problems common to large media industries

Once solidly established, mass media industries risk complacency, gentrification, and ultimately failure if they don’t remain sensitive to shifts in the market and consumer demands. Andy Grove, the fabled leader of computer-chip manufacturer Intel, and later a scholar on business strategy at Stanford University, calls major changes that take place in an industry’s competitive environment, Strategic Inflection Point.

Examples of Strategic Inflection Points in various industries include:

a discovery of a new innovation that changes consumer tastes (e.g., the Internet),

a change in consumer values (e.g., the shift toward organic food),

a legislative order or public policy shift (e.g., the breaking apart of the telecommunication industry), or

conglomeration trends in an industry (e.g., the closing of independent bookstores and the rise of booksellers chains like Barnes & Noble, and the subsequent rise of the e-book and

Grove notes that Strategic Inflection Points require a significant change in an industry’s business strategy, but as is often the case, top executives are often the last to learn of such significant changes, making it difficult for them to respond proactively. And, when they do learn of them, they often fail to respond effectively.

Grove asserts that the typical way that most industry executives respond to a significant change in an industry’s competitive environment is first by ignoring the new challenges. Industry executives who are overconfident in their company’s existing level of security and success may become complacent in the face of new challenges and underestimate new shifts and trends. Two examples are the music industry’ underestimation of the impact the Internet would have on record and CD sales. Another example is the newspaper industry’s gross underestimation of the impact the Internet would have on newspaper subscriptions and off-line readership.

Grove notes that once the challenges can no longer be ignored, industry executives often move into resistance mode, actively resisting change. Resistance can take other forms, including enlisting Congress and government agencies to adjust public policy
to protect existing media infrastructures. The traditional television industry, based on locally licensed stations, spent three decades pressing the federal government to impede the natural growth of cable and satellite delivery alternatives. In the end, however, the customer appeal of cable and satellite reception eroded the lobbying effectiveness of local stations’ trade groups and lobbyists. Other examples of resistance involve mergers and acquisitions, which are often heralded as steps toward a stronger future. As Grove asserts, resisting inevitable change is often delusional and only serves to stave off the inevitable—the fading away of one industry and the beginning of a new one.

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