A successful example of incubation: The digital transformation of Sweden’s largest newspaper

In 2013 Aftonbladet, the largest news media outlet in Sweden, could boast that it had excelled at digital transformation. Aftonbladet had managed to keep growing during a challenging period for the media industry and in 2011 saw digital profit surpass print profit.

So what was the grand strategy behind (arguably)  the first successful digital transformation of a large Swedish corporation - and what can we learn from it?

In 2008 Aftonbladet had a turnover of 2.1 BSEK, of which 1.8 BSEK stemmed from the daily newspaper. A daily paper with a circulation of close to 500K ex per day - which is a pretty impressive market share in a country with less than 10M inhabitants. Aftonbladet was hence a juggernaut and a cash cow business. But an internal trend analysis of the future of media and newspapers suggested that given the digital headwinds of the internet, and the general development of newspaper volumes across the world,  maybe 100K ex per day was a more likely circulation in just a few years' time. 

The paper edition was 1.8 BSEK of the 2.1BSEK total turnover. The additional 300 MSEK, 15 % of total revenue, came mostly from online ad sales, aftonbladet.se was the largest website in Sweden at the time.

The website was originally started as an exploratory project in cooperation with JMK (The Department of Media Studies at Stockholm University) where the monthly edition of Aftonbladets culture magazine was converted into HTML and published in its entirety as early as 1994. It was a project characterized by editorial curiosity and the will to explore the essence of an online tabloid, and journalists were happy to take part.

As the Internet grew, ads started appearing in the online edition, and with the business perspective of the online newspaper came protectionism. A tendency to guard the golden treasure and a tendency to fight over the spoils of the online bounty. Journalists demanded reimbursement for articles to be republished online - “My employer earns money twice, for print and for online. While I only get paid once!”

move to properly incubate - The online edition was separated into an independent subsidiary. As a standalone business, with its own profit and loss, run by an independent managing director.. The online company was forced to set internal politics aside and truly understand the logic of running an online news media. How to judge when to republish print stories and when to write fast, online-first updates, fit for the new medium the Internet.

Aftonbladet later reiterated the approach when going into television, TV production, and web TV. They also started preparing to do so for mobile - but quickly understood that mobile business logic and model was very much in line with how the existing web business worked and therefore did not gain enough from independence to being worth the extra overhead of an independent company. That is, the incubation was not really necessary or at least minimal for the mobile efforts.

A few years after incubation the digital business had grown strong enough to be prioritized on equal terms against the now struggling and, more humble, print business. The subsidiary was integrated back as part of the core business, and the extra overhead of running two companies could instead be invested in the exploration of the next horizons for growth. 

The experience at Aftonbladet with the incubation of the web business is what has given us at Rhubarbs the conviction that incubation is key for successful transformation. Whatever new thing we are trying can not be expected to fight against existing businesses and ways of working from the get-go. it has to grow strong and show its worth in a protected space for a while before we can fully get the transformation we want.