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Aug. 15, 2011, 2:30 p.m.

From soup to nuts: Google buying Motorola is a skirmish between two biz models, and news needs both

Modular versus interdependent: how two approaches to structuring a business show the tension underneath the news industry’s adjustment to the Internet.

I will confess I don’t believe I’ve ever had a meal that actually progressed from soup to nuts. Maybe “from salad to ice cream” might be a better way to give the impression of tracking a meal from beginning to end, but “soup to nuts” is the idiom we’re stuck with. And now Google can say that Android fulfills it, with its $12.5 billion purchase of Motorola Mobility. (That’s assuming regulator approval, which we probably shouldn’t just assume at this point.) Instead of being simply the provider of an operating system for smartphones and tablets, a Google+Moto pairing would also produce some of those phones and tablets itself, rather than relying exclusively on a network of producers (HTC, Samsung, LG, etc.) to actually design, build, and distribute the hardware.

The move likely won’t have any significant impact on news organizations or how they view the Android platform for news apps. But it is an interesting signpost for one of the biggest dichotomies any Internet-centric company faces: the tension between being modular and being interdependent.

That divide comes from Harvard Business School professor Clay Christensen’s book The Innovator’s Solution. Here’s how business analyst Horace Dediu, a former Christensen student, puts it:

Interdependent systems have linkages between elements ranging from product components to the members of a product value chain. Essentially, the pieces communicate or interface via non-public or non-licensed protocols and have only specific partners (e.g. the iPod and iTunes).

Modular product architectures, on the other hand, are similar to the concept of plug-and-play and resemble building blocks, consisting of standardized interfaces, enabling parts to be easily swapped in and out and multiple suppliers or partners to compete.

As Dediu puts it, these categories lack the sense of moral judgment that terms like “open” or “fragmented” bring. Windows is a modular system — you can run Windows on thousands of different kinds of computers made by untold numbers of manufacturers. The Mac, in contrast, is an interdependent system — if you want to run Mac OS X, you’ll need to buy a Mac from Apple to do it. (Without a little hacking, at least.)

As Christensen puts it in Solution:

Interdependent architectures optimize performance, in terms of functionality and reliability…Modular architectures optimize flexibility, but because they require tight specification, they give engineers fewer degrees of freedom in design. As a result, modular flexibility comes at the sacrifice of performance.

With the iPhone, Apple controls the hardware and the software, so it can work to make them work together as well as possible. With Android, Google has to worry about working with hundreds of different devices, with different versions of the OS, different screen sizes, different carrier-imposed UIs, and different levels of computing power.

For years, the huge success of Windows and the Mac’s marginalization made it seem like the modular path was in permanent ascent. But Apple’s successes in recent years — the iPod, the iPhone, the iPad, and the resurgence of the Mac — are largely due to the emphasis on performance and the unified, controlled experience an interdependent approach can bring. And, while Google no doubt has other motivations for acquiring Motorola — namely, patents — the appeal of soup-to-nuts was no doubt a big part of the purchase.

So when does one approach make more sense than the other? Dediu:

Interdependent architectures are the only way to rapidly and competitively improve the performance of not-good-enough systems. Modular architectures are the only way to squeeze profitability from more-than-good-enough commoditized technology.

So if you want a laptop and your needs are relatively low — if you’re just going to send email and browse the web, say — then you might as well just get a cheap Windows netbook, because it’ll be plenty for your needs and, of the many vendors who sell Windows-based computers, some of them will be aiming for the low end of the market.

Christensen calls these customers “overserved” — those who “consume a product or service but don’t need all its features or functionality.” Dediu, again:

Apple’s value systems, priorities and processes are all tuned to interdependent architectures. Google’s value systems, business models and competencies are all tuned to modular architectures.

Apple solves the problems of new markets, Google solve the problems of over-served markets.

As Dediu puts it, who you think will win in the smartphone wars comes down to whether you think smartphones today are “good enough” — that its customers are overserved — or whether you think they’ve got a long ways to grow and evolve and get better.

News organizations: shifting from interdependent to modular

So which of these approaches best describes the news business?

If you think that customers of news are, generally speaking, overserved — that they can get news without too much difficulty, that it meets their needs or wants, that it does the job they’re hiring news to do — Christensen’s thesis would suggest that a modular approach is where the money’s going to be. Who’s modular? Aggregators and curators — who use the plug-and-play nature of stories to assemble new experiences from other company’s work. Low-cost content-creators — who use their audiences and other unpaid or low-paid contributors to generate a news product. If you bet modular, you’re betting on the Huffington Post, on Patch, on Topix, on Gawker Media, on Google News. You’re betting on free-flowing RSS everywhere, open APIs, and common distribution platforms like Twitter. You’re betting on the kind of approach that says “if there’s a new social network/distribution platform/iPad app, we should be on it.”

But if you think that customers of news are not overserved — that the news products people consume are not meeting their needs, that news production and delivery have a long way left to evolve — then you’re betting on interdependent systems. You’re betting on The New York Times R&D Lab to come up with something new and innovative; you’re betting on people continuing to type www.newsorganization.com into their browser when they want news rather than relying on the news finding them on Facebook. You’re betting that people don’t want to finagle with the setting of a Flipboard or a Zite — that they’ll want a trusted news organization that runs the whole system from news tip to iPad app.

Two cultures

Of course, “modular” and “interdependent” are not black and white — all companies mix the concepts up. New York Times stories still get aggregated by outsiders. HuffPo and Gawker Media do original reporting to flow alongside the two-graf summaries. A soup-to-nuts newspaper still uses wire services and relies on tech platforms they don’t control; apps like Flipboard rely on modular outside content, but they’re trying to build their own siloed consumption environment.

And the news business might not line up with the divide perfectly, I’d argue, because legal concepts like fair use build in a certain interoperability. Not to mention the fact that institutions with great capacity in one field (say, reporting and producing journalism) often lack great capacity in another (say, creating a great digital reading experience). An interdependent model only makes it more likely a company would innovate in the direction of greater performance, according to Christensen; it’s still up to the company to get it done, and the news industry hasn’t always inspired confidence on that point.

Still, this pull between modular and interdependent will play a big part in how news evolves. The traditional newspaper model was highly soup-to-nuts — they controlled everything from the reporting to the printing presses to the army of small children who would deliver the result on your lawn each morning. And the Internet is, by its nature, highly modular — build on common standards and platforms and hooks, small pieces loosely joined, all circling around the common grammar of the link.

If you work in a newsroom where the “web people” and the “newsroom people” found themselves locked in battle, you’re seeing part of this conflict. When newspaper people complain about Apple’s 30 percent cut of iPad app revenues and start going on about selling their own tablets, you’re seeing part of this conflict. When you see The New York Times put up a paywall that blocks certain kinds of readers but lets others by changing the URL in their browser, you’re seeing a news company try to navigate part of this conflict.

No one model will “win” to the exclusion of the other. And “winning” can mean lots of different things. At the moment, Android is “winning” if you look at market share, but Apple’s crushing the competition in terms of profit. Google gobbling up Motorola makes it clear you’ll need a mix of both models to compete at the highest levels. But I think this dichotomy, and the institutional cultures that support both sides of it, is going to be a big part of how news — and the news business — evolve in the next few years. Place your bets.

POSTED     Aug. 15, 2011, 2:30 p.m.
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