Publishing companies online strategies

1
Fighting the bear with pea shooter? Publishing companies’
online strategies
Miia Kosonen
Lappeenranta University of Technology, School of Business, Finland
miia.kosonen@lut.fi
Abstract
The rise of the Internet and digitalization are strongly influencing the media industry. They are
changing the existing market dynamics and activities, and thus require new strategies. The
purpose of this paper is to explore the strategic impact of online services in newspaper and
magazine publishing. Drawing on a comparative case study of six publishing companies, the
study examines how the strategic objectives and means, i.e. firm capabilities and the available
resources, match with each other. Based on the study, it seems that there is asymmetry as
publishers have aimed at targeting a too wide a set of objectives with the provision of online
services but with very limited resources. With their existing resources and capabilities,
publishers seem to get support to their strategic objectives regarding brand support and being
closer to customers. Yet considering the long-term strategic objectives – growth and
profitability –the available resources and capabilities remain a pea shooter with which it is
impossible to shoot ‘the profitability bear’. The study identifies new capability areas that are
required in order to set up novel types of online applications and also target new customer
groups with them.
Keywords
strategy, online strategy, publishing companies, media business
Introduction
In recent years, the media industry has been confronted by complex and rapid change, high
competition, new forms of production and distribution, and also entirely new types of
products (Küng, 2004, Chan-Olmsted, 2006). Researchers have followed this development
and proposed that the rise of the Internet and digitalization are strongly influencing the
industry. They are changing the existing market dynamics and activities, and thus require new
strategies (Doyle, 2002). While several researchers (Doyle, 2002, Küng, 2004, Chan-Olmsted,
2006) have noted the dramatic changes that are going on in the industry, current research fails
to address the competitive implications of this development. Respectively, Shaver and Shaver
(2006) have called for studies investigating strategic issues to do with the Internet in media
industries (see also Ellonen, 2007, Ellonen and Kuivalainen, 2007).
The purpose of this paper is to explore the strategic impact of online services in newspaper
and magazine publishing. In particular, the study focuses on the perceived match/mismatch

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between strategic objectives and means, i.e. firm capabilities and the available resources. The
research questions can be stated as the following:
1. What kind of online strategies do publishing companies have?
2. How do publishing companies’strategic objectives and means (resources and capabilities)
match with each other?
The rest of the paper is structured as follows: firstly, the theoretical background of the study is
shortly introduced. Thereafter, research design, methods and data are described, after which
the empirical findings are presented. The paper concludes by discussing the theoretical and
practical implications of the study.
Theoretical background
Competitive advantage is a central concept in strategy research and refers to the ability of a
firm to outperform its industry and create above-average returns or rents (Besanko et al.,
2000). However, strategy theories differ in terms of explanatory factors used investigating the
sources of competitive advantage (Rumelt 1991, McGahan and Porter, 1997, Hawawini et al.,
2003). Since 1990’s, the dominating view in strategy research has been the so-called
resource-based view that links competitive advantage to the rare and value-creating resources
and capabilities of a single company.
The central tenet of the resource-based view is that a firm is a bundle of idiosyncratic
resources and capabilities (Wernerfelt, 1984, Barney, 1991, Peteraf, 1993). Resources are
tangible or intangible assets that a firm possesses, controls, or has access to, and from which it
may potentially derive rents (Helfat and Peteraf, 2003), whereas capabilities reflect firm’s
capacity to deploy these resources (Amit and Schoemaker, 1993). Respectively, firms are
heterogeneous with regard to the resources and capabilities they possess. Firms endowed with
superior resources are able to produce more economically and/or better satisfy customer
needs. According to Barney (1991), a firm’s competitive advantage is based on its valuable,
rare, imperfectly imitable and non-substitutable resources, i.e. so-called VRIN attributes. In
addition, both ex post limits on competition and imperfect mobility of resources are needed
for the sustainability of rents (Peteraf, 1993). In summary, resource-based view of the firm
can be seen as a ‘meta-theory’behind the strategy selection, building and operationalization
of the strategy in firms.
Grant (2002) has categorized resources as tangible, intangible, and human resources. While
tangible resources are financial or physical in nature, intangible ones may consist e.g. of
technology and culture. Taking the human-bound nature of knowledge into account,
knowledge and skills are approached as human resources (Grant, 2002). Such knowledge-
based resources are non-imitable and cannot be replicated due to their nature (Amit and
Schoemaker, 1993). In this research, the three-part categorization of tangible, intangible and
human resources was applied as the basis of the examination, in order to provide a
comprehensive view on different types of resources related to publishers’online operations.
Capabilities, in turn, can be classified based on their type, content and input in firms’value
creation processes. Typically a distinction is made between higher vs. lower level capabilities,

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i.e. the so-called dynamic capabilities required for building new capabilities by combining
existing ones, vs. capabilities that are needed in everyday operations (e.g. Teece et al., 1997,
Danneels, 2002). Further, these operational capabilities can be classified as customer-related
(market) and technology-related capabilities (Abernathy and Clark, 1985, Danneels, 2002).
Market capabilities consist of customer knowledge, meeting customer needs, customer
relationships, and channels for customer communication, while technology capabilities refer
to design and manufacturing, production systems and know-how, and managerial skills
(Abernathy and Clark, 1985, Danneels, 2002, Valanto et al., forthcoming).
As noted by Danneels (2008), market and technology capabilities also have their “second-
order”side, such as market sensing and R&D competences. Market sensing refers e.g. to
scanning the environment to identify new customers, or access new customers. Second-order
technology capabilities (R&D competences) reflect the firms’ability to identify promising
opportunities and set up new production facilities. Such explorative organizational learning is
needed to build new capabilities to serve new markets, or to use new technologies. This study
follows the classification by Danneels (2002, 2008) and approaches capabilities as market and
technology-based, carrying elements of both operational (first-order) and dynamic (second-
order) capabilities.
Finally, firms’ strategies emerge from resources (Bowman and Hurry, 1993). Hence,
resources can be perceived as assets that are addressed to reach the strategy purposes. Grant
(2002) summarizes firm strategy as a way to match the resources and capabilities to
opportunities in the external environment. For the purposes of the current study, we approach
media companies’online strategy as a pre-defined set of goals and objectives regarding online
markets, shaped alongside the available resources and capabilities.
Figure 1 summarizes the research framework.

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Figure 1. Theoretical framework
Methods and data collection
The choice of research design was based on the objectives of the study. In order to gain new
insights from the publishers’perspective, a descriptive and exploratory research strategy was
chosen and a qualitative research approach was applied. A comparative case-study approach
(Eisenhardt and Graebner, 2007) was considered suitable for increasing understanding about
companies’online strategies, as they remain an understudied area (Shaver and Shaver, 2006).
Within this setting, each case is treated as an independent experiment standing on its own as
an analytical unit (Yin, 2003). Researchers may justify whether an emergent finding is
idiosyncratic to a single case, or consistent within a number of them, by comparing findings
from the individual cases (Eisenhardt and Graebner, 2007). The research setting consisted of
six case companies representing both magazine and newspaper publishers, three of each. The
sampling approach was purposeful sampling, with a view to reaching information-rich cases
(Patton, 2002), while allowing coherence and comparability between cases. In other words,
the selected companies were rather symmetric regarding their respective markets and
company size, allowing researchers to focus on the similarities and differences regarding
online strategy objectives and means.
The data collection method was semi-structured interviews (Shank, 2006). Both strategic-
level managers and executives/experts responsible for individual newspapers and magazines
were interviewed in order to produce complementary insights from each publishing company.
RESOURCES
Tangible IntangibleHuman
Market capabilities
First-order
Second-order
Technology capabilities
First-order
Second-order
ONLINE STRATEGY

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Altogether, 19 interviews were conducted during the year 2009. The interviews themes
covered issues related to publishers’ strategic objectives in general, market/customers,
partners, the development of online services, and the skills and capabilities needed. Also
additional questions were made via email to some informants to complement the interview
data, particularly in order to tackle the amount of personnel and other resources related to
online service provision. The interviews were fully transcribed, resulting in a dataset of 219
text pages. The data analysis was conducted in two phases. First the individual cases were
analyzed thoroughly using the above-presented theoretical framework as a base for coding. In
the second phase, a cross-case analysis was conducted to find recurrent themes and patterns
across cases.
In order to maximize the reliability (Kirk and Miller, 1986) of the study, a detailed enough
description of the research process should allow the reader to follow the researchers’
reasoning. In terms of validity (Kirk and Miller, 1986) a chain of evidence (Yin, 2003) was
built, using the Atlas TI program as a coding tool.
Results
Resources
Editorial skills and multi-channel journalism represented a key internal resource for all
studied publishers. The core of publishing companies’operations was to produce valuable
content that customers could not obtain elsewhere. This required understanding on e.g. what
types of content is appropriate and of enough high quality. Many interviewees also
highlighted the necessity of being able to produce content across a variety of channels and not
focusing only on print publishing:
“If we do not exist online, we do not exist for younger readers at all.”(Editor-in-chief)
However, a problematic issue was the limited internal resources for developing and updating
the online services. In many cases, there were no technical resources at all and the editorial
content-creation online was expected to be executed “on the side”. This had resulted in
increased workload and rigidity of online service provision: even minor changes in publishing
systems had been difficult to implement.
Taking the lack of internal resources into account, external know-how was increasingly
utilized in particular through partnerships with web service providers and through building
networks with other media companies operating in same types of markets. Many of the
interviewees noted how even the publishers had started to ‘open themselves to the outer
world’, its opportunities and synergies; earlier, they typically relied only on internal
resources.
“Through partnerships, we gain visibility also outside our circulation area.”(Editor-in-chief)
“Being online requires not only content… It is reasonable to buy technical know-how from
outside the house.”(Editor-in-chief)

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Regarding tangible resources, for publishers it was mostly about content produced by the
editorials. However, the interviewees pointed out how the role of external content generated
by users or advertisers was gaining more ground, and the online services were seen to support
networking with external stakeholders by nature. Another distinctive resource was the
customer base and increasingly also the e-community of users/customers. Particularly for
some magazine publishers, the active community of online customers represented a focal and
unique resource, allowing them to establish close relationships with their audience while
providing access to a wealth of customer information and discussions. As one interviewee
described, “our online service practically equals with the community”.
The most salient intangible resources were newspaper and magazine brands. In addition, the
available Internet technologies and online applications also represented an important resource
for publishers’operations. As noted earlier, these were typically accessed through technology
partnerships, at best leading to innovative website solutions combining in-house content with
external knowledge.
Figure 2 summarizes the identified resources.
Figure 2. Online-related resources in publishing companies
Capabilities
Regarding market capabilities, both newspapers and magazines were considered as reliable
authorities in their own field. Respectively, their role was to provide spaces for customers to
interact in a ‘safe place’, and to bridge different people together. Across a variety of cases the
interviewees underlined the importance of such community-hosting capabilities; however,
regarding online markets and hosting online communities, magazine publishers were in
general considered to have succeeded better in this task than newspapers. This may be related
HUMAN TANGIBLE INTANGIBLE
internal
external
Editorial skills,
multi-channel
journalism
Partnerships,
external know-how
Customer base,
e-communities
Editorial content
Content by users
and advertisers
Brands
Technology,
online
applications

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to the fact that newspapers were targeted to a wider audience and perhaps lacked a ‘niche’
type of interest that would support community formation.
Another focal aspect of market capabilities was being able to acquire and harness customer
knowledge. One of the interviewees described the need to not only gain customer knowledge,
but to take customers’thinking into account in every situation:
“The key is the ability to live the readers’everyday life.”(Internet producer)
Communicating with customers was important for the daily routines in terms of being able to
provide attractive content and thus meet customer needs, but it also manifested companies’
ability to sense their market, i.e. second-order market capabilities:
“Via the online service we get a huge amount of information about what our target group
thinks and wants.”(Editor-in-chief)
At the same time, the publishers pointed out how they were lacking systematic means to
deploy online customer knowledge. In other words, the internal processes of providing the
online services were not yet aligned with the knowledge residing in customers. Another
problematic issue with market capabilities was the publishers’ability to provide appropriate
customer applications, regarding consumer audience but business customers in particular. For
instance, the interviewees described how they lack competence related to online advertising
and selling, while customers would expect publishers to take an expert role and be able to
offer also novel solutions.
“Our business customers would need practical guidance, consulting, about how each of them
should implement their advertisement solutions.”(Editor-in-chief)
Typically, most publishers relied on simple banner advertisements. Only the largest
publishing companies –which were not involved in this study –were seen to have succeeded
in selling online services. This was recognized as an important field of capability
development, as the online advertising markets are growing notably. All in all, the studied
companies yet considered market capabilities as their relative strength.
In contrast, across all cases the publishers’technology capabilities were perceived as
relatively weak. This is related to the nature of their operational work, where providing
content is a key area and technology only provides the necessary facilities.
Respectively, the strongest capability area was matching channel and content, which is also
identified as a novel dimension of technology capabilities. Due to their relatively long history
in providing online news and content, the studied publishers had been able to develop their
related operational competences.
At the same time the publishers felt incapable of evaluating the available technological
solutions, selecting appropriate technologies, and modifying them. This was in issue of
internal coordination and collaboration capability: as one of the interviewees illustrated, the
corporation posed a lot of technological know-how but it was difficult to repatriate in the
local units. Taking their limited resources and capabilities into account, in many cases the

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company representatives underlined how important it would be to have internal ‘champions’
or key persons who would be able to speak both technical and journalistic language and
operate in that interface. In cases where such persons were available, the operational tools had
been better aligned to match the unit’s needs and also novel online solutions had been
successfully implemented.
“It is not about lack of ideas or visions… but if we then try to define which kind of online
tools and applications we would like to have, we cannot say.”(Development manager)
Secondly, enhanced online service development in terms of project management facilities and
R&D was called for. The studied publishers were largely in the stage of learning: as one
interviewee noted, they have not had tradition of doing systematic development work but
R&D has rather operated “on the corridor level”. However, a lot of effort had been put to
restructuring the organization to better serve the provision of online services.
“We have systematically started to lead the online operations.”(Development manager)
“At least now we have an own unit to do online business, finally.”(Editor-in-chief)
Figure 3 summarizes the identified capabilities.
Figure 3. Online-related capabilities in publishing companies
Online strategy objectives
Regarding online strategy objectives in the long run, all the studied publishers emphasized the
growth objective (amount of online customers, both readers and advertisers) and making the
online services profitable. Naturally these were also the most important objectives. In the
short run, publishers aimed at using their online services as a vehicle to support the print
MARKET CAPABILITIES TECHNOLOGY
CAPABILITIES
Dynamic,
2nd order
Static/1st
order,
operational
Customer knowledge
Customer applications
Customer communication
Community
hosting
Channel & content
Project management
R&D collaboration
Restructuring
Market sensing

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product (amount of subscriptions), while also gaining more visibility for the well-established
brand:
"For the newspapers the role of the Internet is increasing all the time, it’s creating and
strengthening our brand." (Development manager)
In addition, the nature of the online services allowed publishers to ‘hear the voice of
customers’and establish a closer relationship with their target audience. However, there were
only a few cases explicitly identifying it as a strategic objective, and it still carries
contradictory elements. It seemed that all magazine publishers highlighted the importance of
getting closer to customers’thinking and nurturing customer relationships online, while
newspaper publishers were rather uncertain about how online services would eventually
support this objective in comparison to the long tradition of print publishing. In other words,
they approached the provision of online services as rather taking them further off from their
customers, and were searching for means to get closer to the audience.
“How people use the Net… We can never establish such a close relationship there, as our
print newspaper does.”(Development manager)
“The first role is to support the print. That’s where our money comes from. From the net, we
get coins. The second role is to make our coins bigger, to get some earning logic to the online
service.”(Managing editor)
There were also cases characterized by a hope that online services would turn profitable, but
no specific online strategy development work had yet been conducted. This could be seen as a
classical ‘hen-egg’dilemma: resources would be allocated to online strategy work only after
online operations would pay off, but turning them more profitable through online service
development was practically impossible because of the limited resources.
Finally, figure 4 summarizes the identified online strategy objectives along a timeline (t) and
demonstrates their relative weight in the studied publishing companies.
Figure 4. Online strategy objectives
Having presented the results of the empirical study, the next sections will summarize the key
findings and suggest some practical implications and future research directions.
GROWTH,
ATTRACTING MORE
ONLINE CUSTOMERS
BRAND SUPPORT
AND VISIBILITY
more subscriptions
BEING CLOSER
TO CUSTOMERS
LONG-TERM
PROFITABLE
ONLINE
SERVICES
t

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Discussion
The aim of this study was to identify publishers’online strategies, and to explore the linkage
between strategic objectives and the available resources and capabilities. Based on the current
study, it seems that there is asymmetry, i.e. mismatch between online strategy objectives and
the available means. This implies that the systematic development of online strategies should
be paid more attention to, instead of trying to target too wide a set of objectives with the
provision of online services.
Figure 5 summarizes the findings of the study. With their existing resources and capabilities,
publishers seem to get support to their strategic objectives regarding brand support and being
closer to customers. However, considering the long-term strategic objectives, the available
resources and capabilities remain a pea shooter with which it is impossible to shoot ‘the
profitability bear’; instead, new capability areas are required in order to set up novel types of
online applications and also target new customer groups with them.
Figure 5. Results of the study
Based on the results, it seems that there are certain market and technology capability
dimensions that are of specific relevance for operating in online service markets. These
include community hosting capabilities, meeting customer needs with online applications, and
the related channel & content capabilities which illustrate the match between technology and
content. Online services provide publishers direct and on-going channels for maintaining
customer relationships and gaining customer knowledge, while allowing increased feedback
and pools of content generated by both consumers and advertisers.
Editorial skills and content,
multi-channel journalism
Brands
BRAND SUPPORT,
VISIBILITY
Partnerships, external
content, online
applications
BEING CLOSER TO
CUSTOMERS
GROWTH,
ATTRACTING MORE
CUSTOMERS
LONG-TERM
PROFITABILITY OF
ONLINE SERVICES
Customer knowledge
Customer applications
Customer communication
Community hosting
Channel & content
Project management
R&D collaboration
Restructuring
Market sensing
operational capabilities
dynamic capabilities

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From managerial point of view, this study carries several implications. As many publishing
companies have faced severe problems in turning online news and content profitable, they
should opt for experimenting online and developing market-related capabilities that are
needed to serve both advertisers and consumers. In order to achieve the strategic objectives,
more emphasis should thus be given on developing new capabilities instead of focusing on the
traditionally strong capability areas. The results indicate that publishers need to 1) develop
organizational structures by resourcing in independent online units, 2) develop their R & D
and project management skills, 3) establish partnerships in order to develop their
collaboration capabilities 4) target also new customer groups online, and 5) develop their
community-hosting capabilities by providing customers spaces for interaction.
According to Grant (2002), strategy should be a manifestation of firm’s resources and
capabilities. However, without systematic development effort, online strategy objectives may
fall into their invidiousness. It would be valuable to initiate the strategy development process
by mapping the resources and capabilities available vs. the resources and capabilities needed.
Conclusions
The contribution of the study was twofold. Firstly, it added to the literature of media
management by explicating publishing companies’ online strategies and providing a
categorization of their strategic objectives and means to reach the objectives. Secondly, by
revealing certain mismatches between strategic objectives and resources and capabilities, it
gave practical insight on how to better align the publishing organizations for online services
and operations.
An obvious limitation of this study is that it investigated six cases operating in the same type
of markets in Finland. Future research endeavors should be conducted to further test and
validate the identified capability dimensions within the industry, e.g. to gain a detailed
understanding about the content and nature of community-hosting capabilities that are needed
for breeding customer interactions. Taking the changing media landscape and advances in
social-media types of online services into account, such capabilities are of specific relevance
also for future media business.
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