I’ve spent the last couple of weeks proof-reading my book. This has been my final chance to make some tweaks to the text before it goes off to the printer.

Unfortunately, it has needed more than a few ‘tweaks’ – and I found I had to rewrite a few chunks of text that simply didn’t make any sense. Not ideal, but necessary.

My favourite quote about writing is from George Bernard Shaw (yes, that’s him on the right), who advised any writer to go back over their work to find the bit they were most proud of, and then instantly delete it.

My book falls loosely into three types of content: some theory [this is what the internet has done to businesses], case histories [examples of what businesses have done to survive disruption] and advice [this is what you should do].

Ultimately, others will decide whether or not anything I’ve written is actually any good, but I thought I’d be pretty good on the theory, not bad on the case-histories, and I should tread very carefully on actually offering advice.

On re-reading, I think I should be trodden much more carefully on the theory, the case histories are – on the whole – actually not bad – and my advice, or rather insight into the reality of transformation, is much better than I thought. I’m not going to pretend I’m some kind of management guru, but clearly a decade an a half and the Guardian and constant conversations with those going through similar things obviously taught me something.

The other shock has been that the final half of the book, which was actually written quite quickly, and after I had really cracked the structure is a much better read. Anyway, now the book is pretty much wrapped up, I can start blogging, which is, frankly, much much more fun!

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Just reading the proofs of Creative Disruption and re-reading my section of Deutsche Post. I’ve written about them as proof of how you can move into new adjacent markets,but only after you have fixed your core business.

Deutsche Post started the modernisation programme on their network back in 1990, when they were loss-making and state-owned. At the time it had nothing to do with the internet, and everything to do with looming privatisation and unification of Germany.

The Royal Mail‘s similar renewal programme didn’t start until 2004. [If you want the full comparison, read Richard Hooper's report Modernise or Decline ].

By making their core mail business profitable, they freed up the cash to move into new adjacencies: notably freight, and logistics [which are actually growing as a result of the internet']. However mail is still Deutsche Post’s cash cow, and even for all their cost control and modernisation it is still losing money.

When I spoke to their strategy boss Markus Reckling, about this – and what they thought was going to happen. He admitted to uncertainty and said

I used to think strategy was about avoiding unforseen events, now I know it’s about being able to cope with them.

There’s an enormous amount of wisdom packed into that little quote. If you follow it’s logic, it will drive you into focussing on making your business as healthy as possible right now, in order to keep your options open in the future. Which, I have to say, I think is exactly right.

In such uncertain times, the challenge isn’t the fine tuning of your big bold plan – but having a good answer to the question: ‘And what if your assumptions are completely wrong’. Because, if we’ve learned one thing – there’s a good chance that they will be, through no fault of your own.

This is why debates about ‘the end of print’ or ‘the death of the high street’ are pretty pointless in buisness. And ‘strategy’ is not about making reckless bets based on long term assumptions about such things.

Blockbuster a long time ago followed the consensus that the future of their business was on demand, so they went into and exclusive 20-year partnership with the most dynamic and thrusting business around to create a direct-to-home, video on demand service. That business was called Enron: the project never made it past a test [although Enron still managed to declare hunderds of millions in revenue from it]

It was about this time that they also turned down the chance to purchase a loss making little business called Netflix for a rumoured $50m.

Kodak, meanwhile, was way, way too certain that people would keep using film [they believed even into the 90s that the majority of consumer image capture would be on film, with people then getting digital prints]. Such certainty cost them dear.

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The flaws in my book are all too visible as I read it. But so, fortunately, are some of the strengths. I’m not the world’s greatest theoretician, but I can tell a pretty good story – and I’m pleased with the insights I’ve drawn from the IBM, Apple, HMV and Encyclopedia Britannica case histories.

I very deliberately didn’t do a whole section on newspapers; although towards the end I compare the adjacency strategies of the New York Times, Johnston Press [consolidate in print through geographic expansion]; Washington Post Company [move into Education and Cable], Naspers and Schibsted [build and buy real internet businesses]. Because ultimately, it is this strategy that dictates the financial framework that any newspaper business has to operate in.

I’m also pretty pleased with some of the things I’ve tackled about the factors you need for a successful transformation strategy – and my little spiel about ‘Denial, Delusion, Distraction and Bewilderment’. In the hands of a slightly more guru-like author, that could be the core of a book in its own right.

And there’s no section on paywalls – not least because it was such a live topic that anything I wrote would either have to be spectacularly couched, or end up completely out of date. I’ll return to the topic here, as I leave the world of book editing behind, and start to get back into my blogging stride towards the end of the Summer.

My biggest regret though is all about porn. With a bit more research, it could have been a great set of case histories, but in the end it was just a 350-word panel shoe-horned into the book in not quite the right place.

Anyway, enough chatting on – there is proof reading to be done..

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Fortunately Jeff Hayzlett announced his departure from Kodak before the edits went in, and at the last minute, there was some closure on EMI (included in a section on how debt holds back transformation efforts) when Terra Firma put £105m into the business to keep the banks at bay.

Gmg’s recent losses came in too late. But, I have only written a bit about my alma mater.

[Memo to self: future blog post on choosing case histories and examples would be a good idea].

Right now, I have two main emotions about the book. The first is just sheer relief that the writing is over, and I don’t have this nagging thing in the back of my head about a chapter I have to get finished, or someone else I need to contact. Being able to divert all the energy it took out of me back into family and work is a joy.

The other feeling is sheer amazement that I did it. It increasingly feels like something done by a completely different person.

Writing a business book is rather like swimming the Channel: a monotonous solo slog, where style and creativity take a second place to the determination to get it done. OK, it’s harder to swim the Channel, but you get the idea.

The next thing I have to think about it how and when to *really* start blogging. Expect a slight increase in frequency of posts as Summer nudges forward, turning into an full-throttled torrent come September / October.

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The problem is, I hate reading back anything I’ve ever written – always have done. In the same way that I can’t bear to hear a recording of my own voice. So, other than the odd brief glance, I haven’t really looked at the manuscript since I finished writing it.

As with everything else I’ve ever written, I suspect that for every bit I read that I think ‘Oooh, that’s really quite smart, did I really come up with that?’; there will be at least half a dozen bits where I’m screaming: ‘IDIOT, IDIOT!’ and want to start rewriting the whole thing.

As long as I do my bit, we should be on for publication in October. Just in time for the Christmas rush (yes, it’s the perfect gift for that special someone in your life: your boss).

One early frustration has been not being able to get permissions on some minimal extracts from Business Week – basically a few headlines that sum up Kodak’s trials and tribulations. Firstly I couldn’t believe we were going to have to pay for it; and secondly I couldn’t believe the price they were asking. So – they’re not in the book, but I’ll link to them from here when it comes out.

And so to work…

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I’m currently away, something similar to normal blogging service should resume shortly.

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Looking at the fates of the music industry, or travel agents, or how businesses like Kodak and Britannica have failed and then picked themselves up, how postal services struggle in a world of e-mail, or how an entertainment retailer like HMV avoids going bust in a world of Amazon, Apple and Pirate Bay, I’ve been struck by the similarities – both in the challenges faced, and in the solutions sought.

It was when I started to spot the same themes cropping up time and time again, I thought it might make a good topic for what will, all being well, be my first book.

Somehow, I managed to convince FT Prentice Hall that this was a good idea, and so I am now right in the middle of writing it – much more slowly than I, or they, would like, and the results of this exercise will hopefully be with you sometime early next year.

Why bother?

It has always struck me that there has been a huge amount written about Google, Amazon, Wikipedia and eBay and the general ways of the online world. Some of this is brilliant, and genuinely insightful, some of it is frothy digital euphoria.

There has also been plenty written about what is wrong with newspapers, broadcasters, Britannica, record labels etc, and what they should or could have done; but there have been very few books that I’ve come across that take a systematic look at the what has happened to these businesses – and what they have done that has actually worked, often in the most trying of circumstances.

The point is – businesses that have to deal with the internet are fundamentally different to those that are the products of it. It is great to look at Google; great to admire Amazon, and Wikipedia is as fascinating a social and creative phenomena as you fan find. But if you are running a business that is profoundly structurally challenged, you share very little of their corporate DNA.

Yes, everyone needs to know about their world, but thinking you can just graft on the bits you like from them in a hope that you will ‘get digital’ is no more likely to succeed than putting on a flashing bow tie and hoping everyone thinks you have a sense of humour.

This process goes beyond those who have had to make the leap from physical to digital and offline to online. Already the first wave of digital businesses are finding themselves challenged (eg eBay), and we currently have a Battle Royale breaking out on all fronts between Google and Microsoft which is entirely digital.

Defining ‘creative disruption’

My first thought for a title was ‘OMG, the Internet Ate My Business’ . Which was fine if I’m just going to chronicle woes, but, it’s a little bit negative (oh, and publishers prefer titles with just two words in!). So, we wanted something that summed up both cause and effect, and that offered a pragmatic blueprint for survival and success. This is where we came up with Creative Disruption. What, you might ask, do I mean by that? To me, it is the process of profound change in a business or sector driven by three things

a. Digital physics
There are some imutable laws that follow the move from atoms to bytes, and from offline to online. This is the stuff we know too well. Digital files can be infinitely copied and effortlessly distributed. Processing power, bandwidth and storage space continue to get faster, bigger and cheaper. The network is a platform. Everything online is instantly global. In some sectors this affects the core product (eg music, newspapers, classified advertising) which is where the greatest disruption occurs. In others, just the transaction and distribution (eg travel, cars) are affected, which is where we find the threat of disintermediation.
b. Changing consumer behaviour
Teasing out the affect between changes in behaviour caused by the internet, and behaviours that were latent but enabled by the internet is for bigger brains than mine. Either way – there are four powerful urges in consumer behaviour in the online age. People want to Create, Connect, Challenge and they want Control. These urges overlap, and converge – but they are like itches that the smartest online solutions scratch. We ignore them at our peril.
c. New entrants and entrepreneurs
If the first two provide the fuel for changing a sector beyond all recognition, it is entrepreneurs and new entrants two who provide the spark that sets the whole thing off. Apple in the music and mobile industries. Reed Hasting’s Netflix in DVD rentals. Brent Hoberman and Martha Lane-Fox with LastMinute.com. Niklas Zenstrom and Janus Friis with Skype. Incumbents sitting on steady growth and great margins have no incentive to change – which is why it takes Entrepeneurs to shake things up. Of course, entrepreneurs have always existed, and have always changed sectors; but in a digital world, the barriers to entry in many areas are so low, and the potential for disruption is so great in so many sectors, that we have a quite unparralleled wave of change.

This is not just disruption, it’s creative disruption

The reason I’ve been keen to add the ‘creative‘ label, is because as an incumbent, it is all too easy to focus on what is being knocked down, but it is even more important to think about what is being built up and created.

Entrepreneurs who just want to be destructive may well succeed in their goals. But it is only those who believe in creating brilliant customer experiences that will ultimately create great businesses.

Netflix, for example, didn’t just disrupt Blockbusters – it created a brilliant new way for you to get DVDs. Lastminute.com similarly wasn’t just about hacking away at Thomsons and Thomas Cook – there was a brilliant proposition, as much about convenience and price. And now, Kayak and Skyscanner are taking the travel world to the next step – a further creative disruption, by creating a business even thinner than LastMinute.com but with real consumer value of live price comparison.

Craigslist might well have hacked many newspaper’s classified revenues off at the knees, but to simply see it as that, ignores the phenomenal job Craig Newmark has done at the same time of turning something as creatively moribund as newspaper classifieds and turning them into a global community.

Standing on the shoulders of giants

The smart ones among you will have noted the nod in the title to both Schumpeter (‘Creative Destruction’) and Clayton Christensen (‘Disruptive Innovation’). This is deliberate. Both men loom large in my thinking – in particular Schumpeter, who I think should be getting much more of an airing in the current climate.

Schmpeter looked at a number of massive technology changes and how they affected different businesses – from the arrival of the Spinning Jenny to the launch of the motor car. His point – as I mentioned above was that dramatic change like this creates a whole new world, while often destroying the old one.

He was – as far as I can tell – the first economist to really stress the role of entreprneurs (‘new men’ and ‘new businesses’) in creating spectacular/ disruptive change in a sector. But he also analysed and described that change more vividly than anyone before, and most people since.

His description in Business Cycles of the impact of the railways on the businesses is perhaps the finest definition I’ve seen of the change that the internet would later cause to the business world as a whole.

“Upsets all conditions of location, all cost calculations, all production functions within its radius of influence; and hardly any “ways of doing things” which have been optimal before remain so afterward.”

And, if there is one phrase that sums up the challenge faced by so many businesses with Germanic (ok, he was actually born in Austria) precision is it that all their old ways of doing things are ‘no longer optimal’.

Christensen’s The Innovator’s Dilemma is one of the great works of modern business thinking. I sat through Christensen’s legendary 3 hour explanation of disruption that covers everything from steel mills to strawberry milkshakes a few years ago, and was blown away. As an exposition of what disruption is, and how it works – it is truly astounding. And, I think Christensen and his team’s templates for innovation are also pretty smart. But I think that while he identifies 95% of the problem, he only profers about 30% of the solution.

So what can incumbents do about it?

Well, I’ve got to hold something back for the book. But if you look at the turnaround at HMV, or if you start to ask yourself why Deutsche Post is deemed a viable business while the Royal Mail is a bit of a car crash. Or if you look at what we have beeen doing at Guardian Media Group, you will start to see some of the principles in action.

My general thesis is that the nice bit of the solution – smart innovation, often at the edge of the business, just isn’t going to be enough. To focus solely on that lacks credibility with anyone who is actually operating in this world.

The disruption that happens within a business is going to have to be at least as profound and radical as that happening outside. It will normally involve fundamentally rethinking how the core business operates, as well as looking a mix of diversification and edge innovations. It requires vision, the willingness to challenge pretty much every assumption about how you operate, and what has been branded by some academics as ‘strategic agility’

It is not easy.

One of the things I’ve always noticed is that everyone outside a challenged incumbent such as Britannica or Kodak or the newspaper industry always knows what they should have done or, less often, what they should do next. But everyone inside them somehow seems to be getting it wrong. Why is that? Is it because there are no smart people in any of these businesses? Is there no chief executive who understands the digital world?

No, it’s the simple fact that having to actually do this, having to deal with both the people and the numbers involved is tough. Change takes infinitely longer to deliver than to describe. Revenue lines in decline can still be significant. Those on the up are likely to be very small. Managing that gap is anything but easy – especially in a public business. Changing the way a business thinks, the way it sees the world and its role in it – is also a big change. Especially when, as is the case in so many businesses affected in this way, the entire business has been built on doing one thing well for decades and decades.

Blogging and writing

When it comes to writing something like this, I’m like a mid-ranking middleweight getting back into the ring after retirement. Some of the moves are still there, but a lot of the pace and power has gone. After a decade in management (which effectively means a decade in Powerpoint with occassional bursts of blogging), going back to Microsoft Word to crank out tens of thousands of words is proving a little tricky. And a bout of RSI hasn’t helped matters. Nor has a day job and three young children. So, I need to focus, which means I’m not blogging my every thought, and I’ve left it till now to even explain what I’m up to.

However, it’s time to break cover – so I’ll be posting here occassionally, tweeting a bit (@Waldo) and also be setting up an e-mail list – which is very old fashioned, I know – but it’s the easiest way for anyone who’s actually interested in progress to follow.

And yes, of course I care what you think

This is just a very rough outline. If you have any thoughts or suggestions – please feel free either to add comments below (because spam, I’m afraid I have to premoderate), or e-mail me at Simon AT Creativedisruption DOT Net.

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