How Disruption Works: Job Loss Isn't Really Job Loss

from the jobs-move-around dept

One of the key points in understanding how disruption works is to recognize that as old industries fail, new industries grow up to take their place. For a true free market to work, failure has to be not just accepted, but embraced. Tragically, in the crony capitalist system we have today, large incumbents go running to the government as soon as they're disrupted, whining about how the disruption is not the normal workings of disruptive innovation, but rather "the end of the world" and a sign of clear evil. It's why you hear talk of "too big to fail" and all sorts of efforts to paint new innovations as illegal, rather than just disruptive competition. Yet, as we've seen over time, disruptive innovation may move jobs around and cause certain sectors to diminish, but it tends to open just as many, if not more, opportunities elsewhere over time. I don't think I've ever seen that displayed quite as clearly in graphic form as in a chart that LinkedIn recently released, looking at what parts of the industry have been growing and which parts have been shrinking over the past few years:
This chart caught the attention of Paul Smalera, who specifically noted that newspapers are at the very bottom, but online publishing is right near the top on the growth side -- a near perfect showing of how jobs shift over time. He notes the classic Innovator's Dilemma issue with news companies, where they thought they were in the business of selling newspapers, and that held back their ability to innovate:
They have been trapped in a terrible mindset that they are in the business of selling newspapers. The leap from paper to digital may be vast, but to newspaper publishers, it seemed like vaulting to a different business entirely, one they were loathe to get into. No matter what kind of lip service newspapers paid to the digital transformation, the most prominent paywall model out there, that of the New York Times, still protects print subscriptions with a tiered digital pricing strategy – one so annoying that it motivated its former digital design director to complain publicly about the entire signup process.

The lesson online media companies have taken from newspapers’ slow, public death is to move beyond the idea of selling the product. Online sites are selling their audience. It’s a simple twist of the equation, but one that changes everything about how a media company is run. A CEO who has realized that her audience – her customers – is the most important thing the company has will stop at nothing to give those customers what they want. Anything to make them feel as if they’re getting value from the company. And although she’ll monetize their aggregate value with advertisers and marketers, she’ll also protect them from underhanded sales pitches or confusing pricing strategies that infuriate the web-savvy.
This is a really good point on multiple levels. Beyond the innovator's dilemma (and the key point of figuring out what the real product is), Smalera is also debunking one of the popular myths of the internet era: when you're selling a user's attention, companies will naturally abuse their users. What he notes is that companies that do this don't end up lasting through the long haul, because users get annoyed and go elsewhere. Even though it's become a common pejorative statement among neo-luddites to mock the idea that the "users is the product," one thing that is true when that happens is that the companies need to treat their users right, or they have a crappy product that they can't sell.

Similarly, Mathew Ingram uses this to discuss why it's so difficult for legacy businesses to adapt, noting that it's difficult to change business models on the fly. Not only do you have to make big bets on new things, but you also have to keep the legacy business running while at the same time trying to undercut it with the new thing. It's why so many companies fail the innovator's dilemma test. Unless you have incredibly visionary leadership who can push a company through with a strong and clear vision of why the company must move in that direction, the magnetic appeal of trying to prop up increasingly obsolete businesses is just too strong.

But, the failure comes not because of some new "threat" or because of some kind of disgraceful activity (no matter how much legacy players try to describe it that way), but because corporate leadership chose to let others innovate, rather than supporting a plan of out-innovating themselves. Very, very few companies are willing to cannibalize their own business models -- but the failure to do that just means that someone else cannibalizes it for you.

And it goes way beyond news. The chart above shows some other key areas of disruption as well. That clump of retail, automotive, construction, banking, telecommunications, pharmaceuticals and real estate represents prime feeding ground for the next decade of disruption -- much of which has already started. You don't necessarily see the corresponding growth points on the opposite side of the chart, but as with newspapers and online publishing, give it a few years, and those new jobs and industries will make their way up the chart, as the legacy players continue to shrivel up (and whine all the way down).

Filed Under: disruption, growth, jobs
Companies: linkedin

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  1. identicon
    Anonymous Coward, 6 Apr 2012 @ 8:26am

    Most of the things on the losing side of the scale are there because of the economy. Restaurants, retail, supermarkets, construction, and banking will all make comebacks as the economy improves. Some things on the positive side will see declines as the economy improves as well - philantropy, e-learning, and management consulting.

    It's interesting to see that telecommunications has been purging jobs surpassing every industry except retail in number of jobs lost. It's frightening to think that in an age when people are constantly demanding more data bandwidth, that these industries are laying off workers.

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