Why are newspapers going out of business? The simple explanation is that newspaper owners are stupid; the world around them is changing and they’re oblivious. Michael Nielsen has a more interesting explanation. He says that newspapers are in trouble not because they’re stupid now but because they’ve been smart in the past.
Nielsen argues that newspapers are locked into their current business models because they have been so successful. Any small changes will make their businesses less profitable. I don’t know enough about the newspaper industry to say whether Nielsen is right, though I find his argument plausible. (His article is entitled Is scientific publishing about to be disrupted? However, it is about much more than scientific publishing.)
Nielsen argues that newspapers are standing on the top of one hill and profitable online news sources are standing on a higher hill, a hill that didn’t exist 20 years ago. In mathematical lingo, both businesses are at local maxima. Newspapers are trapped because they can’t improve their situation without first making it worse. Anyone who leads a newspaper down its hill in order to climb a new hill will be fired before he starts gaining altitude again.
I don’t care that much about newspapers, but Nielsen’s article struck me because it provides an explanation for many other situations. I feel like some areas of my life are stuck at a local maximum: there’s plenty of room for improvement, but not by making small changes.
Time management is a good example. I once wrote that the best you could hope to do at managing your time is to use a greedy algorithm (how can I best spend the next 5 minutes).
The obvious flaw in this approach is that you risk missing out a better solution.
But I am not sure there is an easy fix beyond allowing yourself to be crazy from time to time.
“But I am not sure there is an easy fix beyond allowing yourself to be crazy from time to time.”
Most of the time, there’s the added constraints that once left, one cannot return to a previous local maximum.
“… there’s plenty of room for improvement, but not by making small changes.”
You can improve by making small changes; you just have to wait to measure the results until you’ve taken a bunch of steps. This is a case where setting the measurement horizon too short creates a problem.
A few weeks ago I blogged on the question of whether universities are in a situation similar to the newspaper industry. I don’t know if I’m right, but I do know that most universities are trying to get better right now by doing what they’ve done in the past, and I suspect that the better ones are at a local max that can be topped by something much different.
This whole concept is covered with lots of examples (disk drives, earth movers, insulin, motorcycles) in Christensen’s book The Innovator’s Dilemma, which is at least partly responsible for the now overused term “disruptive technology”. The Wikipedia article Disruptive Technology has lots of examples from Christensen’s book and from other domains.
You’re absolutely correct, John. In the transit industry, we ran into a problem here in Houston a few years back. We had 2 bus routes operating primarily on Westheimer. One route had 4 branches while the other had 2 branches, although each route shared the same branch with 1 route operating it before 7:30 p.m. and the other operating it after 7:30 p.m. This mish-mash was the result of years of incremental extensions designed to minimize costs, but the result was also horribly confusing to customers.
Several studies had been conducted between 1999 and 2005 but nothing had actually been done about any of the studies. We began our changes in FY2006. Since one route operated six days per week and the other seven days per week, the first step was to add the Sunday service. The costs of doing so were moderate, but greater than zero. As a result, we faced initial opposition – opposition that dissipated when it was determined that: a) the new Sunday route had the highest average daily ridership of any new service we’d introduced in the previous 20 years; b) the other route retained its ridership base; and c) two of the north-south connecting routes experienced ridership increases, the majority of which could be attributed to the transfer location at Westheimer. Then we removed the one shared branch from the second route and operated it exclusively on the first route. This allowed us to streamline our information to customers and potential customers. Again, there was a nominal increase in cost. Step three required the removal of two unproductive branches. In this case, there was a cost savings accompanied by a minimal ridership decrease. Step four was a political solution whereby the remaining two branches on the one route were separated into two separate routes. The next part of this step was the synchronization of traffic signals on Westheimer, which resulted in reduced – and consistent – travel time particularly from the beltway to the West Loop. So after standing pat for nearly a decade in this “good situation” we moved from two routes with six branches operating inconsistent spans of service and days of the week to three routes with no additional branches operating consistent spans of service and days of the week.
Did I mention that we reduced the peak vehicle requirement and increased ridership (prior to the fare increase, of course)? Costs did increase slightly on weekdays due to developing consistent spans of service but the increase in ridership kept many of the indicators the same if not actually improved over the FY2005 scenario. So we had to increase costs initially to be able to make the changes necessary to improve the overall situation in the long run. Staying put is not acceptable.