by Adam Hartung | Apr 5, 2010 | Books, Current Affairs, Defend & Extend, In the Swamp, Lifecycle, Weblogs
Do you read more today, or less than you did 10 years ago? For most of us, the answer is more. Our ever present access to email and texting means we watch less TV, and pick up more from reading. Of course, we read a lot less paper than we used to – books are falling more out of favor every year – and the plight of newspapers and magazines is rocky. For traditional book publishers like Random House, Pearson, et.al. as well as periodical publishers like Tribune Corporation or News Corp. there is a lot of concern about survivability. But it's not because we're reading less. It's because the market has shifted, and people are reading differently.
What should a publisher focus upon? Words. Content. A recent Harvard Business School web discussion "HBS Cases: iPads, Kindles, and the Close of a chapter in Book Publishing" highlights that the role of a publisher is to find really good stuff that people want to read. The author, former CEO of Random House, points out that a publisher's job is to edit content into the format which makes it easiest to understand and digest. A good publisher aids us in our seeking knowledge, or enjoyment. But most publishers have completely lost sight of that goal, instead focusing on printing. Books, magazines and newspapers. Keep the presses busy, and the old supply chain filled.
In the business lifecycle we start with the Wellspring of ideas. When something catches hold, we enter the Rapids of growth. That's great, because growth is a fun place to be. But when markets start shifting then things go flat. We think slowness is our fault, so we work harder at what we've always done – but the cause is a market shift so the hard work makes little difference. We drift into the Swamp, where we are so overwhelmed with all the problems from no to negative growth that we forget what our original purpose was (we get so busy fighting alligators and killing mosquitoes that we forget the mission was to drain the swamp!) Eventually resources are depleted and we slide into the Whirlpool of failure.
Publishers are now in the Swamp. Cutting costs, focusing on "big deals" (like bidding wars to publish a book by a celebrity like Sarah Palin), and spending all kinds of time dealing with the supply chain. As the HBS article explains, while iPad and Kindle represent an opportunity for incremental growth – and new revenue – by feeding people content when they want it where they want it and how they want it – the publishers are in a pitched battle to slow electronic publishing. The publishers are trying to Defend & Extend their old process of printing, and distributing, paper. They want to defend their old Success Formula. And in doing so, they've completely lost sight of the opportunity digital publishing offers!
A paper published on the University of Missouri web site "What Happens When Newspapers Cut Back on Marketing Investments? An Empirical Analysis" is extremely enlightening. With ad spending down, in an effort to "save" the business, they are cutting editorial. Yet, this is creating a vicious cycle of decline (a Whirlpool is emerging.)
- Newsroom cuts are the most costly on revenue. More than cutting sales or distribution, cutting content led to the greatest loss. Duh! Of course. Readers are there for content – not for ads or distribution! Talk about forgetting your purpose.
- The bigger the cuts, the impact on revenues gets progressively worse! Remember what I said about creating a whirlpool? When you cut what people want, you hasten demise.
- Newsroom cuts are most costly on profit. Not only does revenue decline, but of all cost cuts the content cutting not only takes away readers – but quickly advertisers as well. Advertisers depend on content to draw people to their ads. Otherwise all you have is an ad tabloid – remember?
My book publisher is Pearson. Eighteen months ago I proposed that we take Create Marketplace Disruption and turn it into 16 short stand-alone mini-books. People could then buy just part of the book, as it suits their needs. Sell these for $1 or $2 each strictly as electronic downloads. That idea flew about as far as the famed dodo. Financial Times Press sells books I was reminded. No interest in this other wacky idea I proposed.
But I'm confident that for most of you, the idea of nice short readings – like say a blog – is a lot more appealing than digesting a 225 page book. People don't want less words, they just want things differently. That's why I do public speaking and workshops – because many of us don't want all the detail of the book and appreciate receiving the content in another format.
So, do you know what direction your market is headed? Are you moving forward to meet emerging needs and preferences? Or are you trying to defend & extend the way you've historically done business? For most publishers, the current direction spells disaster – failure. Learn from their mistakes, Disrupt your approach and find some White Space to learn how you can make money and grow!
by Adam Hartung | Oct 23, 2009 | Current Affairs, Defend & Extend, eBooks, In the Swamp, Leadership, Lock-in, Music
If you try standing in the way of a market shift you are going to get treated like the poor cowboy who stands in front of a cattle stampede. The outcome isn't pretty. Yet, we still have lots of leaders trying to Defend & Extend their business with techniques that are detrimental to customers. And likely to have the same impact on customers as the cowpoke shooting a pistol over the head of the herd.
Book publishers have a lot to worry about. Honestly, when did you last read a book? Every year the demand for books declines as people switch reading habits to shorter formats. And book readership becomes more concentrated in the small percentage of folks that read a LOT of books. And those folks are moving faster and faster to Kindle type digital e-book devices. So the market shift is pretty clear.
Yet according to the Wall Street Journal Scribner (division of Simon & Schuster) is delaying the release of Stephen King's latest book in e-format ("Publisher Delays Stephen King eBook"). They want to sell more printed books, so they hope to force the market to buy more paper copies by delaying the ebook for 6 weeks. They think that people will want to give this book as a gift, so they'll buy the paper copy because the ebook won't be out until 12/24.
So what will happen? Kindle readers I know don't want a paper book. They wait. Giving them a paper copy would create a reaction like "Oh, you shouldn't have. I mean, really, you shouldn't have." So the idea that this gets more printed books to e-reader owners is faulty. That also means that the several thousand copies which would get sold for e-readers don't. So you end up with lots of paper inventory, and unsatisfactory sales of both formats. That's called "lose-lose." And that's the kind of outcome you can expect when trying to Defend & Extend an outdated Success Formula.
Simultaneously, as book sales become fewer and more concentrated a higher percent of volume falls onto fewer titles. And that is exactly where WalMart, Target and Amazon compete. High volume, and for 2 of the 3 companies, limited selection. This gives the reseller more negotiating clout against the publisher. So as the big retailers look for ways to get people in the store, they are willing to sell books at below cost – loss leaders.
So now publishers are joining with the American Booksellers Association to seek an anti-trust case against the big retailers according to the Wall Street Journal again in "Are Amazon, WalMart and Target acting like Predators?" . Publishers want to try Defending their old pricing models, and as that crumbles in the face of market shifts they try using lawyers to stop the shift. That will probably work just as well as the lawsuits music publishers tried using to stop the distribution of MP3 tunes. Those lawsuits ended up making no difference at all in the shift to digital music consumption and distribution.
"Movie Fans Might Have to Wait To Rent New DVD Releases" is the Los Angeles Times headline. The studios like 20th Century Fox, Universal and Warner Brothers want individuals to buy more DVDs. So their plan is to refuse to sell DVDs to rental outfits like Netflix, Redbox and Blockbuster. Just like Scribner with its Stephen King book, they are hoping that people won't wait for the rental opportunity and will feel forced to go buy a copy. Like that's the direction the market is heading – right?
If they wanted to make a lot of money, the studios would be working hard to find a way to deliver digital format movies as fast as possible to people's PCs – the equivalent of iTunes for movies – not trying to limit distribution! That the market is shifting away from DVD sales is just like the shift away from music CD sales, and will not be fixed by making it harder to rent movies. Although it might increase the amount of piracy – just like similar actions backfired on the music studios 8 years ago.
Defending & Extending a business only works when it is in the Rapids of market growth. When growth slows, the market is moving on. Trying to somehow stop that shift never works. Only an arrogant internally-focused manager would think that the company can keep markets from shifting in a globally connected digital world. Consumers will move fast to what they want, and if they see a block they just run right over it – or go where you least want them to go (like to pirates out of China or Korea.)
They only way to deal with market shifts is to get on board. "Skate to where the puck will be" is the over-used Wayne Gretzsky quote. Be first to get there, and you can create a new Success Formula that captures value of new growth markets. And that's a lot more fun than getting trampled under a herd of shifting customers that you simply cannot control.
by Adam Hartung | Oct 7, 2009 | Current Affairs, Disruptions, General, In the Rapids, Innovation, Leadership, Web/Tech
"Amazon Cuts Kindle Price to $259" is the USAToday headline. This $40 whack is the second price cut this year. Sony is selling its ePocket for $199. Of course Kindle is pushing that it has more content available and easier wireless access than Sony,- even internationally. Expectations are for 3 million e-Readers to be sold in 2009 (about 1 million around the holidays.) Obviously, if you aren't paying attention this is a big deal. It is changing publishing (books, magazines and newspapers.) But the impact goes far beyond publishing.
Simultaneously, The Wall Street Journal reports "Just a Touch Away, the Elusive Tablet PC." According to this article, new devices are being tested that will allow you to do everything from classic PC applications to web interconnection to watch movies – or read books – on a keyboard-less new tablet. Something that is a cross between an iPhone/iTouch (with a bigger screen) and a PC. As iPhone users are learning (quickly) you don't need a keyboard or mouse to have an interface to your machine and the world.
So what will be the future solution? Will it be one of these, or yet something different? I don't know. Do you have a crystal ball? But the answer to that question really doesn't matter to us today. We don't need to know that sort of specific to begin growing our businesses.
Not being widget nuts, or platform forecasters, should not stop us from planning for a different sort of future and changing our approach today. Scenarios for 2013 (you do have scenario plans for 2013, don't you?) should be planning on practically everybody having one of these devices. And perhaps these devices being so cheap they could be included with sales of every major appliance (like a car, or refrigerator). If that sounds silly, just look at how cheap a flash (or thumb) drive is now. Remember when we thought floppy disks were expensive? Now people exchange flash drives that have more capacity than a 2004 laptop without thinking about cost. These made tapes, floppy drives, zip drives and a lot of other technology obsolete in a hurry.
How can your business take advantage of this shift? Can you replace paper manuals, maybe even user instructions with a tablet? Or a tablet app? Can you use an interactive device that grabs input from your appliance to do diagnostics, recommend maintenance, report on failures? Would this help customers pop for the new frig – say if it helped lower electric bills? Or could it encourage that new washer by helping set the cycles to lower water cost? Could you build it right into the console on a washer or dryer? Or could you encourage someone to buy a new car by telling them to forget about maintenance logs and just track the car's performance on a tablet?
If you provide content – are you planning for this? Recently The Economist sent me an email (I've registered on their web site) telling me they were going to start charging for web content. I've heard News Corp. properties, like the Wall Street Journal, intend to do the same. I guess they haven't noticed the world is moving in a direction that makes such a plan – well, impossible. In a recent Harris poll (reported on Silicon Alley Insider "People Won't Pay for News Online") 74% of web users said they'd simply switch sites before paying. With one of these eReader/Tablets in hand, why would they ever pay for content when another provider is a finger streak away? As access becomes easier and easier, the willingness to pay will go down and down. Publishers had better start figuring out how to get paid a different way than subscriptions!
Now is about when executives like to say "so I want to know which format will win before I start doing this. I only want to do this once." That old cry for efficiency. Unfortunately, while waiting for a winner to emerge, the waiter becomes the laggard. The early adopter, that recognizes the value provided to consumers, gets out there and starts using these innovations to drive better customer value. And to capture more sales. When you are part of making the market – like Apple in music – you gain huge advantages. You don't have to know all the answers to compete. You just have to be willing to Disrupt old notions and use White Space to experiment and learn.
I have drawers filled with obsolete electronics. How many obsolete cell phones do you own? How many big old monitors are you recycling to replace with flat screens? Do you still have a fax machine? I have an old keyboard that used something called "sideband technology" to allow me to interact with people and get news and sports info years before the internet was popular – and before wireless internet was available. Obsolete now, that device taught me how valuable the internet was going to be when Congress made it available for commercial use. Fear of throwing away a few products or software – maybe a betamax machine or copy of visicalc – is no reason not to get into the market and learn!
Markets are marvelous things. As these articles discuss, nobody knows how we will be using technology in the future. Not exactly. It will be some combination of eReader – computer – music player – television – telephone. But we do know the broad theme. And if you want to get out of this recession, you can start playing to this market shift now. You'll never grow if you sit on the sidelines watching and waiting. Get in the market. Participate. Use this technology to create new solutions! There are countless applications (as the expanding iPhone app base is proving.) Want to get into the Rapids of growth? You'll never succeed if you don't become part of the marketplace. Nothing creates learning like doing!
by Adam Hartung | Aug 5, 2009 | Current Affairs, Disruptions, eBooks, General, Innovation, Leadership, Openness, Web/Tech
"Sony Unveils Pocket Size Electronic Book Reader" is the Los Angeles Times headline. According to Silican Alley Insider the new Apple tablet is a GREAT book reader. Although Steve Jobs thinks book publishers are incredibly screwed up and he's less optimistic about book sales than he was music sales when he launched iTunes. And Amazon has sold out its Kindle e-readers since they started manufacturing them two years ago.
With all these announcements, you'd think everyone knows about e-readers and the market shift happening in publishing – from books to magazines to newspapers. Even I've blogged about this for months – and the positive impact this has had on book sales as well as Amazon's revenues and profits. But:
(Link to chart and Forrester Discussion here)
Half of all people surveyed in 2Q 2009 still haven't seen or heard about e-readers.
This is important. Imagine it's 1983, and you weren't aware about personal computers and their benefits – even though the IBM PC was Time magazine's "Man of the Year" in 1982. We now know that early adopters of PCs developed new solutions for many problems – from analysis to word processing to advertising development to commercial graphics to in-house publishing to communicating via email — on and on and on. Those who understood this technology early, recognized the shift it demonstrated, had early advantages on competitors. You didn't have to compete in technology, or be a technology officianado, to take advantage of this computing shift for your advantage.
Today, ereaders are another serious market shift that early adopters can leverage. Soon newspapers and magazines will be hard to come by, or so thin (due to printing and distribution cost) that their content will be much less than desired. But ereaders allow you to keep up with journals you've come to trust. And advertisers need to be prepared to follow them onto this platform – to reach people they otherwise would miss.
If you've quit reading books because you don't have the money to spend (at $20+ apiece), desire to carry them, or the time to read them, ereaders allow you to buy and carry 350 or more books at a fraction of previous prices. You even can buy pieces of books (chapters for example) that give you what you want. Think of the shift from long-play albums/CDs to iTunes sales of single songs as an analogy. You can get the benefits of books without many of the reasons you may have quit reading them.
Would you like a repository of information you can call upon for your daily work? With e-readers you can carry an entire library, something you'll not do in paper. Or on your laptop.
Speaking of laptops – this will all be on a laptop you say – so forget ereaders. Do you really think we'll all be carrying these 7 pound monsters around in 5 years? Look at college kids today. How many do almost all their work on a phone? They use the computer only when forced to – for typing papers or building spreadsheets. Laptops are increasingly becoming much more than people want – too big, too heavy, too hot, too power hungry, too short battery life, too complicated, too much software, too many bugs, too many viruses, too expensive. Laptops will soon be like mainframes. Look at the trend. Sales of big screen laptops have cratered as netbooks, with tiny screens, have taken off. People are moving away from laptops to smaller and easier to use products – like ereaders.
Why make your salesforce, or customers, or training techs carry a laptop when an ereader will give them everything they need? They cost less, are easier to keep working, and don't get hindered with personal apps like MS Money that you didn't put on the laptop in the first place but couldn't stop. Given ereader prices, you might be able to consider an ereader disposable in 5 years. Literally, you could give a customer an ereader with all the training, specs, history, design elements, etc. of your product the way we now use a brochure. It literally might be cheaper than a 10 page glossy brochure costs to print and distribute – but with everything they need to design in your product, or operate it, or service it. Imagine an ereader in your car glove box rather than the owner's manual you never use – but the info will be catalogued, searchable, and linked to the internet so it's always current with service information.
Market shifts affect us all. Too often we say "oh that shift is obvious, and I'm surprised the current competitors aren't jumping on that." Then we ignore the shift ourselves. Competitors that make higher rates of return, and prolong those rates of return, observe these market shifts and immediately build them into future scenarios. They think about how to use these shifts to improve their competitive position, and create White Space to test the opportunities – even when they represent Disruptive change. These are Phoenix Principle companies – and the kind you want to be – because they grow more, make more money and have longer lives.
Learn how to spot market shifts and leverge them for your advantage. Don't end up like GM – out of touch and into bankruptcy. Read the new, free ebook "The Fall of GM: What Went Wrong and How To Avoid Its Mistakes."
by Adam Hartung | Jul 21, 2009 | Current Affairs, eBooks, General, In the Rapids
I've blogged before about the decline in book readership. In fact, the number of book stores has dropped some 20% in the last 3 years. It's not that people don't want to be learned. Rather, people no longer prefer to carry around a full length paper book. What was no big deal has become large, cumbersome and heavy. This isn't how we described books until we started reading everything imaginable on electronic devices. The new solutions made the old approach less desirable. The market shifted. And if books weren't available electronically, people would read other things which are available electronically.
Amazon wisened up and launched Kindle to meet this market shift. Good move, it allowed Amazon to keep growing while traditional format product sales declined. Now "Barnes & Noble launches on-line Kindle challenge" is the Financial Times headline. While Amazon keeps pushing new content onto Kindle, including newspapers and magazines, Barnes & Noble is maximizing the platforms it can reach electronically. Their solution, more software than hardware today, allows them to immediately offer 700,000 titles electronically. They now boast the largest on-line book store – somewhat eclipsing Amazon's early success. And their hardware device is yet to come.
Should Amazon be worried. I don't think so. The market for e-reading is growing extremely fast. With each new product generation the traditional market share shrinks as more people convert. At this stage, these companies are merely helping the market grow rather than competing with each other. That's the wonderful part about growth markets, – about being in the Rapids – there's so much new demand that it's less about competing head-to-head than about expanding the market by meeting more and more needs. Instead of slogging it out in trench warfare – which is the traditional book selling market – you can offer more features and ways to differentiate – thus growing the market. For both Amazon and Barnes & Noble this is a very, very good thing. It breathes growth into their businesses by moving into the shifted market space.
Borders was actually first to this market, linking up with the proprietary eReader from Sony. But Borders didn't move hard into the new market. As the weakest of the 3 leading book retailers, Borders should have moved fast to get out of the dying brick-and-mortar stores. Then used those resouces to take an early lead in the new market space. But the leaders at Borders kept trying to Defend & Extend the old business, and moved too slowly on the new business. Instead of getting out of the dying business, and becoming #1 in the growing business, they waited. Oops. Now Borders is again the weak competitor – and at grave risk of extermination.
The market is shifting. Congratulations to Amazon and Barnes & Noble for moving into the shifted market space. Quickly we'll be seeing fewer and fewer book stores on the street, as this business (similar to music) will become largely an on-line business. And better for us all. With cheaper books and other reading materials, maybe we'll continue to be even better read than previous generations.
Soon publishers and authors will have to step up to this shift. We all know that newspapers and magazines have been slow to adjust to this market shift. They should be begging for distribution on the Kindle device – and pushing B&N to get their device out even faster so periodicals can be distributed to them. Or maybe get their issues into the B&N software so people can read them on their laptops, netbooks or iPhones. The publishers, from newspapers to books, have been slow to understand this changed market. They, like recording publishers, are locked-in to the physical product (the CD for music, and paper for publishers). The winners will be those who move fastest to the new market. Sure, some people will always want print. But the market for digital is simply going to be lots, lots bigger. Best to get into that market today and figure out the new business model.
