Business strategists, like journalists, are supposed to be expert at pattern recognition. So what are we to make of an industry that experienced a 42 percent decrease in its stock price in the United States for the three years ending in 2007? What does it say about a sector when industry leaders with iconic brands change hands under financial duress? New owners often shuffle and replace executives, but how do the incoming leaders compete when faced with a triple threat that is wholly new: younger customers are going elsewhere for the core product, cost cuts are undermining operations and the strategy that worked for decades seems to have reached its natural limits?

This is a story, of course, that newspaper journalists know all too well. It's a story that's playing out globally, and not just in the United States. In Europe, for instance, French newspapers' advertising revenues were off 8 percent last year, as readership declined to just 42 percent of adults—lower than the US, where readership is around 48 percent. Newspapers in emerging markets have started to feel the same pressure. The patterns are painfully clear to see. By any measure in business, the newspaper industry has entered a state of upheaval. After roughly 100 years of financial stability, massive change is now compressed, with no certainty about the model of newspaper publishing that's likely to prevail.

The pace of change. As the son of an editor of a western Massachusetts daily, I find the events facing newspapers particularly poignant. But as an adviser in formulating strategy with global companies in dozens of industries, I can tell you that you are not alone. Turbulence is rising almost everywhere, as Bain & Company has found through studies of companies that have redefined their core business.

Of the companies that made up the Fortune 500 in 1994, 153 either went bankrupt or were acquired in the subsequent 10 years. Another 130 undertook a fundamental shift in their core strategy. In other words, 283 out of the 500 faced serious threats to their survival or independence and only about half met the threats successfully. In the decade ahead, we predict that only about one in four will remain intact. Meantime, the average holding period of a share of common stock has declined to nine months, compared with three years in the 1980s. And the tenure of CEOs has declined to less than five years from eight years a decade ago.

With the average lifespan of companies dropping to just over 10 years from 14 a decade ago and a dramatic decrease in the useful life of a company's strategy, more and more companies today find themselves in the position of trying to redefine themselves to survive. Today, in fact, nearly 75 percent of businesses will encounter the issue of redefinition, according to our analysis, compared with only about 50 percent for the period from 1985 to 1994.

Redefining the Core. Why do corporations undergo these big transformations? One way to understand it is through research done for my book Unstoppable, which delves into how companies renew their core strategies. Businesses repeatedly go through what we call the "Focus-Expand-Redefine (F-E-R)" cycle. Nearly every large enterprise seems to move through it over time. In the focus phase, companies concentrate their core business. They grow their markets, cut costs, improve operations, and develop innovations. In the expand phase, they take advantage of these capabilities and market positions to move into adjacent markets. They seek out new customer segments, geographies, distribution channels and new-but-related product lines. Newspapers have lived in the "F" and "E" phases up until recently.

At some point, many companies find growth and profitability tapering off or declining. Perhaps the market is saturated, or the pool of available profits has shifted. Perhaps new competitors with lower cost structures or innovative products have appeared. This is certainly what's going on in the news sector.

Consider the FER cycle as it has affected the New York Times, perhaps the best-known newspaper franchise in the world. From its origin in 1851, the Times grew by focusing on its core as a regional newspaper. By 1993, it was earning US $2 billion in revenues and seeing operating profits of US $126 million. But the company seemed to reach a natural limit. Revenue growth for the preceding decade averaged less than 3 percent per year, earnings had declined, and the stock price had underperformed.

The answer was a dramatic move beyond the New York area in circulation and advertising. The shift to a national newspaper was a resounding success. In 10 years, revenues grew to US$3.2 billion, operating profits more than quadrupled to US$539 million, and the company purchased strong regional newspapers like the Boston Globe. Any company's shareholders would be gratified with such performance.

And then came the internet, spawning new competitors and online information. From its US$8 billion peak, the company's market value has declined by nearly two-thirds as investors wait to see how the Times responds to the crisis around its core business.

The Times and most other newspapers are now squarely in the redefinition phase. In one sense, the newspaper industry's very stability, and recent growth, may have masked the urgency around needed change until late in the game.

The Right Time. How urgent is this need? Bain forecasts that within 10 years, 80 percent of today's newspapers will be diminished to one of four reduced states: The first is "death of a thousand cuts," characterised by continual outsourcing, consolidation, and downsizing—and regret for not acting more boldly. The next is a "shrink to grow" model, one with a smaller or less-frequent print format built around an "online" news utility at its centre. The third state is acquisition by a larger media company or consolidator. And the last is extinction.

Redefinition is clearly the preferable answer. But it is also the toughest to carry out in business. Companies that set out to do this typically face three dilemmas. They can be expressed as questions that management must answer in order to proceed. They are: How will I know whether I need to redefine my business model? What should I use as the foundation of my redefined core? How do I make the necessary changes while managing the current business?

Publishers recognise the need to redefine their businesses. A key indicator is the profit pool. The content-creation portion of the entire US$76.5 billion annual media profit pool is the largest at US$32 billion, compared with smaller slices for other players like programming aggregation, distribution and devices. Newspapers enjoy more than 23 percent of this, compared with film, TV, magazines and so on. Yet there's no guarantee this will continue.

Consider what happened to the photography market. In 1995, film manufacturing accounted for nearly 40 percent of its US$1.9 billion profit pool. By 2005, the profit pool had nearly doubled, but the film was down by 95 percent. In the shakeout, Canon adapted, but former leaders Polaroid and Kodak did not. Profit pools move much faster than markets.

Similarly, competitors have eroded newspapers' profit pool. They come from a host of familiar players—news-centric internet players like Yahoo and Google, user-generated content in the form of sites like Facebook and YouTube, paid subscription television and cable providers like HBO and Comcast, niche print players like People magazine, newspapers' own internet offerings and even video gaming.

These alternatives reflect changing tastes and demographics. Few sectors have seen a shift as dramatic in the preferences of their core customers. The Times estimates its print readers average 42 years of age while those online are about five years younger. More broadly, the Newspaper Association of America found that between 1970 and 2007, the percentage of daily newspaper readers 55 years and older declined only 12 percent, to 64 percent of the U.S. population. However, among 18- to 24-year-olds, and 25- to 34-year-olds, it has tumbled to 34 percent from 73 percent and 77 percent, respectively.

Hidden Assets. In the face of such threats, business leaders have to come up with answers to the three dilemmas mentioned above. Typically, some decide to man the fort and defend the core business. Others try to transform their companies all at once through a big merger or a leap into a hot new market. These strategies are inordinately risky. But a smaller number of companies pursue a lower risk alterative. They search out and uncover hidden assets, those that have been overlooked, undervalued, or underutilised, to redefine themselves around. The key to successful redefinition in more than 90 percent of cases we've studied is the discovery of these unappreciated assets.

Most hidden assets fall into three categories: undervalued business platforms, untapped customer insights, and underexploited capabilities. Each can provide the foundation on which a company can redefine its core. A well-publicised example is what happened in the music industry: A few years ago, Apple realised that its talents in software, product design, and marketing could be applied to more than just computers, and in particular to a device for listening to music. Today, iPod-based music accounts for nearly 50 percent of its revenues and 40 per cent of profits—a new core. Similarly, newspapers may join records and tapes as artefacts of delivery, while their libraries of reporting, news analysis, and images live on in another form.

One print media company that has transitioned successfully is Marvel Entertainment. Marvel's core product—comic books—is fundamentally different from newspapers, but their business transformation is instructive. In 1996, Marvel was in bankruptcy, its vast library of 5,000 comic book characters not worth the paper they were printed on. But new CEO Isaac Perlmutter understood the power of Baby Boomer nostalgia and the old characters were reborn on the screen. Thanks to Wolverine, Spider-Man, and the Incredible Hulk, by the end of 2007 Marvel's revenues from movie licenses and merchandise accounted for more than half its US $486 million in net sales and much of its US $140 million in profits. And these films have captured whole new age groups.

Newspapers' Assets. Hidden powers like Peter Parker's don't exist only in comic books. Newspapers have a power of their own, and some newspapers are using these as the foundation of their new strategies. Let's look at several.

Brand: Few still read The Wall Street Journal's stock tables in print these days, but the authority of that "Bible of Business" is still worth a tremendous amount—as Rupert Murdoch knows. In some of its print components like the daily news summary, the Journal has long been a proponent of the brevity that suits the digital age. But its bread and butter are giving the full account to a readership that wants the story behind the story in business, even as it branches out into weekender sections. Similarly, the New York Times has merging its traditional "journal of record" brand with everything from cultural news and trends to health advice and political blogs.

Access to households and minds: Email addresses of reporters and columnists now seen at the bottom of print news stories recognise a modern reality: Readers are no longer passive receivers of information, if they ever were. Today, they want and expect to respond and have a dialogue in real time. The Times has experimented with an online feature that allows readers to annotate articles with comments that support and challenge. This potential to create communities could be a goldmine in the right circumstances. After all, it is the essential business model of one of the Internet's most successful and modern companies: eBay. Yet local newspapers are having a tough time transitioning to the Internet, according to a recent survey by the Readership Institute at Northwestern University. It revealed that 62 percent of respondents have never visited their local daily newspaper's website.

Advertising and advertiser networks: Newspapers have not relinquished their title as the king of reach and "coverage" in most cities. As can be seen in the proliferation of small-newspaper chains, local news is still of intense interest to local readers and advertisers understand this. Yet news organisations need to go beyond thinking of this capability as some kind of small-scale variant of craigslist.

In 2006, a consortium representing 176 daily newspapers began sharing content, advertising, and technology with Yahoo. The consortium posted advertisements on Yahoo's jobs site and used Yahoo's technology for their own online advertisements. In turn, Yahoo tagged and optimised their content. Earlier this year, a second set of US newspaper publishers joined together with similar goals in mind.

Content: Having a network of trained reporters out looking for a meaningful story cannot be duplicated by most competitors. Both the reporters and their ability to create unique content are truly at the core of the newspaper industry, and will remain its reason for being.

The Hartford Courant made just this point as its executives announced the newspaper's downsizing. "The new paper will be organised differently and have a new look," said Editor Clifford L. Teutsch. "We are going to reinvent, with one eye on our traditions and another on the future." Teutsch said the Courant will continue to emphasise investigative reporting, with a focus on "digging up threats to health and safety." Those are certainly sentiments my father would applaud. For all the changes in the industry, these principles remain timeless. To some extent, so do the fundamental choices that newspapers must make in order to grow as businesses.

The challenge facing newspapers may be similar to that faced by the Swiss watch industry not so long ago. For 40 years after the end of World War II, the Swiss, too, lived through technological change and customer defections. By the mid-1980s, the nation's watch industry had been almost eclipsed by Asian competitors making cheaper, digital versions of their mechanical gems. Yet today, the Swiss are back, bigger and better. A variety of innovation brands, from traditional players like Tissot and Rolex to new brands like Swatch, now share US $10.4 billion of the world's US $16.6 billion profit pool for watches.

Imitating this transition from mechanical to digital "timeliness," seven French publications recently teamed with France Télécom to test an electronic newspaper called Read & Go, which allows readers to download newspaper content over the wireless network. In a sense, it is like Amazon.com's Kindle. That device allows customers to subscribe to e-versions of 19 newspapers from around the globe. But Read & Go also includes advertisements, though today only those provided by France Télécom.

Are these little plastic displays the future for newspapers? In his book, The Vanishing Newspaper, journalism professor Philip Meyer asserts that 2043 will be the year when the last physical copy of a newspaper is printed. I plan to be around when that date arrives. What will newspapers look like then? Will they be around at all? Time will tell.

Chris Zook is coleader of Bain & Company's Global Strategy practice, and the author of Unstoppable: Finding Hidden Assets to Renew the Core and Fuel Profitable Growth (Harvard Business School Press, 2007). He is based in Amsterdam, The Netherlands.