How Industries Survive Change. If They Do.

By some logic, there is no earthly reason why bicycles should still exist.

They are a quaint, 19th-century invention, originally designed to get someone from point A to point B. Today there are much faster, far less labor-intensive modes of transportation. And yet hopeful children still beg for them for Christmas, healthful adults still ride them to work, and daring teenagers still vault them down courthouse steps. The bicycle industry has faced its share of disruptive technologies, and it has repeatedly risen from the ashes.

Other industries (cough, cough, newspapers) should be so lucky.

For some businesses, the current economic downturn is a bit problematic. For those already facing fundamental threats — like newspapers and American auto makers — it could accelerate the path to what, it has been said, might be death.

But history offers some reason for optimism. Industries like bicycle manufacturers, when faced with a threat of obsolescence, managed to creatively reinvent themselves. What lessons do they provide for today’s struggling industries?

There’s no clear route to cheating industrial death. Those companies that have survived technological challenges have in common some combination of perseverance, creativity, versatility and luck. Their precise strategies vary. Some made sweeping changes, and abandoned their original products entirely; others were able to endure by changing little but their marketing.

Take, for example, a certain class of luxury goods. Inventors have created more user-friendly writing implements than fountain pens, more dependable time-keeping devices than mechanical wristwatches, and more efficient ways to heat houses than fireplaces. Yet, many consumers still gladly opt for the cultural cachet of technologically more primitive goods.

These older technologies have survived by recasting themselves as luxuries and by marketing their sensory, aesthetic and nostalgic appeal. Their producers emphasize their experiential rather than functional qualities.

In short, they were Ye-Olde-ed, and a boutique-y rump of the original industry now survives.

The popularity of newspapers the day after Barack Obama’s election — when they were probably valued more as historical artifacts than as sources of news — had a whiff of this development.

But newspapers were not designed with maximum tactile pleasure and durability in mind. “Newspapers were always this scrubby sheet of paper with ink that came off, and that deteriorate in a few hours,” said Gregory Clark, an economic historian at the University of California at Davis.

For that reason, he said, it is somewhat difficult to imagine newspapers remarketing themselves as a luxury product.

Perhaps there are other qualities unique to newspapers that can be exploited, just as previous creative industries have discovered when facing disruptive technologies.

Photography might have killed Western painting and portraiture, for example, because painters knew they couldn’t compete with the speed and accuracy with which photographs represented the visual world. Instead, many painters and other traditional visual artists innovated with more abstract and less representational images.

Similarly, television might have crowded out movies. Instead, Hollywood focused on bigger, more spectacular, more risqué films — the stuff that television couldn’t deliver.

Some survivor industries discovered new customer bases.

Bicycles, for example, grew in popularity through the late 19th century, peaking in the 1890s, but the craze weakened around the turn of the last century. After the First World War, manufacturers discovered a new youth market, which lasted until the baby boomers were kids. Then bikes fell out of favor again, but were revived during the 1970s when those boomers, and their kids, became more interested in personal exercise and gas-free, environmentally friendly modes of transportation.

Radio is an even better example. In its 1940s heyday, it was the center of national entertainment. Then, in the 1950s, television began stealing radio’s biggest stars, like Jack Benny and Abbott and Costello. National advertisers — radio’s revenue base — followed the talent. “Radio, actually shockingly, was pronounced dead in 1953,” says Susan J. Douglas, chair of the communication studies department at the University of Michigan.

But the industry revitalized itself by tapping into new markets. First it stumbled upon the youth music market, congregating around the car radio. Then radio innovators found other neglected markets, including underground music movements, longer-form news and talk radio. Along the way, radio’s business model changed; the medium cultivated new niche advertisers, rather than national advertisers, to pay for its new niche programming.

For some companies, nestling into a marketing nook wasn’t enough. They made radical transitions to new products and new industries, and survived through evolution, not preservation.

“Much of the history of the ‘American system of manufacturing’ is the story of inventors moving from a declining industry to a new expanding industry,” says Petra Moser, an economic historian at Stanford who studies innovation. “Inventors take their skills with them.”

Gun makers learned to make revolvers with interchangeable parts in the mid-19th century, Ms. Moser says. Then those companies (and some former employees, striking out on their own) applied those techniques to sewing machines when demand for guns slackened. Later, sewing machine manufacturers began making woodworking machinery, bicycles, cars and finally trucks.

Some famous companies have taken more improbable turns, either because their original business was fading or because they saw better growth opportunities. Before making cellphones, Nokia made paper. Before making cars, Toyota made looms (a Toyota textile business still exists). Corning is still a specialty glass and ceramics company known to most consumers for its tableware, but for more than a century it has also profited from uses as diverse as early light bulbs, space, defense and fiber-optic cable.

Some superstar companies managed to reinvent themselves multiple times — I.B.M., for example. Over a century, the company has nimbly transitioned from punch-card accounting equipment (its original business) to large mainframe computers, to personal computers, and finally to information-technology — each time facing skepticism from analysts who thought I.B.M. might be too big, too old or too entrenched to adapt.

These companies survived by keeping their ears to the ground. New customer needs emerged, and smart corporations positioned themselves to meet them. “You have to be willing to walk away from the things that have made you great,” says Scott D. Anthony, president of Innosight, which consults with companies (including newspapers and automotive businesses) on how to foster a culture of innovation. He argues that the incumbents in the newspaper industry were caught sleeping during the initial meteoric growth period of Web sites like Wikipedia because the avenue for innovation — letting crowds rather than experts aggregate and filter data — seemed so antithetical to what newspapers did well.

Of course, straying too far from what a company does well has also proven dangerous. “If you look at the history of firms that have tried to diversify their businesses, you’ll see it’s virtually an impossible thing to do,” says David A. Hounshell, a historian at Carnegie Mellon University who studies technology and social change. “Usually when a firm announces a program to diversify, they’ve pretty much written their death warrant.”

Newspapers have faced challenges before and have adapted — including through efforts at diversification. Can these historical precedents teach newspapers how to defeat the economic forces of technological change once again?

Like previous industries fearful of obsolescence, newspapers can either develop a new product, or find a way to remarket and remonetize the old one. Right now, newspapers are doing a little of both: They’re adapting their product to the Web to attract new audiences, and they’re trying to re-monetize by delivering more targeted advertising.

Meanwhile, we’ve already seen some of the “destruction” half of Joseph Schumpeter’s famous “creative destruction” paradigm, with many newspapers cutting staff and other production costs. Unfortunately for newspapers, historians say, the survivors in previous industries facing major technological challenges were usually individual companies that adapted, rather than an entire industry. So a bigger shakeout may yet come.

But perhaps the destruction will lead to more creativity. Perhaps the people we now know as journalists — or, for that matter, autoworkers — will find ways to innovate elsewhere, just as, over a century ago, gun makers laid down their weapons and broke out the needle and thread. That is, after all, the American creative legacy: making innovation seem as easy as, well, riding a bike.

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Author: Catherine Rampell
Original Source: New York Times
Date Published: November 16, 2008
Web Source: http://www.nytimes.com/2008/11/16/weekinreview/16rampell.html
Date Accessed Online: 2008-11-18