(FORTUNE Magazine) - When a business story breaks, you usually read all about it in the Wall Street Journal. But when the first major business story of the year broke on Jan. 3, the paper whiffed. On that day its parent company, Dow Jones, announced the abrupt resignation of Peter Kann, its CEO, and Karen Elliott House, the Journal's publisher and Kann's wife. But the newspaper read--and feared--by everybody in corporate America published the equivalent of a press release.

Kann's replacement will be Dow Jones COO Richard Zannino, the first nonjournalist to run the company since 1933. In contrast to Kann, a Pulitzer Prize winner and the Journal's first "resident" reporter in Vietnam, Zannino spent his seminal years at Liz Claiborne and Saks Holdings, where he was a rising star who held top finance and operations jobs, gaining extensive experience in "customer value creation," according to Dow Jones. Kann will remain chairman of the board until 2007, when he reaches the company's mandatory retirement age of 65.

Here's what you didn't read in the Journal. Under Kann, Dow Jones has faced two crises. The first is his management. Since Kann became CEO in 1991, Dow Jones's total return to shareholders has been 109%. By comparison, the New York Times Co. and the Washington Post Co. delivered returns of about 228% and 368%, respectively. The second crisis has been the abysmal market conditions afflicting all newspapers, as readers and advertisers abandon print for the Internet and other new media. If ever there were a time to break with tradition and appoint a nonjournalist as chief executive, it's now.

After years of tolerating the company's lackluster performance, the Bancroft family, which controls 62% of shareholder votes, finally had enough. The family doesn't want to sell Dow Jones--at least not yet. But it's no longer bitterly divided between those in awe of Kann and those who wanted him out. The two sides came together in April when James Lowell, the family's former investment advisor, presented the clan with a plan to prevent the company's value from deteriorating further. "When we blew the whistle and the shit hit the fan, we got all the branches of the family together and said, 'Something has to be done,' " says Lowell. "The changes in the top management were decided on as the first constructive compromise [between the two family factions]."

Given Kann's age, the Dow Jones board had already begun a succession process. But some Bancrofts feared it might be a smokescreen to enable Kann to install his wife as the next CEO. "It was the nepotism that just pushed everybody over the top," says a family member. Irvine Hockaday, a Dow Jones director and succession committee member, acknowledges that House was one of three finalists to replace her husband. (The other was Gordon Crovitz, president of the Dow Jones electronic publishing group.) But Hockaday insists Kann didn't campaign on his wife's behalf; Kann also denies lobbying for his wife.

On the day of the announcement, Dow Jones stock rose 10%, increasing the company's market capitalization by more than $300 million, to $3.2 billion. How is Zannino going to keep it from drifting down again? In an interview in his Lower Manhattan office, the affable 47-year-old talks primarily about initiatives that are already underway. One of the things he stresses is the importance of making the Journal's content available via every imaginable outlet, whether it is the Internet or handheld devices like iPods and BlackBerries. Part of Zannino's strategy may be to abolish the publisher's job at the print edition of the Journal. "I think the future structure for us will have to be more of an über--Wall Street Journal franchise publisher who'll look after readers and advertisers regardless of what channel they come in," he says.

He speaks optimistically about MarketWatch, the financial website that Dow Jones bought last year in a deal valued at $519 million, and is a little more cautious about the Journal's weekend edition, launched in September. He says MarketWatch exceeded the company's profit expectations last year and will add to its earnings in 2006. Zannino acknowledges the weekend edition has taken some advertising from the regular weekday paper, but insists that half of its ad revenue is new money. He's especially enthusiastic about a plan to shrink the paper's size and reduce the number of stories that jump from one page to another. "Making it smaller will make it more convenient," he says. "Fewer jumps will make it easier for people to get into and get out."

Talk of smaller papers and fewer jumps has people in the Journal newsroom grumbling that the new CEO is a "bean counter" who doesn't grasp what journalism is about. But Zannino is quick to say that the lengthy narratives that are the Journal's signature will "remain at the heart of what we do."

And deep down, even chronic newsroom complainers recognize it's time for a different approach at Dow Jones. They had a Pulitzer Prize winner as CEO--and they still suffered brutal cost cutting and an exodus of star editors and writers. If there's a better way, maybe someone from outside the business can find it. As Hugh Bancroft puts it, "We need somebody with a broader perspective to run the company." A little customer value creation can't hurt either.

DEVIN LEONARD, a senior writer at FORTUNE, can be reached at dleonard@fortunemail.com.