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

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.

New Model Army of Self-Publishers

News that Pearson has purchased the self-publishing roll-up Author House reminded me of this post from September 19, 2007 which I wrote just after Author House acquired iUniverse.com.  My thought this week was what took so long for a large established publisher to make this acquisition.

The news that Author House and iUniverse.com were merging was not entirely unexpected, but it is interesting to me that the publishing community basically ignored the event. While it was reported in Publisher’s Lunch and Publisher’s Weekly, the report in PW focused on the question of job cuts which may reflect a limited interest in the strategic ramifications this segment poses to mainstream publishers. Led by Lulu.com, this publishing segment is exploding and the last thing being considered will be job cuts. Just look at the capabilities on offer at Lulu. Author House and iUniverse complement each other: A number of years ago, iUniverse.com made the strategic choice to add an extensive selection of professional editorial services to their suite of services, which surpass the service offered by Author House (and others in the market). Tactically, I think the two companies will slot together like jigsaw pieces.

Random House has a relationship with Xlibris and is alone among the major publishing houses in building formal relationships with the self-publishing marketplace. I would expect other major publishers to jump into this space, in the short-term, through acquisition. The leverage these companies achieve over their technology, employees and fixed expenses, the processes they have established and the market they have built make these companies appealing. Ironically, there is a ‘democratization of access’ underway in publishing, which to date, most “publishers” have not participated in; but, this will change as traditional publishers look to the self-publisher market as a natural product extension.

In the case of Author House and iUniverse.com, they each produce over 5,000 titles per year with total staff of approximately 100. In terms of titles per month and titles per employee, they shame a traditional large publisher. Everyone will argue that the quality of the content produced by self-publishers is poor, but this is no more true than the statement that all content produced by traditional publishers is exemplary. How often has a traditional publisher invested significantly in a title’s success only to watch it sell 300 copies? For the self-publisher—with an author pays model, no inventory and no promotion expense—there is only upside if a title takes off unexpectedly (and sells 300 copies).

I am not suggesting that the self-publishing business model will be adopted anytime soon by a major publishing house, but there are lessons to be learned from the success that the self-publishing industry has built in the last 10 years. Enabling technology has produced this ‘democratization of access’ and, while it is hard to imagine that there is that much content to produce, the numbers prove the case. Lulu is producing 4,000 new titles per week for a total of 300,000 newly released titles, Author House has over 30,000 authors and 40,000 titles, and iUniverse says they have sold over 5mm books.

Amazon has invested in this area (B&N is getting out via iUniverse.com) and I see some convergence between the traditional publishing model and self-publishing. The content quality issue is irrelevant: Firstly because good content will always find its market and Secondly, because quality in the self-publishing segment depends not on the content but the service the author received. Get ready to see traditional publishers adopt some of the practices of the self-publishing industry.

MediaWeek (Vol 3, No 26): OCLC, AAUP Conference, Intellectual Property Enforcement, Harold Robbins, Book Bloggers

OCLC announced that a revised record use policy will be going into effect on August 1st (LJ):

After more than a year and a half of proposals, withdrawals, and revisions, OCLC's final updated policy governing the usage of WorldCat records is set to go into effect on August 1. The document, an update to the currently prevailing "Guidelines for Use and Transfer of OCLC Derived Records" (from 1987), is written in the form of an agreement on "Rights and Responsibilities" governing both OCLC Cooperative members and the steward organization itself. This commitment-driven approach is a departure from OCLC's previous attempts, criticized for being opaque and for featuring severe legalistic language. The current iteration has been repeatedly described as "a code of good practice," and stresses cooperative member libraries' vested interest in maintaining WorldCat as a viable and self-sustaining resource for catalog records and other services.

A wrap up of the AAUP conference in Salt Lake City (Chronicle):

The program was praised by many attendees in part because it focused on digital how-to: how to make and market e-books, and how to work with libraries that want everything in electronic form. It's far too early to say that most or even many university presses have made the transition from a print-based world to an electronic one. But most have now recognized that they have to figure out what that transition will look like for their particular presses if they want to keep publishing.

Concluding:

Beyond the practical questions, there was a philosophical slant to the conference, too. The publishers wondered and worried about the future of the long-form argument—e.g., the scholarly monograph. How will it survive in an era of quick Internet searches and piecemeal reading? Nicholas G. Carr, author of The Shallows: What the Internet Is Doing to Our Brains, wasn't in Salt Lake City, but his argument that the Internet is killing off "deep reading" came up several times.

At a freewheeling session on "information hyperabundance," the audience wrestled with how society ought to deal with the flood of data coming at us. Michael J. Jensen, director of strategic Web communications for National Academies Press, talked about how publishers and the rest of us are up against "a whole industry of distraction engines" that wants us to surf the Web, play video games, and generally do anything but read a book.

A drink writer is a bad writer (Independent):

"The idea that drugs and alcohol give artists unique insights and powerful experiences is an illusion," he said. "When you try and capture the experiences [triggered by drugs or alcohol] they are often nonsense. These drugs often wipe your memory, so it's hard to remember how you were in that state of mind."

LA Times notes that the Obama administration is beefing up the policing of piracy and counterfeiting of goods and e-books are mentioned (LAT):

Intellectual Property Enforcement Coordinator Victoria Espinel said her office would review current efforts to curb intellectual property infringement of U.S. goods abroad, especially in China. China also is the source of many counterfeit goods. A U.S. Customs and Border Protection report published last year said 79% of seized fake goods came from China.

The enforcement strategy outlined in a 61-page report released Tuesday contains over 30 recommendations, which includes establishing an interagency committee dedicated to curbing fake drugs and medical products. It also calls for agencies to encourage foreign law enforcement to go after rogue websites and "increase the number of criminal enforcement actions" against intellectual property violators.

"There's not an industry that hasn't been affected," said Dr. Mark Esper, executive vice president of the Global Intellectual Property Center at the U.S. Chamber of Commerce, who lauded the enforcement strategy. "The next victim out there is probably going to be the e-books and the publishing industry. "

Also in the LAT, book bloggers are inheriting the world of book reviews (LAT):

Blogs like Riley's, because of the genres they focus on, have caught the eye of publishers, who are eager to have a new opportunity to reach readers. "Women's fiction that maybe wouldn't be covered by traditional book sections is being blogged about, talked about," says Jennifer Hart, vice president and associate publisher at HarperCollins for its paperback imprints. "There are books blogs for every niche of publishing — from literary and commercial fiction to young adult, to sci-fi, to cookbooks. This offers publishers an incredible opportunity — we can reach the audience for all of our books, no matter the genre."

Some of this diversity was reflected in the Book Blogger Convention's attendees. Joan Pantsios, a public defender from Chicago just getting started with book blogging, has a fondness for literature. Carrie Brownell, whose Christianity is important to her blogging, is a stay-at-home mom from Oregon. Monica Shroeder, a 23-year-old military service member, devours books with incredible speed — especially those with vampires. Yet despite their different backgrounds, world views and tastes in books, these women — most book bloggers are women — were all incredibly friendly, eager to connect.

Almost complete collection of Faukner's works goes up for auction at Christie's (AP):

The auction could be the last chance to acquire such a large collection of the Nobel Prize-winning author's work, said Louis Daniel Brodsky, a poet and Faulkner scholar, who lives in St. Louis.Brodsky, who donated his own private collection to the Center for Faulkner Studies at Southeast Missouri State University, said he once owned the extremely rare copy of Faulkner's first novel, "Soldier's Pay," in a dust jacket that's part of the lot up for auction."There are five of those known," he said.Also included in the collection are signed copies of "The Wild Palms" and "Absalom, Absalom!" In keeping with common auction house practice, Christie's didn't identify the owner, but said he was an American.A few items offer a glimpse into the personal side of the author, whose stream of consciousness writings explored the complicated social system of the South.Ironically, Faulkner likely would have cringed to know his personal items are to be part of a public bidding war, Griffith said.

The lot eventually went for $833K. Not too bad - pays for a few air conditioners.

News that Author House will bring Harold Robbins back into print reminded me of Basil Fawlty and the Waldorf salad episode of Faulty Towers. This is Basil's review of Robbin's work:

"aimless thrills, ... the most awful American ... tripe, a sort of pornographic muzak." Of course, when he (Basil) learns the Hamiltons (guests) like Robbins, Basil pretends to have been referring to another author named "Harold Robinson." Harold Robbins was an American romance novelist whose peak of popularity lasted from the 1950s through the 1970s. His lurid, melodramatic writings were dismissed by critics as trashy pulp but were international bestsellers.

Here from the press release:

AuthorHouse, a leading self-publishing imprint of Author Solutions, Inc. (ASI), announced Thursday that is re-releasing 12 classic novels from America's top-selling fiction author of all-time, Harold Robbins.

Robbins' widow Jann said she chose AuthorHouse because it provided her the opportunity to make the books available over a wide range of digital platforms, like the Kindle, the nook and through Kobo. Additionally, the books will be re-released in paperback and hardcover formats.

"I'm an avid reader of eBooks and Harold would have loved the idea of making his books available digitally," said Jann Robbins. "His books spoke to all people, and by increasing the ways we can reach readers [through digital formats], I believe we're carrying on his legacy."

Galley editions of the first three titles: Where Love Has Gone; The Lonely Lady; and Goodbye, Janette will be debuted at the 2010 American Library Association (ALA) Annual Conference Friday through Sunday at the Washington Convention Center in Washington DC.

In addition, AuthorHouse will re-release nine more titles in the coming months. The release dates for hardcover copies and digital versions of the books will be announced in July, but pre-orders will be taken at the conference. "Harold Robbins is an American icon, selling more than 750 million books, in 32 languages, to readers worldwide. He paved the way for mainstream authors like Danielle Steele and Jackie Collins. We are pleased to bring his writing into the new digital age," said Kevin Weiss, ASI president and chief executive officer. The other nine titles being made available through AuthorHouse include: The Adventurers; Never Love a Stranger; Descent from Xanadu; Memories of Another Day; The Pirate; The Inheritors; Spellbinder; Dreams Die First; and The Dream Merchants.

From the @twitter this week:

Guardian: Conrad Black given fresh hope of early release after US supreme court ruling The http://bit.ly/9hImnD
TeleRead: Ray Kurzweil’s ‘Blio’ e-reader: Is it really all that? http://bit.ly/dgwClg
Guardian: 'Operation Thunderdome' takes US paper digital. http://bit.ly/c75mnE http://bit.ly/9fgvDu Digital first print last. Revolutionary
MediaPost Viacom's Copyright Infringement Lawsuit Against YouTube Dismissed: In a sweeping victory for Google, a federal... http://bit.ly/bRBAtR

BBC News: Spy novelist Alan Furst takes readers back in time http://bit.ly/bpagJF - Just saw this. He is a great writer. (Video)
Nothing to report in Sport this week.