Thursday, September 06, 2012

Segmenting Publishing Strategy

A re-post originally from November 9, 2009:

There is a self-publishing conference in NYC this weekend which reminded me of a project I worked on several years ago. After reading an interesting article in the Harvard Business Review about defining a company's corporate strategy, I decided to use the ideas in the article to spur discussion about my client's strategy. The HBS article Charting Your Company's Future is available from the HBS site and is summarized as follows:
Few companies have a clear strategic vision. The problem, say the authors, stems from the strategic-planning process itself, which usually involves preparing a large document, culled from a mishmash of data provided by people with conflicting agendas. That kind of process almost guarantees an unfocused strategy. Instead, companies should design the strategic-planning process by drawing a picture: a strategy canvas. A strategy canvas shows the strategic profile of your industry by depicting the various factors that affect competition. And it shows the strategic profiles of your current and potential competitors as well as your own company's strategic profile--how it invests in the factors of competition and how it might in the future. The basic component of a strategy canvas--the value curve--is a tool the authors created in their consulting work and have written about in previous HBR articles. This article introduces a four-step process for actually drawing and discussing a strategy canvas. Readers will learn how one European financial services company used this process to create a distinct and easily communicable strategy.

The process begins with a visual awakening. Managers compare their business's value curve with competitors' to discover where their strategy needs to change. In the next step--visual exploration--managers do field research on customers and alternative products. At the visual strategy fair, the third step, managers draw new strategic profiles based on field observations and get feedback from customers and peers about these new proposals. Once the best strategy is created from that feedback, it's time for the last step--visual communication. Executives distribute "before" and "after" strategic profiles to the whole company, and only projects that will help move the company closer to the "after" profile are supported.
My client was a medium-sized publishing company in a rapidly growing market and we met to brainstorm about redefining the organization's business strategy. Using the HBR article as a guide, we constructed a set of 'straw-man' profiles describing our client base and key characteristics. Firstly, we constructed the following customer type segmentation as follows:

Publishing Segmentation

Professional nave either a track record of selling titles and/or have commercial interests, such as a seminar business, where the book is a component (but not the main source) of revenue. In the latter case, the author/publisher may be less concerned with the commercial success of the title but retain a strong desire to produce a quality published product in the traditional sense. This group is likely to understand the publishing business.

Amateurs may have significant misconceptions about the industry and their capacity to be successful. They will require significant education and (possibly) even motivation to complete their “product.” They may develop a personal relationship with the publisher rather than a business relationship and will become more demanding of time and effort than the Professional.

Non-Commercial versus Commercial could be a choice of the publisher as well as a representation of the commercial potential of the product. For example, to a "pragmatist", a book could be a 'give-away' that supports some other aspect of their business and is thus 'non-commercial' but to an amateur the book may be 'non-commercial' because it doesn't have a market. My client's customer base had expectations about the commercial merits of their products, which often, did not match reality and this was important for my client's management to recognize.

Most of our customers in the lower-left quadrant would place themselves much further to the right on the commercial spectrum than reality would dictate. We also recognized that placing customers into the lower right quadrant could not be planned with a degree of accuracy and depended on the willingness of the client to promote and market their title aggressively. Realistically, we felt it was next to impossible to anticipate success in this quadrant.

In the upper-right quadrant, we would most likely find established authors, professional speakers and back-in-print titles. (We didn't look at profitability in this exercise but that would be an obvious additional task).

We then selected a spectrum of key attributes that we believed the publisher's customers valued: Price, speed, contact, quality, control, product sales, community, education, ease of use, reputation. Using these attributes (which would be confirmed by research later), we attempted to plot how our customers in each quadrant valued each attribute. Importantly, we understood these drivers to be 'valued' differently by the customers in each quadrant.

The resulting chart for Pragmatists plotted for the client and one of their competitors looked like this:

The Pragmatist
Pragmatists: This draft profile suggests key areas of differentiation from one player to the other. The competitor (black line) operates at the top of the chart for the drivers that their customers view as critical and give low consideration (limit time and effort) on those that do not and which don't support their strategy. In my clients case, we believed customers valued education highly but we also knew this aspect of the business cost a lot to deliver.

The Dreamers
We also looked at the 'dreamer' segment and chose a different competitor which had made a conscious decision to build sales volume with clients in that quadrant.
To support this strategy their revenue model was partially driven by unit sales (of the finished book), and they determined that many of their authors did not care about quality in the same way a traditional publisher/ author would. The competitor believed that ‘Dreamers’ were interested in receiving the end product as soon as possible.

In contrast, my client publisher sought to actively engage with the ‘dreamer’ to produce a better end product. Paradoxically, in the case of the competitor the ‘dreamer’ may remain blissfully ignorant but happy, while in the case of my client the customer may be dissatisfied because the process took longer, the interactions with staff were frustrating and the choices overwhelming. Same type of customer - "Dreamer" - but different approaches produce different customer experiences and expectations.

Strategy: As we discussed these 'straw-man' profiles we recognized that, for our business, there was a lot of revenue in delivering services to the lower left quadrant if we could get the business driver mix just right. Our challenge was to understand how to produce that revenue profitably. One obvious solution was to withdraw/eliminate costly services the author/customer is uninterested in. Over-delivering to this segment is pointless (which is a philosophy that one of our competitors practiced.)

We also recognized that classic business strategy suggests that companies endeavor to move their customers in the direction of the upper right quadrant. In the self-publishing market it would be virtually impossible to turn ‘Dreamers’ into ‘Moneyed’; however, it may be possible to move a small number into ‘lotto winners.’ The assumption would be that these authors have a product with a ‘hook’ that is somehow unique, and they are willing to work actively on the book to improve it and support it in the market. An added bonus would be one if the author was willing/able to publish additional titles. Rather than expend effort building marketing, promotion and editorial services (add-ons) for clients in the lower left, one potential strategy would be to expend this effort on the select titles/authors that showed promise in moving these titles/authors to the right along the commercial spectrum.

Using the framework we hashed out over an afternoon, our next step was to confirm the key customer drivers by segment (Professionals, Amateurs), to plot our position and our competitor's, and then identify our ideal profile. Once we defined this ideal profile, we would build a strategy focused on moving the company from the 'old' curve to the 'new' one.

In implementing this approach it is important to recognize that customers dictate and research is likely to identify a new driver and confirm that one or more suggested drivers are not important at all. Substitutions could occur and research should be tailored to uncovering these ‘unknown’ drivers not just confirming the ones the staff identifies.

Lastly, communicating the strategy internally is important and using a visual tool like this strategy map makes this easier. Once the ‘big-picture’ strategy is defined, then other tactical aspects of the strategy should be easier to define. This can be both a fun exercise and one critical to the future success of an organization.


Jay said...

-thanks for an information rich post!
-very helpful as always!

Anonymous said...


For reasons I do not quite understand myself I am only reading this really excellent today.

It sounds to me like Amazon with their encore product have figured out how to choose the customers who have potential to move from Dreamers to Lotto Winners.


pheacock said...

Interesting post. Alas, the link to the HBR article leads to a Page Not Found.

MC said...

Fixed - Thanks. The article is now only available for a fee however.