News Corp.: HRM Innovation and Change

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The need to transform with changing business environment is the basis of organizational growth. No organization today has been able to remain static and abstain from learning from its environment in order to grow. Learning organizations are those who do not accept change as a reaction to a condition or event rather as a ladder towards a new business proposition. The rate of organizational learning is viewed to be the only source of competitive advantage for the company (Senge 1999). There has been a need to change the business process according to the changing business environment and the demands of business. Innovation is an important part of gaining competitive advantage (Tushman, Anderson & O’Reilly 1997). Inertia and organizational complacency leads to death of traditional organizations. Thus, adoption of “innovation streams” helps them shape and reshape existing products to optimize success (Tushman, Anderson & O’Reilly 1997). These strategies help in shaping the future of the market.

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Organizational innovation refers to “the creation or adoption of an idea or behaviour new to the organization” (Lam 2005, p. 115). According to the existing literature on organizational literature, innovation may be driven through structural changes and/or through changes in process or products or both. Another method stresses on the process of cognitive learning, wherein the organization has to develop ideas for problem solving, which are related to organizational learning and knowledge creation. Further, innovation is also seen as the capacity that organizations have to adapt to the changing demands of the external environment (Lam 2005). Therefore, organizational innovation cannot be just related to one-dimensional change in the organization, rather is the multi-dimensional adoption process that an organization goes through. The amalgamation of all these change processes brings forth the true innovative character of the organization.

News Corporations (News Corp.) has transformed itself from a traditional media management company to a digitally driven mix of various brands from Wall Street Journal to MySpace. “News Corporation’s core mission has always been to provide as many consumers as possible with the highest quality content through the most convenient distribution channels.” (Annual Report 2006, p. 4) In 2005, News Corp acquired, the Internet’s most popular social networking site, as well as the gaming and entertainment site and several other smaller, but promising, sites. In 2006 transformed from a media company to a digital company (Annual Report 2006). Other than this, News Corp. Entered m-commerce which is the next big thing after ecommerce: ““We are making available music, art, games, video clips and other content – much of it based on popular Fox brands such as Family Guy, American Dad, Napoleon Dynamite and Ice Age – that can be purchased and downloaded directly to a mobile device.” (Annual Report 2006, p. 6) Integration between the traditional media management business and digital media was established through innovative systems and practices were established. The company launched Fox Interactive Media (FIM) to “oversee these new businesses, to build up our existing web presence and to improve coordination and synergy across all of the company’s websites and digital media efforts” (Annual Report 2006, p. 5). However, can these transformations of the organization’s business strategy and product amount to innovation? The main objective of the paper is to understand the nature of innovations adopted by the company in the phase of last five years i.e. 2004 to 2009.

News Corp.’s Need for Innovation

Innovation is the source of sustainable competitive advantage (Tushman, Anderson & O’Reilly 1997; Senge 1999; Lam 2005). Innovation is important for all companies as it removes complacency and inertness in organizational operations and helps it to function competitively. However, the need for innovation may differ from business to business depending on the industry structure and the organizational position. What are the main reasons why innovation is required? In this recessionary phase, it has become important to main customer expectations and lower cost in order to remain competitive in a recessionary phase. Therefore, the need to innovate is to:

Reduce costs and enhance customer experiences, in addition to fuelling revenue growth; Greatly improve… internal processes in addition to hatching must-have products and services; and Involve just about everybody in the company (as well as partners outside the organization and, in some cases, customers), not just the traditional R&D team.” (Krell 2009, p. 6)

Therefore, it is the need to enhance customer experience and to understand why customers buy their product in order to better their experience. Further reducing the cost of operations in order to cope with increasing shareholder demand and making the business more efficient is important. Therefore innovation through various aspects of business – be it process or product, organizational culture and structure, organizational design, etc. – has to be recognized in order to reap sustainable competitive advantage. Organizational innovation leads largely to new product development. This section enumerates the need for development of new products and why such need arose in case of News Corp.

News Corp. was in the traditional media management business, however, with changes in the industry structure they decided to move into the digitalization of media. However, it is important to understand why this change was necessary. Why was it necessary for the company to enter into digital media? The reason as stated in the Annual Report of 2006 is ingrained in the mission of the company:

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News Corporation’s core mission has always been to provide as many consumers as possible with the highest quality content through the most convenient distribution channels. That was the strategic imperative behind our entry into the satellite business, and that same imperative now propels us into the digital world.” (Annual Report 2006)

Technology and innovations through the Internet has brought changed the way newspaper media works (Caruso 2007; Edwards 2008). Due to change in technology, print media stalwarts like New York Times, Washington Post, and Economist had adopted the Web 2.0 as the distribution media. The internet has provided the opportunity to publish freely and distribute the articles to maximum number of people connected to it. This has reduced the cost of an industry drastically which was characterized by high fixed cost of production and distribution (Edwards 2008). The technological advancement in the field of print media and the Internet brought in the need to bring forth a new model of business.

In the 2005, Annual Report News Corp. identified the threat that digital piracy and Internet had on the film and entertainment segment of the company’s business. Digital media provided a number of solutions to the problems that the traditional media proposed to the expansion of business and customer satisfaction. In case of television and cable, customers are happier if they have access to larger number of channels. The Internet provided the opportunity to provide new channels and distribution at a very low cost. This made many small media players, especially those in print media, changed their business model completely, and went online completely. The need to change has been ushered due to the low-cost technology of the Internet. There has been a need to change the business model largely in order to retain competitive advantage:

The key is to reinvent the business such that the advantages once enjoyed become advantages that can once again be exploited. Large publishers and broadcasters have two key advantages: quality and breadth.” (Porbstein 2009, p. 17)

In order to remain competitive in an ever-increasing competitive world, media companies must adopt new technologies and change the way they do business. News Corp. adopted the online mode of business without totally discarding its traditional model of business. Online advertisement in the US rose by 10% in 2008 and is expected to experience positive growth (Datamonitor 2009). Innovation is required to tap the opportunity as well as the threat that new environmental conditions posed to the company. With the Internet revolution, the way information was dealt with changed drastically. Information, no longer, remained a propriety, rather started being easily available to all. Further, the way the media companies provided their channels or information was challenged by the invasion of the Internet. Models like iGoogle and My Yahoo! empowered the consumers to choose and filter the information they want to know, rather than being filtered by the media management companies (Porbstein 2009). Therefore, the only strategy that traditional media companies can take is to “set themselves up so that all of their content can be sliced, diced, and delivered in any way imaginable with minimal effort and at a low cost” (Porbstein 2009, p. 17). Therefore News Corp. had to adopt innovation provided by the new technology as it changed the way information and media worked and provided definite competitive edge.

News Corp.’s vision and strategy

It is important to drive growth through innovation (Anthony, Johnson & Sinfield 2008). It is argued that innovation is not risk taking behaviour of a company, rather a calculated study and action based on the “patterns, principles, and practices” which are historically known (Anthony, Johnson & Sinfield 2008, p. 39). The main idea is to create a culture of innovation that can be embedded in the organization. Thus, innovations strategy must be translated through the vision of the company, rather as a reaction to the external demands. In this regard, this section will discuss the current vision mission and strategy of News Corp.

Current Vision, Strategy, and Innovation

The company’s vision is voiced through the core principle stated by Rupert Murdoch, Chairman and CEO of News Corp., “News Corporation is a creative media company that attracts and retains customers by giving them the news and entertainment that they value.” (Annual Report 2009, p. 3)

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The company has identified that the media industry cannot be constrained within the traditional dimensions and the medium of providing information is changing drastically from internet to mobile phones. Thus, the current strategy of the company is to aim towards the new medium of transferring content – be it through the Internet or on mobile devices. Therefore, News Corp. is changing its position from a media management company to a content management company who sells the content through the best possible medium and the one that the customers want. This present strategy of the company is evident from the 2008 redesign of the Wall Street Journal website and effective marketing strategy of Dow Jones digital products (Perry 2008).

The mission of the company, as delineated by the CEO of News Corp., is to take the best advantage of the online business model ( 2009). The mission of News Corp. is digital transformation of the news media (Rohm 2002). The company aims to earn revenue through advertisement as well s online content. The Annual Report of 2006 described the core mission of the company as follows: “News Corporation’s core mission has always been to provide as many consumers as possible with the highest quality content through the most convenient distribution channels.” (2006, p. 4)

The strategy of News Corp. is in diversity. The Annual Report of 2009 mentions that the company’s competitive advantage lays in its diversified business:

Diversity is a critical component of News Corporation’s business strategy and we believe that integrating and supporting diversity development across all of our businesses is pivotal to our long-term success. Over the past decade, News Corporation’s business leaders have continued and enhanced our commitment to diversity by significantly increasing the representation of minorities in our workforce, reaching out nationally to minority communities and boosting the amount of procurement dollars spent with minority-owned businesses. The scope of this work has broadened over the years and will continue to expand to meet the larger needs of News Corporation’s businesses.” (Annual Report 2009, p. 20)

The company’s strategy has been to ensure that its business is diversified in different areas in order to maintain its profitability even when one of the segments of the company is not operating properly. The company’s strategy is to gain control over the digital media and reap profit from the new innovative digital media i.e. the Internet and mobile.

Components of a vision

The vision of the company is to reap the benefits of the digital media advantage. The company has therefore concentrated on making its print media segment of business into a digital business. This strategy is clear from the speech of the company’s CEO:

Today I will outline three things that need to happen – at news organizations, among our customers, and within business – for good journalism to prosper in the 21st century. First, media companies must deliver the news media consumers want – and do it in the ways that best fit their lifestyles. That means we must innovate like never before. Second, we need to do a better job of persuading consumers that high-quality, reliable news and information does not come free…Finally, the government needs to clear the path for companies to invest and innovate – by reducing unnecessary regulation and eliminating obstacles to growth and investment.” (News Corp. 2009)

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Therefore, to company aims to capitalize further on the media content that the company sells. News Corp. aims to earn revenue for the digital content they provide on mobile handsets or in digital form. Further, they intend to deliver the media content to the consumers in the way that best suits them. This actually indicates that News Corp. is not trying to close its traditional mode of business, rather it implies that the company is entering new mode of distribution of its content without discarding its traditional mode of business. The other strategy is to remove the regulatory impediments that arise in adopting the new mode of business.

Therefore, the core strategies that News Corp. intends to adopt through the recessionary phase may be divided into two sections (News Corp. 2009). First, the company will continue to invest in their diversified assets at different stages of growth. Second, the company will innovate to finds ways for fostering growth for the future. Third, they aim to rely on the flexibility that comes from a robust balance sheet with rough take the advantage of $7 billion cash on balance sheet and utilize it to expand further internationally.

News Corp.’s strategy is to adopt innovative business models in order to remain competitive in an increasingly competitive market. The company has maintained a diversified portfolio that helps it to diversify its risks into different forms of media business from newspapers to television to films. The recent technological explosion through the Internet has changed the way the company did business and realizing the potential of e-commerce and m-commerce has become the strategy of the company. The company aims to provide the customers with “real choice in content and innovative products” (News Corp. 2009).

Difference between Innovation and Corporate Strategy

Business strategy is defined as the plans and patterns that integrate the core objectives of the firm in a unified whole (Mintzberg et al. 2003) whereas, innovations strategy is the process of changing the product that the firm offers. It is a subset of the business strategy of the firm (Durmuşoğlu et al. 2008). However, it must be understood that innovating the product without making any changes in the organizations is futile as they continuously follow rigid “sets of values, skills, and managerial and technical systems that served them well in the past even when these values, skills, and systems have become inappropriate in the new environment” (Durmuşoğlu et al. 2008, p. 387). Innovation strategy primarily concentrates on the new product development aspect while a business strategy aims at complete alignment of the overall aims and objectives of the firm.

News Corp. has a clear innovation strategy that demonstrates that the company aims at leveraging the opportunities that are provided by mobile commerce and therefore intends to make its content available in the portable mobile platform. For instance, in 2007 the company entered into a joint venture with VeriSign to provide entertainment content in mobiles (Annual Report 2009). As their mission states, in order to provide convenience to the customers, News Corp. intends to make availability of entertainment content even more easy and comfortable. Thus, entering into the arena of m-commerce is a strategic decision of the company pertaining to the overall strategy to enter new technology driven business opportunities. Innovation strategy is to improve the content in order to be available on mobile at ease.

News Corp. has improvised the product that it offered earlier. In case of new product development, News Corp. brought forth offerings like MySpace, IGN Entertainment, Fox Audience Network, Photobucket, Beliefnet, and Fox Mobile Group under the segment News Corp. Digital Media (NDM) (Annual Report 2006; News Corp. 2009). Further, their acquiring of Dow Jones has been another product innovation. NDM was restructured in order to align the whole business of the company around the digital media segment: “News Corp. Digital Media will play a lead role in shaping digital strategy across News Corporation, ensuring a consistent, long-term vision of both product innovation and revenue generation across the entire company.” (News Corp. 2009) Therefore, the company’s business strategy was aligned with the innovation strategy of the company.

Traditionally financial news was for niche readers. The company identified the increasing consumer demand for financial news, which as converted into Dow Jones online news (Wee 2007). Further, the company had decided to make its newspaper web sites free in order to attract more readers and advertisers. Interlinking of the business segments is another product innovation that News Corp. had adopted in 2007. It had been using The Journal to attract viewers for its Fox Business News cable television channel (Wee 2007).

The web strategy that the company took in the early 1990s was initially a defensive strategy; however, the company leadership forged it into offensive strategy by the turn of the century. Fox Interactive Media was formed in 2005, and soon the company acquired a host of digital media sites like MySpace and other video game and sport portals (Kirkland 2007). The company was the first newspaper company to venture into online business (Kirby & Engelhart 2010). The company’s strategy has been to reap maximum profit through the content they provided through digital media. The company has put some of its content on pay in order to gain higher amount of revenue, apart from the revenue they reaped from advertisers:

With the traditional newspaper business model dying, Murdoch and others hope to create a new one built around paid content. The Wall Street Journal already requires readers to fork over US$119 a year to access most of its online stories, an amount that has risen steadily from roughly US$80 a few years ago. At the same time, the paper is able to charge roughly 30 per cent more for ads visible to paid online subscribers, versus those available for free. Murdoch has said he plans to have pay walls in place by this summer at his other papers, including the New York Post, the Times of London and the Australian.” (Kirby & Engelhart 2010, p. 28)

That is why the company went into a tussle with companies like Google to save the copyrights to their content. This shows that the innovation strategy of News Corp. was to enter the digital media domain of their products, while the business strategy was to integrate all its business segments and reap revenue from its content.

Context, Competencies, and Culture for Innovation

Innovation is important for media business. The paradigm, on which the business was based on, changed completely with the advent of new technology and digital media. The digital revolution is supposed to have a similar impact on society and business, as did industrial revolution (Gargano 2009). Digital media has provided a strategy wherein companies can become leaner and cost efficient. The organizational structures and culture of the companies adopting digital media has changed and so has that of News Corp. the company therefore has taken various measures in the last five years to change its culture and organizational structure to align its business with the new digital revolution.

Innovation as a Core Business Process

MySpace had reduced its employee strength by 30% (Jones 2009). The aim of the company is to maintain a culture of innovation centred on their customers. Thus, it was necessary to reduce the large employee strength in order to maintain the culture of innovation as a core strategy of the company: “News Corp. said MySpace plans to “return to a startup culture” and said its restructuring plans aim to make MySpace more innovative, efficient, and entrepreneurial.” (Jones 2009)

Innovation as a core strategy is the key to success for television channels in the digital media environment (Broadcast Engineering 2009). The US recession and the changing viewer preference and competition scene for television has become the recipe for a “perfect storm” for declining revenue and changing audience preference.

Further with acquisition of MySpace into News Corp. was a challenge for the company as the former boasted a flat hierarchical structure and culture. The former did not have authority to bind the decisions of the company, and merging with News Corp. meant accepting authority (Sellers 2006). This meant changing the culture of the organization considerably in order to embrace the new digital media. However, MySpace underwent a change in culture of the organization with change in the leadership (Gaudin 2009).

The business strategy of the whole media industry had changed due to digital media: “…the media industry will see structural not cyclical change, calling these changes “intensified… digital migration” (Broadcasting Engineer 2009, p. 8). The core business strategy concentrated on acquiring new and innovative digital media businesses for the company and merges them into the existing platform. For instance, MySpace acquired the free music-streaming site like and ilike (Marino 2009). The company has led a strategy that spins around innovation of new products either through acquiring or through development within the company. However, the focus of the company has been innovation brought into the media business.

Aspects of News Corp. Environment that Supports Innovation

The company’s environment fosters innovation through its leadership’s positive support for any lucrative innovation into media and the adoption of the digital media. The company leadership believes that innovation and not acquiring is the right way towards growth (Grover 2009). The main idea of the company is to change the traditional media model that is overtly accepted by the leadership of the company:

…steps to revamp the sickly journalistic business model, Murdoch stressed that he is intent on charging for online content from his publications, and would try to emulate the success in that area enjoyed so far by The Wall Street Journal. “People will pay for quality journalism, and to cut back on staff would be to cannibalize that,” Murdoch said. He specifically said he has resisted cutting back on the staffs of his London newspapers in the event that one or two of his competitors close down.” (Grover 2009, p. 6)

The business of News Corp. has been aligned around the digital media acceptance. The main revenue drivers, as expected by the leaders of the company are Wall Street Journal website and MySpace: “Murdoch said Wall Street Journal’s website could generate more than $100m in online advertising, and that he would like fewer hut more expensive adverts on MySpace. The social networking site. “MySpace is going to be a great profit driver.”” (Perry 2008, p. 2)

In 2009, the company has made further announcement to encourage innovation from within the company rather than acquiring new companies (Shambora 2009). The idea is to utilize its brand position as a content developer and leverage the position it enjoys. News Corp.’s core strategy presently is to reinventing the core brand of the company i.e. content (Rosenbush 2005), and strategizing to make it relevant today.

The main problem with the strategy adopted by News Corp. is its digital amalgamation of the traditional media that is not very effective:

Big Media’s love affair with the Internet ebbs and flows with the markets. When they see money pouring into Web start-ups, they feel threatened and rush to do the same. They ramp up their digital divisions, which usually are no more than venture arms, and hope to strike it rich. When the markets are down, as they are now, their attention drifts elsewhere? Exactly at the time when they can pick up innovation on the cheap.” (Schonfeld 2009).

The problem that the environment presently posts for the company is amalgamation of the digital media division with the core business (Higgins 2006). With the whole of the business based on digital platform, the existence of a separate media division is questionable. The problem lies in the dilemma within the company – whether to go full-blown digital or retain the core media business and prevent the digital business leech on the core business.

Learning for innovation

Learning organizations is the source of competitiveness in today’s’ business environment (Senge 1999). The company has learned that the key to maintain competitive advantage is to maintain a diversified strategy, and the core to diversification strategy is to innovation. The company has maintained a strategy for learning from the external and internal environment and put the learning into being through its strategic goals. News Corp. has learned through its business innovation that it has the capacity to break the traditional practices in at least one of the three ways “value chain design, conceptualization of consumer value, and identification of potential customers” (Govindarajan & Trimble 2004, p. 69).

News Corp.’s strategy has been maximization of shareholder value and revenue of the company. It had entered the innovative world of digital media in order to maintain its relevance in the next-generation technology led business model. However, the company’s strategy towards innovation had historically not been that for learning. The culture at News Corp. does not inculcate a culture to fail which is important for an organization to bring out the innovativeness in its employees (Lee 2001). The culture of the organization has a conventional planning mindset that makes the approach top down, and learning through innovation problematic (Govindarajan & Trimble 2004).

News Corp’s business strategy around MySpace was particularly faddish as it failed to make the platform strong enough to control the large amount of traffic. The traffic at MySpace has been declining vis-a-vis the other social networking sites like Facebook (Carlson & Angelova 2009). However, this failure of the social networking site to combat competition has not sent a message to the News Corp. management who intend to expand further on MySpace platform. Further, the company is also aiming at pricing its content, especially for the Wall Street Journal and Time magazine website (Reid 2009). However, even during the economic downturn, News Corp. aims at continuing its process of innovation in order to maintain its relevance (Kaplan 2008). Learning must come from the failure of the new products as well as the failure of new business models (Hlavacek, Maxwell & Williams 2009).

Potential Change Management Issues

The potent change management hindrance is in the amalgamation of new and traditional media business models and how traditional media perceives new technology (Harmon 2002; Dobelle 2005; Feuilherade 2006). News Corp has not discarded its traditional business model however, has embraced a more flexible digital platform. However, it is at a loss as to how these two divisions can be successfully merged. The traditional business form thus left behind was the core business of the company, and News Corp identified that its core business is in content development. The distribution and supply chain medium of it may alter with changing technological platform. Therefore, the core business of the company was retained and the company management heralded the digital age (News Corp. 2006).

In the new digital media model to News Corp wants to change the revenue model on which the whole digital relied upon, is being challenged (Sandoval 2009). The company is moving from a free content model in digital media and establishing a pay-for-content strategy to increase revenue. The company has realised that external agents like Google were cannibalizing on their advertisement revenue: “Murdoch is considering a pairing with Bing because he believes Google benefits at the expense of his own media outlets. He argues readers often scan story excerpts on Google News without clicking through to newspapers’ Web sites, robbing them of ad revenue.” (MacMillan 2009, p. 26) The change in culture of the parent and the acquired company has brought about problems for News Corp, especially in case of MySpace acquisition (Arrington 2009). The hiring of the new CEO for MySpace also had erupted trouble for the company as he belonged to the main rival Facebook and had access to the rival’s confidential information. Therefore changing the business model and accepting a digital platform had made the issue more difficult.


News Corp. was one of the foremost innovators in media industry as it accepted the digital platform and saw its potential in the 1990s when many traditional media companies were discussing the woes digital media will create to the traditional media platform (Monica 2006). The company moved steadily from the traditional media management company to a digital media company with its presence in wide range of digitalized traditional media, larger channel offerings to the customers, greater geographical reach, and new business model. Due to the change in business platform therefore may issues related to worker layoffs (Blair 2001) and cultural change of the company arose especially in the post-acquisition phase (Kramer 2009). However, from the understanding of the innovations strategy employed by News Corp. it is clear that the company is eager to peruse an innovation strategy, however, the impediment arises from the problem of amalgamation with its traditional business model. Innovation strategy is used as a defensive strategy to combat the ongoing technology upheaval and counter the cost-pressure of the recession. However, the strategies have not yet been completely merged with the business strategy of the company. Consequently, innovation cannot be considered the core strategy or business of the company, but another division where it has diversified. News Corp has become the perfect example of the companies who adopt technology as a defensive tool to maintain relevance in a changing business environment, however, fail to accept the change from the core of their business. That is probably why the company leadership is keen on putting a price on the content which and been made free by Google almost a decade ago.


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