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First Destruction, Then Creation

That is what real revolutions are like. The old stuff gets broken faster than the new stuff is put in its place…And so it is today. When someone demands to know how we are going to replace newspapers, they are really demanding to be told that we are not living through a revolution. They are demanding to be told that old systems won’t break before new systems are in place. They are demanding to be told that ancient social bargains aren’t in peril, that core institutions will be spared, that new methods of spreading information will improve previous practice rather than upending it. They are demanding to be lied to.

Clay Shirky, Newspapers and Thinking the Unthinkable

Since I read these lines from Clay Shirky’s brilliant piece on the decline of newspapers, I can’t seem to get them out of my head.

Recognizing destruction when it’s occurring takes a tougher emotional toll on us than an intellectual one.  We may be acutely aware of what’s happening, but we still cling to familiar institutions.  It’s a very natural human reaction.  But once we begin to loosen our emotional grip on the past, we can break free.

Understanding what is to come in the wake of a revolution is an entirely different story.  It is what venture capitalists attempt to do every day.  But in reality, while we may be right on certain trends we certainly cannot predict the future with any degree of accuracy.  We therefore bet on talented entrepreneurs going at big markets in the hope that *they* will figure it out.

Many markets are being completely upended today.  The combination of increasing broadband penetration and speeds, rapidly declining personal computer costs, information and services moving to the cloud and recessionary pressures on many high cost traditional businesses has created the perfect storm.

But what will come in it’s stead?  What businesses will be built?  What models will be employed?

These are the questions being asked across a number of media and advertising markets today — the music business, the publishing business, the classified advertising business, the yellow pages business, the banner advertising business, the video business and the list goes on.

We have to change the way we think.  We have to ignore old models and old cost structures.  Forget the labels.  Forget the printing presses.  Forget the banner ad.

We have to start by asking what does the consumer or customer *really* want?  How can we deliver it to them as efficiently and effectively as possible?  What is the least it can cost us to deliver?  What can we fairly charge for it?

Let’s take the classified ad business as an example.  While the largely free craigslist has gone a long way towards annihilating a good portion of that market, does that mean there will be no value created in the future servicing local businesses looking to acquire consumers?

Certainly not.  But with our limited current view, we often fail to see the possibilities or even what’s happening right under our nose.

First of all, old school classified categories such as recruiting, autos and personals have all seen hugely profitable businesses built on the web (e.g. Monster, Autotrader, Match).  Now these businesses, or at least their current models, are themselves likely to be upended by better, more efficient models over time.  But new ones will certainly be built in their stead to service the same needs but with very different business and economic models.

Secondly, while craigslist is incredible at inventory and demand aggregation, it has other holes in its offering for local merchants.  Social marketing and payments solutions are just two examples where innovation has barely scratched the surface.

I continue to be intrigued by vertical content and marketplace businesses starting anew in the wake of the creative destruction we’re experiencing.  The businesses of tomorrow are being created today.  Keep ‘em coming!