print organization. From very early on,
rather than replicating the newspaper, the site evolved to become a regional source of
news and information with significant differences from the newspaper. Over 50 percent
of its site content was from sources other than the newspaper, including many of the
product features that were being developed in other new entrant competitors. Its lead
stories were different, and were rotated throughout the day to match site usage patterns.
It also added sections that did not exist in print, but were more relevant to the Internet
audience, and it created user tools that took advantage of the medium: traffic web
26
cameras, searchable event databases, interactive discussion forums on local area issues,
music downloads from local artists, and many other new forms of content. One online
editor described just how different the new product became:
Page views from the newspaper are now barely more than 1/3 of the available pages on our site. We are really becoming a separate company from the newspaper. I came from there. I love the paper, but we are now a different group with a very different way of working. They are one source of information--an important source. But we buy our content from them like we buy it from anywhere else.
Similarly, the site captured multiple new categories of revenue that did not exist in the
business model of its parent newspaper. Though its business model was still not as
innovative as other new entrant competitors, it was considerably more innovative than
most of the other sites in the newspaper sample (See Table 6). For example, while most
online newspapers in the sample showed only one new category of revenue, The Press B
captured three, including: fee-based archival access, e-mail marketing, and usage data
analysis fees.
STRUCTURAL FORM AND MANAGERIAL FRAMING
Previous research on disruptive technology implied that the role of structure freed the
new venture from the pressures of resource allocation in the parent, enabling resource
commitment to flow to the emerging opportunity (Christensen, 1997). However, in the
current research all of the research sites had been able to commit significant resources to
the new ventures prior to separating them from their parent organizations. The case of
The Press B seemed to initially suggest that the role of structure extends beyond resource
allocation. Four of the research sites, including The Press B, eventually separated their
online venture from the parent organization. The process of separation often took several
27
years as the functional units in the parent organization were often reticent to lose their
control of the strategy and development of the online business. To answer whether the
venture had been separated from its parent organization, I performed analysis that
considered the units’ own reported classification and a number of other metrics, including
reporting lines and physical location (See Table 7).
Though all of the research sites considered whether or not to separate their online
venture, there were powerful forces to keep the sites integrated. For example, most of the
research sites viewed the resources of the newspaper as a clear competitive advantage for
the online newspaper websites. In the original 1990 online business plan from The
Beacon A, the publisher wrote: “The power of the newspaper to provide thrust for the
new services can be harnessed only if it achieves deep levels of integration with the
newspaper. Structuring the experiment as an enterprise separate from the newspaper
would be crippling if not fatal.” Reflecting in 2000 on some companies who had
separated their online divisions, the vice president of business development at The
Morning News A described it as a mistake: “Our basic strategy is an integrated strategy,
so we’re not like some of these companies who have spun online out. In the local
information market the newspaper has an advantage. To separate the online unit from the
newspaper is to give away a lot of that advantage.” Indeed with increased threat
perception, newspapers were even more likely to contract authority around considerations
of the existing newspaper resources.
Nevertheless, many companies did separate, including four research sites in the
sample. The underlying motivation, though not entirely set in pattern, appeared to be
related to outside influences. Two of the sites separated at the adamant demands of their
28
general managers, who came from outside of the newspaper organization. In the case of
the online CEO at The Press A, his condition for joining the venture was that it be
separated from the parent organization. At The Beacon Company, the process was more
evolutionary and was driven by interactions with outside partners. One such experience
at The Beacon A is indicative. A partner of the online newspaper who marketed online
directory services through the newspaper’s website had asked if they could build their
own sales force agency to sell the product for the newspaper. Within a year, the sales
agency had tripled the performance of an equivalent number of dedicated print sales reps.
The newspaper then purchased the agency, but kept it separate on the demands of the
sales director. The Agency, as it continued to be referred even after it was bought, stole
product after product from the print organization until 2000, by which time it was selling
close to two-thirds of the online ads for The Beacon A online site.
Even before sites separated, there were some managers who thought that the
Internet, while still a threat, could also offer new opportunities to newspapers. The
president of the Press Company shared this view:
We were worried about the web in that it would alter the way in which people would get information, but it was not purely defensive. We had launched into entertainment years ago as a defensive move in the paper. It eventually became a new source of growth for us. Many of the threats eventually become opportunities. The Internet may be the same way. We definitely classified this as a threat and were concerned about the potential impact on the core business, but there is also something new there we could never have done before.
However, this dualistic view was hard to maintain in an operating environment where
operating responsibilities make it difficult to emphasize the opportunity. Thus, one of the
roles that structure as observed in the data is to de-couple the motivation at the parent and
the motivation at the venture. As the former head of new media at The Beacon Company
29
described: "I didn't focus people on the threat, especially those managing the new
business. Where I did emphasize the threat was in working with the print folks to get
them off their butts and in arguing for resources.” This is consistent with the concept that
separate structure allows competing frames to simultaneously co-exist as described by
Gilbert (2002). Data from the other sites further confirmed that structure played a role in
the way managers framed their motivation. Thus, an additional proposition can be stated:
Proposition 4: Separating the new venture from its parent organization can help de-couple the threat motivation in the parent from an opportunity focus in the separate venture.
The data show that as sites separated, structure played a role in creating an environment
where the entire motivation could be built around the separate opportunity that existed for
online. As one manager in a separated site explained, “When we simply changed our
name from the newspaper name to the city.com . . . it changed people’s expectations of
what would be on the site. This in turn changed how people in our online organization
viewed who they were and what they were producing.” The Beacon Company’s new
president of the new media group described, “Now that we are separate, we own the
opportunity in a way we never did when we were still with the newspaper.” And while
the concept of the opportunity was changing in the separated sites, the integrated sites
continued to remain focused on the threat of the Internet to their parent organizations. As
the vice president at The Expositor B described, “We continue to see this as a way to
protect classifieds, and that if we don’t do it someone else will.” Thus, structure allowed
threat motivation to continue to provide the impetus for resources from the parent, while
blocking its rigidity producing intermediate behaviors from continuing to impact the
venture. Evidence for Proposition 4 is summarized in Table 8.
30
The process of separation, which led to a process of re-framing or frame de-
coupling, combined to help relax the rigidity in these sites. A final proposition can thus
be stated:
Proposition 5: Separating the new venture from its parent organization and re-framing in the venture around a separate opportunity combine to relax the rigidity created by threat-based impetus.
In the four sites that separated, there was substantial expansion in innovation away from
the newspaper and more in line with entrant firms competing in the emerging market.
These sites became less of a newspaper in electronic form, with increasing percentages of
their content coming from new products, including many of those described previously.
While the integrated sites continued to distribute as high as 90 percent of their content
from the newspaper, all of the separated sites relied on 50 percent or less of their content
from their print counterparts (See Table 8). When comparing the two groups, a two
sample t-test showed that the separated group had a significantly lower percentage of re-
used newspaper content than the integrated group, where t(6)=5.81, p<.01. This
evolution had a positive effect; those sites that had separated and moved their emphasis to
the emerging opportunity showed much higher local market penetration scores than the
other sites in the sample (See Table 8). Again, these differences were significant, with
t(6)=2.75, p<.05. Finally, the separated sites became more innovative along the changes
in the underlying business model of the business, averaging close to five new categories
of revenue compared to the integrated sites that developed just above two new categories.
These differences were also significant, with t(6)=4.63, p<.01.
31
TOWARDS A PROCESS MODEL OF RESPONSE TO DISRUPTIVE CHANGE
This research explored the process of response to disruptive change. The findings are a
set of propositions, captured in Figure 1. They are organized around a model that maps
the process of firm response to disruptive change. The first two propositions focus on the
process of resource commitment by examining the source of impetus that drives the
resource allocation process itself. A considerable amount of data exist across the
research sample to confirm the earlier findings of Christensen and Bower (1996) that
when the impetus for commitment is built around the demands of customers in a firm’s
established markets, resource allocation mechanisms will deny resources to the disruptive
technology (Proposition 1). However, when the impetus shifts to a strong perception of
external threat, resource allocation mechanisms will result in the aggressive commitment
of resources (Proposition 2).
The data show that threat of loss to the core business does indeed motivate
commitment and lead to action being taken (Proposition 2). However, that action then
leads to a series of behaviors that cause the action to become exceedingly rigid around an
organization’s best learned response patterns (Proposition 3a, 3b, 3c). For example,
threat behavior was shown to create a rigid focus on the firm’s existing resources, making
it difficult to see new opportunity outside of the existing business (Proposition 3c). This
initial rigidity is then hardened by the aggressive pace of commitment (Proposition 3a
which creates lock-in effects as commitment expands around a focus on the existing
business. This rigidity is further hardened by the contraction of authority that is placed
around the new venture, further leading to a focus on the established business at the
expense of recognizing the new, independent opportunity emerging around the new
32
technology (Proposition 3b). Thus, these intermediate behavior effects associated with
threat motivation lead to intense rigidity around an organization’s most familiar routines
and behavioral patterns.
Two final propositions relate to the impact of separating the new venture from the
operations of its sponsoring parent. Data showed that separate structure created an
environment where managers were more likely to focus on the unique and independent
opportunity associated with the new technology (Proposition 4). The effects of structural
independence and opportunity focus led to a relaxing of the rigidity and an increased
level of innovation (Proposition 5). Where sites remained integrated and management
framing remained focused around the threat to the parent organization, the rigidity was
perpetuated.
CONCLUSIONS AND IMPLICATIONS
Like any model intending to capture the complexity of an organizational response
process, there are elements of the model that need further exploration. Two specific areas
are worth mentioning here. First, there is the question of the source of the threat impetus.
In the current research this was largely triggered by external analysts who were
forecasting the demise of the newspaper industry even prior to any visible loss of
revenues to online media. The question remains as to whether that source of threat-based
motivation could have been triggered without the pressure from outside the firm. The
second limitation to the model is its current inability to determine a direct causal source
leading to separation. As noted earlier, there is some indication that the decision is
driven partly by being able to access input from outside of the firm. This appears to have
33
come either through the demands of outside managers (The Press A and The Press B) or
through what seems to have been a rather serendipitous set of comparative successes with
outside partners (The Beacon A). Further research into this linkage needs to be
conducted.
Nevertheless, the current research does add considerable insight into a number of
existing research streams. First, the very phenomenon of response provided an
opportunity to observe a set of firm behaviors that have previously gone unobserved.
Christensen and Bower (1996) had developed a theory that would predict if firms were
unable to commit resources to disruptive technologies because of dysfunctional resource
allocation mechanisms. The current research found that not only is commitment possible,
but it can be intense when the impetus moves to a sense of threat to the existing
organization. Unfortunately, the very motivation required to secure commitment leads to
a set of intermediate behaviors that produce intense rigidity around the core
organization’s existing work patterns and routines. This finding provides insight into
previously contradictory findings in the decision-making literature, namely, whether
threat perception leads to action or inaction. Kahneman and Tversky’s research on
prospect theory suggested that individuals who are in domains of loss are risk seeking
and able to commit to action (1979). Meanwhile, Staw, Sandelands, and Dutton (1981)
and later Dutton and Jackson (1987) showed that individuals who are threatened by
losses respond rigidly and become risk averse. What the current research shows is that
both of the previous findings are correct, but around different determinants of behavior
(Sitkin and Pablo, 1992). Threat can motivate action as manifest in a willingness to
commit resources. But threat can also lead to inaction around behavior other than those
34
already manifest in the existing patterns and routines of an organization. Thus, threat
leads to high levels of commitment, but that commitment is rigidly deployed around
those response patterns most familiar to the organization.
Another contribution to the literature that comes from the current research is how
it expands the understanding of the role of structure. Previous research stated that the
role of structure was to separate the venture from the resource allocation process of the
parent organization, thus helping secure financial and organizational commitment
(Christensen, 1997). But in the current research, all of the sites had secured considerable
commitment prior to separating the venture. The role of structure then moved beyond
resource allocation. Structure allowed the new venture to de-couple its motivation away
from the threat to the parent organization. This allowed the management to focus on the
independent opportunity being developed around the new technology and to start to
innovate away from the rigid confines of the parent organization.
The current study also presents several opportunities for further inquiry. First,
this paper examined the process of response across eight field sites. This was an
appropriate design given the phenomenological nature of the behavior observed and the
need to deeply examine the complex process of response at multiple levels across time.
This process helped sharpened the constructs around threat perception and rigidity. A
larger sample study is currently being conducted that will look at the phenomenon across
a much larger population of firms in the newspaper industry. Other research also needs
to be conducted across other industries to test whether the behavior observed in repeated
in other settings. Nevertheless, the current findings have expanded our understanding of
the existing literature and will continue to open new opportunities for future research.
35
TA
BL
ES
AN
D F
IGU
RE
S
Tabl
e 1:
Des
crip
tion
of th
e Ei
ght N
ewsp
aper
s Stu
died
New
spap
er
Pare
nt O
rgan
izat
ion
Loca
l Pap
er D
aily
Pr
int C
ircul
atio
n O
nlin
e La
unch
D
ate
Num
ber o
f Onl
ine
Empl
oyee
s (20
00)
The
Bea
con
A
The
Bea
con
Com
pany
2
50,0
00
1994
45
Th
e Be
acon
B
The
Bea
con
Com
pany
2
00,0
00
1995
20
Th
e Pr
ess A
Th
e Pr
ess C
ompa
ny
>500
,000
19
94
>100
Th
e Pr
ess B
Th
e Pr
ess C
ompa
ny
400
,000
19
95
60
The
Expo
sito
r A
The
Expo
sito
r Com
pany
>5
00,0
00
1995
>1
00
The
Expo
sito
r B
The
Expo
sito
r Com
pany
2
00,0
00
1996
32
Th
e M
orni
ng
New
s A
The
Mor
ning
New
s C
ompa
ny
>500
,000
19
94>1
00
The
Mor
ning
N
ews B
Th
e M
orni
ng N
ews
Com
pany
3
00,0
00
1996
41
36
Tabl
e 2:
Sum
mar
y of
Dat
a C
olle
ctio
n
Lev
el in
O
rgan
izat
ion
Spec
ific
Typ
es o
f Dat
a C
olle
ctio
n
Cor
pora
te
Leve
l •
10 In
terv
iew
s: C
orpo
rate
Man
agem
ent (
incl
udin
g C
EO/C
hairm
an)
- Ev
olut
ion
of m
otiv
atio
ns c
once
rnin
g co
mm
itmen
t to
the
Inte
rnet
bus
ines
s -
Inte
rnet
impl
icat
ions
for t
he p
rint n
ewsp
aper
bus
ines
s -
Inte
ract
ion
betw
een
onlin
e an
d pr
int o
rgan
izat
ion
- St
ruct
ural
diff
eren
ces,
coor
dina
tion
chal
leng
es a
nd o
ppor
tuni
ties
- C
ultu
ral,
man
agem
ent,
and
busi
ness
pla
n di
ffer
ence
s -
Fina
ncia
l exp
ecta
tions
and
acc
ount
abili
ty
• D
irec
t Obs
erva
tion:
Inte
ract
ion
with
ven
ture
exe
cutiv
es, p
lann
ing
mee
tings
•
Arch
ival
Dat
a: P
ropo
sals
, int
erna
l mem
os, a
nd c
omm
unic
atio
n w
ith n
ew v
entu
re
Gen
eral
Man
agem
ent
Sale
s an
d M
arke
ting
Edi
tori
al S
taff
•
7 In
terv
iew
s -
Evol
utio
n of
mot
ivat
ions
co
ncer
ning
com
mitm
ent t
o th
e In
tern
et b
usin
ess
- In
tern
et im
plic
atio
ns fo
r the
prin
t ne
wsp
aper
bus
ines
s -
Coo
rdin
atio
n ch
alle
nges
-
Cul
tura
l, m
anag
emen
t, an
d bu
sine
ss p
lan
diff
eren
ces
• 6
Inte
rvie
ws:
-
Mot
ivat
ion
for I
nter
net
busi
ness
-
Coo
rdin
atio
n ch
alle
nges
an
d op
portu
nitie
s -
Cul
ture
-
Ince
ntiv
e sy
stem
-
Sale
s cyc
le
- C
usto
mer
pro
file
• 4
Inte
rvie
ws:
-
Mot
ivat
ion
for I
nter
net
busi
ness
-
Coo
rdin
atio
n ch
alle
nges
and
op
portu
nitie
s -
Cul
ture
-
Stor
y de
velo
pmen
t cyc
le
- C
onte
nt p
rofil
e
• D
irec
t Obs
erva
tion:
Sto
ry c
reat
ion,
sale
s cal
ls
New
spap
er
Leve
l
• Ar
chiv
al D
ata:
Bus
ines
s pla
ns a
nd p
ropo
sals
, cus
tom
er li
sts,
sale
s col
late
ral
Ven
ture
G
ener
al M
anag
emen
t M
arke
ting
Man
ager
E
dito
rial
Sta
ff
37
• 10
Inte
rvie
ws:
-
Mot
ivat
ion
for n
ew b
usin
ess
- In
tern
et im
plic
atio
ns fo
r the
prin
t ne
wsp
aper
bus
ines
s -
Coo
rdin
atio
n ch
alle
nges
-
Cul
tura
l, m
anag
emen
t, an
d bu
sine
ss p
lan
diff
eren
ces
• 8
Inte
rvie
ws:
-
Coo
rdin
atio
n ch
alle
nges
an
d op
portu
nitie
s -
Cul
ture
-
Ince
ntiv
e sy
stem
-
Sale
s cyc
le
- C
usto
mer
pro
file
• 6
Inte
rvie
ws:
-
Coo
rdin
atio
n ch
alle
nges
and
op
portu
nitie
s -
Cul
ture
-
Stor
y de
velo
pmen
t cyc
le
- C
onte
nt p
rofil
e
• D
irec
t Obs
erva
tion:
Sto
ry c
reat
ion,
sale
s cal
ls
Leve
l
• Ar
chiv
al D
ata:
Cus
tom
er li
sts,
sale
s col
late
ral
38
Tabl
e 3:
Res
ourc
e A
lloca
tion
and
Pres
sure
s Aga
inst
Com
mitm
ent
New
spap
er
Evid
ence
aY
ears
inPr
opos
al
Fina
ncia
l C
omm
itmen
t B
asis
Dat
e of
La
unch
C
halle
nges
to
Ope
ratin
g
Com
mitm
entb
Exam
ples
: Fin
anci
al a
nd
Ope
ratio
n
The
Bea
con
A
I, A
, O, P
2
Publ
ishe
r Sp
onso
rshi
p 19
94
N, S
, T
New
sroo
m: “
Get
the
hell
out o
f he
re, I
’ve
got a
real
new
spap
er to
ge
t out
.” (N
ewsp
aper
Edi
tor)
Th
e Be
acon
B
I, A
2
Fore
cast
Pr
ofita
bilit
y 19
95
N, S
, T
Sale
s: S
taff
pro
vide
d tra
inin
g, b
ut
then
dro
pped
pro
gram
mul
tiple
tim
es d
ue to
lack
of c
lient
inte
rest
Th
e Pr
ess A
I,
A, O
, P
2 Fo
reca
st
Prof
itabi
lity
1994
N
, S
Sale
s: “
I occ
asio
nally
sell
a bu
ndle
d pr
int a
nd o
nlin
e pa
ckag
e .
. . it
is h
ard
to re
ally
kno
w w
hat
prin
t adv
ertis
ers w
ould
wan
t.”
(Sal
es R
ep)
The
Pres
s B
I, A
, P
2 C
EO
Spon
sors
hip
1995
N
, S, T
N
ewsr
oom
: Edi
tors
cal
l onl
ine
staf
f “lo
w b
row
con
tent
” fo
r usi
ng
radi
o fe
eds f
or b
reak
ing
new
s, pe
rson
als,
and
uned
ited
user
po
sted
con
tent
and
refu
se to
wor
k to
geth
er. (
New
spap
er E
dito
r)
The
Expo
sito
r A
I, P
3 C
EO
Spon
sors
hip
1995
N
, S, T
B
udge
ting:
“A
nd in
the
end,
the
only
real
val
ue is
cas
h an
d ca
sh
crea
tion.
Y
ou c
an’t
build
a
busi
ness
just
on
pote
ntia
l or
hope
.” (C
EO)
The
Expo
sito
r B
I, A
, O, P
2
Fore
cast
Pr
ofita
bilit
y 19
96
N, S
, T
Bud
getin
g: “
Look
. W
hen
we
role
th
ese
up in
to o
ur b
udge
ts w
e m
iss
out t
arge
ts.”
(VP
Prod
uct
Dev
elop
men
t) Th
e M
orni
ng
New
s A
I,P
1Pu
blis
her
Spon
sors
hip
1994
N
, S
New
sroo
m: “
I will
be
god
dam
ned
if so
me
onlin
e re
porte
r is g
oing
to
39
call
my
sour
ces a
nd sa
y th
ey a
re
from
our
pap
er.”
(Pub
lishe
r)
The
Mor
ning
N
ews B
I,P
2
Fore
cast
Prof
itabi
lity
1996
N
, S, T
Sa
les:
“W
e bu
ndle
d pr
int a
nd
onlin
e, b
ut th
ere
wer
e cl
ient
s who
w
ante
d on
line
only
. Th
ese
wer
e le
ss in
tere
stin
g to
sale
s rep
s and
th
e or
gani
zatio
n w
asn’
t rea
dy to
de
al w
ith th
at re
ality
.” (V
P M
arke
ting)
a I=
Inte
rvie
ws,
A=A
rchi
val D
ocum
ents
, O=D
irect
Obs
erva
tion,
P=P
ublic
Doc
umen
ts
b N=N
ewsr
oom
, S=S
ales
, T=T
echn
olog
y Su
ppor
t
40
Tabl
e 4:
Thr
eat M
otiv
ates
Com
mitm
ent
N
ewsp
aper
Pr
imar
y St
ated
Con
cern
s Im
petu
s of
Thre
at
Mot
ivat
ion
Evid
enc
ea Ex
ampl
esEx
pend
iture
Ex
pans
ion
b
Empl
oye
e Ex
pans
ionb
The
Bea
con
A
Rea
ders
hip,
D
ispl
ay
Adv
ertis
ing,
C
lass
ified
s
Publ
ishe
r
Cor
pora
te L
evel
I,
A, P
La
ck o
f Con
trol
: “W
hat i
f we
do e
very
da
mn
thin
g w
e ca
n th
ink
of a
nd
exec
ute
flaw
less
ly a
nd w
e st
ill d
on’t
mak
e it?
We
can
slow
it d
own,
but
we
can’
t sto
p it.
” (P
ublis
her)
1996
-19
98:
400%
1996
-19
98:
1540
The
Beac
on B
C
lass
ified
A
dver
tisin
g C
orpo
rate
Lev
el
Pub
lishe
r I,
A
Focu
s on
Loss
: 199
7 In
tern
al
estim
ates
of 1
5-20
% lo
ss o
f cla
ssifi
ed
shar
e by
200
1 (1
997
Stra
tegi
c Pl
an)
1997
-19
99:
300%
1997
-19
99:
518
Th
e Pr
ess A
R
eade
rshi
p,
Dis
play
A
dver
tisin
g,
Cla
ssifi
eds
Publ
ishe
r
Cor
pora
te L
evel
I,
A, P
Fo
cus o
n Lo
ss: “
Ther
e w
ere
peop
le
who
thou
ght w
e w
ould
lose
hal
f of o
ur
circ
ulat
ion.
” (C
EO, I
nter
net G
roup
)
1997
-19
99:
300%
1997
-19
99:
5010
0+
The
Pres
s B
Rea
ders
hip,
D
ispl
ay
Adv
ertis
ing,
C
lass
ified
s
Sim
ulta
neou
s Im
petu
s fro
m
both
Cor
pora
te
Leve
l and
NP
Publ
ishe
r
I, A
, P
Neg
ativ
e Fo
cus:
“Pe
ople
wer
e te
lling
us
that
new
spap
ers w
ere
head
ing
to
the
grav
eyar
d an
d w
e w
ere
begi
nnin
g to
bel
ieve
them
.” (P
ublis
her)
1997
-19
99:
250%
1997
-19
99:
3050
The
Expo
sito
r A
Stoc
k Pr
ice,
C
lass
ified
s O
pera
ting
Pu
blis
her,
bloc
ked
to
Cor
pora
te u
ntil
stoc
k pr
ice
conc
erns
I, P
Focu
s on
Loss
: “W
e w
ere
wor
ried
abou
t cla
ssifi
eds p
rimar
ily.
Thes
e ne
w fi
rms w
ere
set t
o co
me
in a
n ta
ke
our m
ost p
rofit
able
pie
ce o
f bus
ines
s.”
(Ear
ly O
nlin
e Pr
esid
ent)
1997
-19
99:
300%
1997
-19
99:
5010
0+
The
Expo
sito
r B
Rea
ders
hip,
D
ispl
ay
Adv
ertis
ing,
C
lass
ified
s
Ope
ratin
g Pu
blis
her
I, A
, P
Neg
ativ
e Fo
cus:
“W
e [m
iddl
e le
vel
man
ager
s] h
ad b
een
conc
erne
d fo
r a
whi
le, b
ut .
. . th
e re
ason
we
final
ly
got i
nto
the
mar
ket w
as th
at o
ur C
EO
1998
-20
00:
250%
1998
-20
00:
1531
41
was
taki
ng h
eat f
rom
Wal
l Stre
et.”
(V
P Pr
oduc
t Dev
elop
men
t) Th
e M
orni
ng
New
s A
Thre
at n
ot p
rimar
y m
otiv
atio
n, ra
ther
di
strib
utio
n /
prod
uctio
n sa
ving
s.
Thre
at n
ot
prim
ary
mot
ivat
ion
I,P
Not
Thr
eat:
“Eig
hty
perc
ent o
f my
cost
s are
pro
duct
ion
and
dist
ribut
ion.
N
ow a
ll of
a su
dden
I ha
ve a
solu
tion.
It
is n
ot a
con
tent
pla
y, b
ut a
maj
or
cost
redu
cer a
nd p
rodu
ct e
xpan
der.”
(P
ublis
her)
1997
-19
99:
200%
1997
-19
99:
6010
0+
The
Mor
ning
N
ews B
C
lass
ified
A
dver
tisin
g Pu
blis
her
C
orpo
rate
I,P
N
egat
ive
Focu
s: “
You
felt
like
Chi
cken
Litt
le sc
ream
ing
‘the
sky
is
falli
ng’,
but a
fter a
whi
le p
eopl
e st
arte
d lis
teni
ng .
. .”
(VP
Mar
ketin
g)
1998
-20
00:
400%
1998
-20
00:
540
a I=In
terv
iew
s, A
=Arc
hiva
l Doc
umen
ts, O
=Dire
ct O
bser
vatio
n, P
=Pub
lic D
ocum
ents
b Pe
riod
base
d on
rele
vant
exp
ansi
on o
f thr
eat p
erce
ptio
n ba
se o
n pr
oces
s ana
lysi
s acr
oss e
ach
site
—se
e Ta
ble
2. N
umbe
rs re
pres
ent
com
pany
est
imat
es fr
om st
art o
f per
iod
year
1 to
end
of p
erio
d ye
ar 3
.
42
Tabl
e 5:
Beh
avio
ral A
ctio
ns A
ssoc
iate
d w
ith T
hrea
t Mot
ivat
iona
N
ewsp
aper
W
illin
gnes
sto
Com
mit
Subs
tant
ial
Res
ourc
es
Con
tract
ion
of
Aut
horit
y
Focu
s on
Exis
ting
Res
ourc
es
Evid
ence
bEx
ampl
es
The
Bea
con
A
L L
L I,
A, O
, P
Con
trac
tion
of A
utho
rity
: “It
was
ver
y ce
ntra
lized
in
the
begi
nnin
g . .
. W
e ha
d a
basi
c bu
sine
ss m
odel
for
ever
y si
te.
We
gave
them
mon
ey.
We
told
them
th
ey c
ould
hire
peo
ple,
but
we
told
them
exa
ctly
how
to
do
it.”
(VP
Tech
nolo
gy a
nd O
pera
tions
) Th
e Be
acon
B
L
L
LI,
AW
illin
gnes
s to
Com
mit
Reso
urce
s: D
espi
te
incr
easi
ng lo
sses
, dou
bled
exp
endi
ture
s in
1998
and
ne
arly
dou
bled
reso
urce
s aga
in in
199
9.
The
Pres
s A
L L
L I,
A, O
, P
Focu
s on
Exis
ting
Reso
urce
s: “
Can
niba
lizat
ion
was
a
huge
con
cern
. . .
We
aske
d qu
estio
ns a
bout
re
ader
ship
ove
rlap
and
whe
ther
they
wou
ld st
op
read
ing
the
pape
r whe
n pe
ople
regi
ster
ed fo
r the
si
te.”
(Res
earc
h D
irect
or, T
he P
ress
Com
pany
In
tern
et G
roup
) Th
e Pr
ess B
L
X
X
I, A
, P
Key
beh
avio
ral a
ctio
ns o
f thr
eat m
otiv
ated
beh
avio
r la
rgel
y ab
sent
in re
spon
se.
The
Expo
sito
r A
L
L
LI,
PC
ontr
actio
n of
Aut
hori
ty:
“Bec
ause
the
clas
sifie
d or
gani
zatio
n w
as so
wor
ried
abou
t def
endi
ng th
e pr
int c
lass
ified
s bus
ines
s, th
at g
roup
hel
d on
to th
e on
line
busi
ness
.” (T
he E
arly
Pre
side
nt)
The
Expo
sito
r B
L L
L I,
A, O
, P
Focu
s on
Exis
ting
Reso
urce
s: “
Ther
e w
ere
som
e pe
ople
who
said
, if w
e gi
ve o
ur n
ewsp
aper
out
for
free
, the
n w
ho is
goi
ng to
buy
it?”
(CFO
) Th
e M
orni
ng
New
s A
T
XL
I,PFo
cus o
n Ex
istin
g Re
sour
ces:
All
deci
sion
s mad
e re
leva
nt a
s the
y re
late
d to
the
core
new
spap
er
stra
tegy
.
The
Mor
ning
L
L
LI,P
Will
ingn
ess t
o C
omm
it Re
sour
ces:
“In
June
199
8 w
e
43
New
s B
star
ted
a ra
mp
up fr
om 5
to 4
0 pe
ople
by
Oct
ober
.”
(VP
Mar
ketin
g)
a Bas
ed o
n Y
in’s
(199
4) te
chni
que
of re
plic
atio
n, L
=lite
ral r
eplic
atio
n of
the
beha
vior
, T=t
heor
etic
al re
plic
atio
n, w
here
the
beha
vior
w
as n
ot o
bser
ved
byt f
or th
eore
tical
ly c
onsi
sten
t rea
sons
, X=i
ndic
ates
that
the
beha
vior
was
not
repl
icat
ed fo
r any
con
sist
ent c
ause
b I=
Inte
rvie
ws,
A=A
rchi
val D
ocum
ents
, O=D
irect
Obs
erva
tion,
P=P
ublic
Doc
umen
ts
44
Tabl
e 6:
Thr
eat M
otiv
atio
n Le
ads t
o R
igid
ity
N
ewsp
aper
Ea
rlyPr
oduc
tPe
rcen
tage
of P
rodu
ct
from
Prin
t N
ewsp
aper
by
199
8
N
umbe
r of
New
C
ateg
orie
s R
even
ue
by 1
998
a b
Exam
ples
The
Bea
con
A
Exte
nsio
n of
New
spap
er
>75%
1
“We
lear
ned
. . .
that
ther
e w
asn’
t ver
y m
uch
of a
n ap
petit
e fo
r an
‘ele
ctro
nic’
ne
wsp
aper
. . .
But
that
’s
exac
tly w
hat w
e di
d w
ith
the
inte
rnet
.” (P
ublis
her)
Th
e Be
acon
B
Exte
nsio
n of
New
spap
er
>85%
1
“Whe
re I
thin
k w
e m
isse
d th
e bo
at is
that
we
saw
it a
s an
ext
ensi
on o
f the
ne
wsp
aper
. In
oth
er w
ords
so
met
hing
rich
er a
nd
deep
er th
an th
e ne
wsp
aper
.” (C
EO)
The
Pres
s A
Exte
nsio
n of
New
spap
er
>85%
3
“Rem
embe
r tha
t I h
ad sa
id
to th
e C
EO a
t the
tim
e th
at
it m
ade
abso
lute
ly n
o se
nse
to re
plic
ate
the
new
spap
er
on th
e in
tern
et.
Then
I sa
w
the
prod
uct a
nd it
was
just
th
at.”
(CEO
, Int
erne
t G
roup
) Th
e Pr
ess B
R
ich
Inte
ract
i
<50
%
3 “W
e ar
e re
ally
bec
omin
g a
sepa
rate
com
pany
from
the
new
spap
er.
I cam
e fr
om
ther
e. I
love
the
pape
r, bu
t w
e ar
e no
w a
diff
eren
t
45
ve
Con
tent
fr
om
M
ultip
le
Sou
rces
grou
p w
ith a
ver
y di
ffer
ent
way
of w
orki
ng.”
(Onl
ine
Edito
r)
The
Expo
sito
r A
Exte
nsio
n of
New
spap
er
>85%
1
“We
coul
dn’t
see
any
mod
els t
hat w
e w
ere
fam
iliar
with
, nor
any
we
knew
how
to m
ake
mon
ey
with
” (C
EO)
The
Expo
sito
r B
Exte
nsio
n of
New
spap
er
>85%
1
“We
faile
d to
reco
gniz
e th
e im
porta
nce
of to
ols s
uch
as
sear
ch, b
ut ra
ther
pre
sent
ed
this
in th
e la
yout
of a
pr
inte
d ne
wsp
aper
.” (V
P,
Prod
uct D
evel
opm
ent)
The
Mor
ning
N
ews A
Exte
nsio
n of
New
spap
er
>90%
1
“Whe
re w
e m
ade
our
mis
take
was
we
mis
sed
the
next
wav
e of
opp
ortu
nity
. W
e co
uld
have
said
we
wan
t to
be a
nat
iona
l cl
assi
fied
sour
ce.
We
coul
d
46
have
bec
ome
diff
eren
t co
nten
t ver
tical
s. B
ut w
e ha
ve d
one
very
littl
e on
co
nten
t ver
tical
s.”
(Pub
lishe
r)
The
Mor
ning
N
ews B
Exte
nsio
n of
New
spap
er
>80%
1
“I d
on't
see
this
as t
hat
diff
eren
t tha
n w
hat t
he
new
spap
ers c
urre
ntly
do,
it
is ju
st a
noth
er c
hann
el.”
(V
P M
arke
ting)
a B
ased
on
inte
rnal
est
imat
es a
nd in
com
e st
atem
ent a
naly
sis a
t eac
h si
te
b Bas
ed o
n co
mpa
rison
s of p
rint n
ewsp
aper
inco
me
stat
emen
t ana
lysi
s and
pur
e-pl
ay e
ntra
nt in
com
e st
atem
ent a
naly
sis.
Six
cat
egor
ies
of re
venu
e w
ere
iden
tifie
d as
bei
ng “
new
” re
lativ
e to
a p
rint n
ewsp
aper
: 1) f
ee-b
ased
arc
hiva
l acc
ess,
2) e
-mai
l mar
ketin
g, 3
) e-m
ail
list r
enta
l, 4)
dat
a an
alys
is fe
es, 5
) beh
avio
ral t
arge
ting,
and
6) d
emog
raph
ic ta
rget
ing.
47
Tabl
e 7:
Stru
ctur
al V
aria
tion
Acr
oss S
ites (
2000
) N
ewsp
aper
Tim
ing
Sepa
ratio
n D
ivis
iona
l U
nita,
b R
epor
ting
Line
sc N
ewsr
oom
dSa
lese
Loca
tionf
Des
crip
tion
The
Bea
con
A
Sprin
g 19
99
S S
H
H
S Se
t up
as a
sepa
rate
uni
t in
a di
ffer
ent
build
ing
from
the
pare
nt, w
ith p
rimar
y re
porti
ng th
roug
h th
e on
line
gene
ral m
anag
er.
The
Beac
on
B Su
mm
er
1999
S
SH
H
H
Se
t up
as a
sepa
rate
uni
t, bu
t sha
red
resp
onsi
bilit
ies w
ith so
me
pare
nt fu
nctio
nal
staf
f. P
rimar
y re
porti
ng re
spon
sibi
lity
still
pr
imar
ily th
roug
h on
line
GM
. Th
e Pr
ess A
Su
mm
er
1997
S
SH
S
S Se
t up
as a
sepa
rate
uni
t in
a di
ffer
ent
build
ing
from
the
pare
nt, w
ith p
rimar
y re
porti
ng th
roug
h th
e on
line
GM
. A
ll fu
nctio
nal s
taff
hire
d se
para
te fo
r onl
ine.
Th
e Pr
ess B
Sp
ring
1995
S
SH
S
S Se
t up
as a
sepa
rate
uni
t in
a di
ffer
ent
build
ing
from
the
pare
nt, w
ith p
rimar
y re
porti
ng th
roug
h th
e on
line
GM
. A
ll fu
nctio
nal s
taff
hire
d se
para
te fo
r onl
ine.
Th
e Ex
posi
tor A
R
emai
ned
Inte
grat
ed
I I
I I
H
Kep
t int
egra
ted
with
the
pare
nt o
rgan
izat
ion.
O
nlin
e G
M a
nd sm
all s
uppo
rt st
aff h
ired
and
loca
ted
in a
sepa
rate
bui
ldin
g, b
ut a
ll fu
nctio
nal s
taff
and
resp
onsi
bilit
ies k
ept
inte
grat
ed w
ith p
aren
t. Th
e Ex
posi
tor B
R
emai
ned
Inte
grat
ed
I I
I I
I K
ept i
nteg
rate
d w
ith th
e pa
rent
org
aniz
atio
n.
Onl
ine
GM
hire
d, b
ut a
ll fu
nctio
nal
resp
onsi
bilit
ies c
oord
inat
ed th
roug
h pa
rent
or
gani
zatio
n.
The
Mor
ning
N
ews A
R
emai
ned
Inte
grat
ed
H
I H
I
I St
ated
stru
ctur
e as
bei
ng h
ybrid
. N
ewsr
oom
w
as c
lear
ly a
hyb
rid, w
ith so
me
onlin
e co
nten
t goi
ng b
ack
to th
e pr
inte
d ne
wsp
aper
. H
owev
er, m
ost f
unct
iona
l re p
ortin
g ru
n
48
thro
ugh
pare
nt o
rgan
izat
ion.
Th
e M
orni
ng
New
s B
Rem
aine
d In
tegr
ated
I
I H
H
I
Kep
t int
egra
ted
with
the
pare
nt o
rgan
izat
ion.
O
nlin
e G
M h
ired,
but
all
func
tiona
l re
spon
sibi
litie
s coo
rdin
ated
thro
ugh
pare
nt
orga
niza
tion.
a O
nlin
e ve
ntur
e st
ruct
ure
rele
vant
to p
aren
t org
aniz
atio
n: I=
Inte
grat
ed, H
=Hyb
rid, S
=Sep
arat
e b B
ased
on
man
agem
ent’s
self
desc
riptio
n.
c Bas
ed o
n pr
imar
y re
porti
ng re
spon
sibi
lity
of fu
nctio
nal s
taff
, e.g
., on
line
sale
s man
ager
repo
rting
to: p
rint s
ales
man
ager
(I),
onlin
e G
M (S
), or
bot
h (H
). d B
ased
on
prim
ary
resp
onsi
bilit
y fo
r con
tent
dev
elop
men
t: pr
int n
ewsr
oom
(I),
an se
para
te o
nlin
e ne
wsr
oom
(S),
or a
hyb
rid o
f bot
h (H
). e B
ased
on
prim
ary
resp
onsi
bilit
y fo
r sel
ling
onlin
e ad
s: p
rint s
taff
(I),
inde
pend
ent s
ales
reps
(S),
or a
hyb
rid o
f bot
h (H
). f B
ased
on
the
loca
tion
of th
e on
line
vent
ure:
with
in th
e pa
rent
org
aniz
atio
n (I
), ph
ysic
ally
sepa
rate
d fr
om th
e pa
rent
(S),
or a
hyb
rid
(H).
49
Tabl
e 8:
Stru
ctur
al V
aria
tion
Lead
s to
Diff
eren
ces i
n Fr
amin
g an
d In
nova
tion
(200
0)
N
ewsp
aper
St
ruct
ure
Subs
eque
nt F
ram
ing
Exam
ples
Perc
enta
geof
Pro
duct
fr
om P
rint
New
spap
era*
*
Loca
l M
arke
t Pe
netra
tion
Sc
oreb*
Num
ber
of N
ew
Cat
egor
ies R
even
uec
**
The
Beac
on A
Se
para
te
O
ppor
tuni
ty
Emer
ges
“Now
that
we
are
sepa
rate
, we
own
the
oppo
rtuni
ty in
a
way
we
neve
r did
whe
n w
e w
ere
still
with
the
new
spap
er.”
(New
Hea
d of
New
Med
ia)
45%
c1.
94
The
Beac
on B
Se
para
te
O
ppor
tuni
ty
Emer
ges
“We
wer
e al
l set
to le
t peo
ple
buy
adds
onl
ine
. . .
The
pape
rs d
idn’
t wan
t to
buy
into
it.
This
is o
ne a
rea
whe
re
we
will
do
bette
r as a
sepa
rate
com
pany
.” (V
P Te
chno
logy
and
Ope
ratio
ns)
50%
1.4
4
The
Pres
s A
Sepa
rate
Opp
ortu
nity
Em
erge
s
“The
y ju
st si
t the
re a
nd m
ake
us fi
gure
it o
ut.
They
don
’t m
ake
the
deci
sion
s for
us.”
(VP
Sale
s)
50%
c2.
16
The
Pres
s B
Sepa
rate
Opp
ortu
nity
Em
erge
s
“Pag
e vi
ews f
rom
the
new
spap
er a
re n
ow b
arel
y m
ore
than
1/3
of t
he a
vaila
ble
page
s on
our s
ite. .
. Th
e ne
wsp
aper
is o
ne so
urce
of i
nfor
mat
ion-
-an
impo
rtant
so
urce
. B
ut w
e bu
y ou
r con
tent
from
them
like
we
buy
it fr
om a
nyw
here
els
e.”
(Onl
ine
Edito
r)
35%
1.7
5
The
Expo
sito
r A
Inte
grat
ed
Thre
at
Perp
etua
tes
“Fun
ctio
nal r
epor
ting
rela
tions
hips
are
ext
rem
ely
time-
cons
umin
g. I
t’s n
ot ju
st th
at th
e gr
oups
thin
k lik
e th
e ne
wsp
aper
. It
take
s a lo
t lon
g to
mak
e co
llect
ive
deci
sion
s.” (E
arly
Onl
ine
Pres
iden
t)
75%
1.
12
The
Expo
sito
r B
Inte
grat
ed
Thre
at
Perp
etua
tes
“We
cont
inue
to se
e th
is a
s a w
ay to
pro
tect
cla
ssifi
eds,
and
that
if w
e do
n’t d
o it
som
eone
els
e w
ill.”
(VP
Prod
uct D
evel
opm
ent)
70%
0.
93
The
Mor
ning
N
ews A
In
tegr
ate
d Th
reat
Pe
rpet
uate
s
“Our
bas
ic st
rate
gy is
an
inte
grat
ed st
rate
gy, s
o w
e’re
not
lik
e so
me
of th
ese
com
pani
es w
ho h
ave
spun
onl
ine
out.
In
the
loca
l inf
orm
atio
n m
arke
t the
new
s pap
er h
as a
n
90%
1.
62 50
adva
ntag
e. T
o se
para
te th
e on
line
unit
from
the
new
spap
er is
to g
ive
away
a lo
t of t
hat a
dvan
tage
.” (V
P B
usin
ess D
evel
opm
ent)
The
Mor
ning
N
ews B
In
tegr
ate
d Th
reat
Pe
rpet
uate
s
Dis
cuss
ions
with
man
agem
ent r
emai
n ce
nter
ed a
roun
d de
fend
ing
clas
sifie
d pr
oduc
ts.
75%
0.
52
a Bas
ed o
n in
tern
al e
stim
ates
and
inco
me
stat
emen
t ana
lysi
s at e
ach
site
b R
atio
of m
onth
ly w
ebsi
te u
sers
to d
aily
new
spap
er re
ader
s. D
ata
colle
cted
from
new
spap
er si
tes a
nd c
heck
ed a
gain
st o
nlin
e da
ta
from
Med
ia M
etrix
and
Nie
lson
Net
Rat
ings
and
circ
ulat
ion
data
from
the
Aud
ited
Bur
eau
of C
ircul
atio
n.
c Bas
ed o
n co
mpa
rison
s of p
rint n
ewsp
aper
inco
me
stat
emen
t ana
lysi
s and
pur
e-pl
ay e
ntra
nt in
com
e st
atem
ent a
naly
sis.
Six
cat
egor
ies
of re
venu
e w
ere
iden
tifie
d as
bei
ng “
new
” re
lativ
e to
a p
rint n
ewsp
aper
: 1) f
ee-b
ased
arc
hiva
l acc
ess,
2) e
-mai
l mar
ketin
g, 3
) e-m
ail
list r
enta
l, 4)
dat
a an
alys
is fe
es, 5
) beh
avio
ral t
arge
ting,
and
6) d
emog
raph
ic ta
rget
ing.
*
Sig
nific
ant d
iffer
ence
at p
<.05
, bas
ed o
n tw
o sa
mpl
e t-t
est c
ompa
ring
inte
grat
ed a
nd se
para
ted
grou
ps in
sam
ple
** S
igni
fican
t diff
eren
ce a
t p<.
01, b
ased
on
two
sam
ple
t-tes
t com
parin
g in
tegr
ated
and
sepa
rate
d gr
oups
in sa
mpl
e
51
Figu
re 1
: A P
roce
ss M
odel
of R
espo
nse
to D
isru
ptiv
e C
hang
ea
Esta
blis
hed
Firm
Mar
kets
Thre
at to
C
ore
Bus
ines
s
SOU
RC
E O
F IM
PETU
S
Com
mitm
ent
+-
Agg
ress
ive
Com
mitm
ent t
o In
itial
Res
pons
e
Con
tract
ion
of A
utho
rity
INTE
RM
EDIA
TE
BEH
AV
IOR
S
Focu
s on
Exis
ting
Res
ourc
es
(P1)
(P2)
(P3a
)
(P3b
)
(P3c
)
Rig
idity
+ + +
Sepa
rate
Inte
grat
ed
Stru
ctur
e
Opp
ortu
nity
Thre
at
Mot
ivat
ion
Rig
idity
R
elax
es
Rig
idity
Pe
rpet
uate
s
INTE
RV
ENTI
ON
(P4) +
(P5)
a Num
bers
cor
resp
ond
to p
ropo
sitio
ns in
the
text
.
52
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