A few weeks ago it occurred to me that, at least conceptually, I have seen the problems faced by the newspaper industry before… at Microsoft.

Both face classic Innovators' Dilemma challenges.

Microsoft is trying to hang on to huge annuity streams from client software, which is a tougher business than ever in 2009 and one that isn't getting any easier.  So Microsoft is forced to straddle the fine line between hanging on to the client and "Modernizing" with Web business models, which I've argued for some time are at least a mildly deflationary force thanks in large part to Google.

The newspaper/local media business is in exactly the same place.  Old advertising models, which are today characterized by inefficiency and questionable effectiveness, are becoming less and less popular with advertisers.  Everything is moving to the Web, where monetization is similarly questionable.  Better monetizing the Web is critical to the future of the newspaper/local media industry, yet it can't quite replace the revenue provided by the old business model.

I suspect that Microsoft and Newspapers/local media businesses will find that the easiest path to success is in being aggressive… by devoting a meaningful but not overwhelming % of available resources to experimentation.  Take two examples I am very familiar with for example:  work done by the Austin American Statesman around Twitter, and alternative Web properties and the Dallas Morning News around "big media" hyperlocal.  These are organizations that place a premium on learning and experimentation — two major keys to getting the Web.  Veterans in the Web business know that experimentation pays off with serendipity.  You don't know where your experimenation will pay off, but you commit to the process because you know that it will eventually create business opportunity & create shareholder value, even it isn't immediately apparent.

So if you're looking to see how things will go for these incumbent businesses challenged by disruption, pay close attention to signs of experimentation and innovation.  Typically, a success story or two are right around the corner.