service innovation the path to book publishing success in the digital age presentation 1

© Jim © Jim LichtenbergLichtenberg 2008 2008

Service innovationService innovation: the path to success in the Internet ageService innovationService innovation: the path to success in the Internet age

- Jim Lichtenberg- Jim Lichtenberg

O’Reilly Tools of ChangeO’Reilly Tools of Change, , 20082008New York, NY New York, NY

February February

Gozanoishi Shrine, on the north shore of Lake Tazawa


Many mountains Many mountains to climb -- no to climb -- no matter what part matter what part of the book of the book publishing publishing industry you are industry you are involved with -- to involved with -- to reach the peak of reach the peak of successful and successful and profitable profitable publishing.publishing.

© Jim Lichtenberg 2008© Jim Lichtenberg 2008

Originally: graphically-rendered thoughts were a Originally: graphically-rendered thoughts were a rare or privileged communications for specific rare or privileged communications for specific purposes.purposes.


After Gutenberg:After Gutenberg:Textual content as a popular commodity…Textual content as a popular commodity…

...created and ...created and (eventually)(eventually) owned by “rightsholders.” owned by “rightsholders.”


In the age of the Internet: In the age of the Internet: content is a “free for all,” content is a “free for all,”

{which is not the same as {which is not the same as “free”“free” for all…} for all…}

for no single player for no single player controlscontrols it. it.

In the age of the Internet: In the age of the Internet: content is a “free for all,” content is a “free for all,”

{which is not the same as {which is not the same as “free”“free” for all…} for all…}

for no single player for no single player controlscontrols it. it.


What is a book publisher?What is a book publisher?

“…“…an editorial board with a bank.” an editorial board with a bank.” P. Jovanovich - 1999P. Jovanovich - 1999

What is the publishing value chain?What is the publishing value chain?

Companies to which publishers have outsourced Companies to which publishers have outsourced many of the original publishers’ functions:many of the original publishers’ functions:

- printers- printers- manufacturers- manufacturers- distributor/wholesalers- distributor/wholesalers- retailers (new, used, online)- retailers (new, used, online)


Who serves the customer?Who serves the customer?

Traditionally the bookstore (independent or chain)Traditionally the bookstore (independent or chain)

Now, who serves the customer?Now, who serves the customer?- bookstore- bookstore- online retailer- online retailer- off-shore retailer- off-shore retailer- sidewalk retailer- sidewalk retailer- publishers website- publishers website- authors website- authors website- special-interest sites- special-interest sites- widgets- widgets- search (!)- search (!)


The solution, Google says, is to give users the ability to search The solution, Google says, is to give users the ability to search and browse their own content, and receive an electronic or and browse their own content, and receive an electronic or hard copy version of the final product. hard copy version of the final product.

And that final product will (could?) include advertisements And that final product will (could?) include advertisements highly relevant to the user.highly relevant to the user.


Is this a product or a service?Is this a product or a service?

““An automobile is actuallyAn automobile is actually art, entertainment and art, entertainment and mobile sculpture, which, coincidently, also happens to mobile sculpture, which, coincidently, also happens to provide transportation.”provide transportation.” Robert Lutz, Chairman, GMRobert Lutz, Chairman, GM


Is this a product or a service?Is this a product or a service?

The Kindle's real breakthrough springs from a feature that its The Kindle's real breakthrough springs from a feature that its predecessors never offered: wireless connectivity... predecessors never offered: wireless connectivity...

As a result, says Bezos: As a result, says Bezos: "This isn't a device, it's a service"This isn't a device, it's a service."


So... is this a product or a service?So... is this a product or a service?


Moving from a PRODUCT to a SERVICE Moving from a PRODUCT to a SERVICE Orientation Orientation

Represents a change in BUSINESS MODEL.Represents a change in BUSINESS MODEL.

• The drastically changing landscape of book publishing is The drastically changing landscape of book publishing is driving the emergence of new business models.driving the emergence of new business models.

• This is not a bad thing because:This is not a bad thing because:

Business Model Innovation improves marginsBusiness Model Innovation improves margins

• • The right strategy and execution are keyThe right strategy and execution are key

• Companies should start by understanding their current Companies should start by understanding their current position, the industry and competition, and by defining and position, the industry and competition, and by defining and selecting opportunities.selecting opportunities.

• Experimentation (some failure) is the name of the game.Experimentation (some failure) is the name of the game.


Department of ‘nothing new under the sun’Department of ‘nothing new under the sun’

““Publishing Models for Internet CommercePublishing Models for Internet Commerce” ” Tim O’Reilly 6/19/1995Tim O’Reilly 6/19/1995

• • Same technology available to everyoneSame technology available to everyone• • Rich ecology of successful playersRich ecology of successful players• • Niches aboundNiches abound

“ “ A key part of what we established with Global A key part of what we established with Global Network Navigator was a brand and a subscriber list. Network Navigator was a brand and a subscriber list. The actual content is valuable -- but far more valuable The actual content is valuable -- but far more valuable is the relationship with the people…is the relationship with the people…

““In an information glut … ‘context’ is king.”In an information glut … ‘context’ is king.”

{…..‘context’ is itself a {…..‘context’ is itself a serviceservice.}.}


Installation Deployment

During the deployment phase following During the deployment phase following technological advances, we see unprecedented technological advances, we see unprecedented

opportunities and new business modelsopportunities and new business models

During the deployment phase following During the deployment phase following technological advances, we see unprecedented technological advances, we see unprecedented

opportunities and new business modelsopportunities and new business models

Irruption

The Industrial Revolution

Age of Steam and Railways

Age of Steel, Electricityand Heavy Engineering

Age of Oil, Automobilesand Mass Production

Age of Information and Telecommunications

Frenzy Synergy Maturity

Panic1797

Depression1893

Crash1929

Dot.com

Collapse

Institutional and OrganizationalAdjustment

1

2

3

4

5

Panic1847

1771

1829

1875

1908

1971

1873

1920

1974

1829

Source: Perez, C., “Technological Revolutions and Financial Capital”, 2002

Crash


Over the past several decades publishing’s Over the past several decades publishing’s focus has been product innovationfocus has been product innovation

•hard coverhard cover•paperbackpaperback•trade paperback trade paperback •mass market paperbackmass market paperback•audio bookaudio book•e-booke-book

But the work flow processes have beenBut the work flow processes have been geared to an ink-on-paper product. From geared to an ink-on-paper product. From which other formats are spun.which other formats are spun.


author creates workauthor creates work

publisher designs physical product publisher designs physical product

printer / manufacturer creates physical product printer / manufacturer creates physical product

publishers / distributor sends products to retailpublishers / distributor sends products to retail

customers can only buy what is on customers can only buy what is on the shelf.the shelf.

The legacy model is uni-directional and The legacy model is uni-directional and producer-centric ...producer-centric ...The legacy model is uni-directional and The legacy model is uni-directional and producer-centric ...producer-centric ...

... and this is breaking down due to the Internet.... and this is breaking down due to the Internet.... and this is breaking down due to the Internet.... and this is breaking down due to the Internet.


The days of yesteryear..The days of yesteryear..The “T-Word” The “T-Word”

CD-R, , CD-RCD-ROM, CD-RW, , SVSVCD, CD+G, , CD-CD-Text, , CD-RCD-ROM XA, , CD-CD-i Bridge, , CD-iCD-i


The future is curled up in the past as a hidden dimension.The future is curled up in the past as a hidden dimension.

- scientific breakthroughs are fundamentally - scientific breakthroughs are fundamentally intuitive “artistic” leaps intuitive “artistic” leaps

((Einstein: time is variable, the speed of light is a constantEinstein: time is variable, the speed of light is a constant))

- innovation requires: - innovation requires: attraction to complexity, attraction to complexity, intuition, aesthetic sensitivity and toleration of intuition, aesthetic sensitivity and toleration of ambiguity ambiguity

- - Apple, Google: Apple, Google: sensing what customers want sensing what customers want before they know they want it.before they know they want it.

The future is curled up in the past as a hidden dimension.The future is curled up in the past as a hidden dimension.

- scientific breakthroughs are fundamentally - scientific breakthroughs are fundamentally intuitive “artistic” leaps intuitive “artistic” leaps

((Einstein: time is variable, the speed of light is a constantEinstein: time is variable, the speed of light is a constant))

- innovation requires: - innovation requires: attraction to complexity, attraction to complexity, intuition, aesthetic sensitivity and toleration of intuition, aesthetic sensitivity and toleration of ambiguity ambiguity

- - Apple, Google: Apple, Google: sensing what customers want sensing what customers want before they know they want it.before they know they want it.


The digital model is customer-centric multi-The digital model is customer-centric multi-directional, and interactive,...directional, and interactive,...The digital model is customer-centric multi-The digital model is customer-centric multi-directional, and interactive,...directional, and interactive,...

author creates work - author creates work - (if desired with customer feed back via web 2.0 (if desired with customer feed back via web 2.0 exchanges blogs, wiki’s etc.)exchanges blogs, wiki’s etc.)

publisher designs product in a variety of physical and digital publisher designs product in a variety of physical and digital formats formats

publisher / printer create product (physical or digital file)publisher / printer create product (physical or digital file)

customer informs publisher of format(s), content elements, and customer informs publisher of format(s), content elements, and delivery / business model desired delivery / business model desired

publisher / distributor / retailer fulfills order publisher / distributor / retailer fulfills order

... and remains flexible across formats and will ... and remains flexible across formats and will continue to continue to evolveevolve..... and remains flexible across formats and will ... and remains flexible across formats and will continue to continue to evolveevolve..


(digital)(digital)Source FileSource File

web pressweb press digital audio file digital audio file (phone)(phone) e- e-bookbook

short runshort run pod-cast pod-cast chapter chapter (chunk) (chunk) PODPOD search search resultresult

+ citizen content+ citizen content

blogblogreviewreview

annotationannotationplay listplay list

+ new flexible business models (ads?)+ new flexible business models (ads?)


Digital prototyping: create, integrate, collaborate. Digital prototyping: create, integrate, collaborate.

This approach gives manufacturers the ability to This approach gives manufacturers the ability to explore a complete product explore a complete product beforebefore it is built it is built— — so they can create, validate, optimize, and manage so they can create, validate, optimize, and manage

designs from concept through manufacturing.designs from concept through manufacturing.

Digital prototyping: create, integrate, collaborate. Digital prototyping: create, integrate, collaborate.

This approach gives manufacturers the ability to This approach gives manufacturers the ability to explore a complete product explore a complete product beforebefore it is built it is built— — so they can create, validate, optimize, and manage so they can create, validate, optimize, and manage

designs from concept through manufacturing.designs from concept through manufacturing.

““The digital prototype is shared The digital prototype is shared among designers, engineers, and among designers, engineers, and even even customerscustomers so the (product) so the (product) can be refined earlier in the process.can be refined earlier in the process.

Why not publishers’ content?Why not publishers’ content?

A “service” transformation in design and manufacturing...A “service” transformation in design and manufacturing...A “service” transformation in design and manufacturing...A “service” transformation in design and manufacturing...


Since IBM first started experimenting with virtual worlds almost a year ago, progress has been rapid…

These experimentations are part of an IBM-led initiative to collaborate with clients and partners on both conducting business inside virtual worlds and connecting the virtual world with the real world to create a richer, more immersive Web environment - thereby solving business problems in a new way.


Context and motivationsContext and motivations

• Services becoming the new hub of most modern Services becoming the new hub of most modern economieseconomies

• Services dominating current economic activitiesServices dominating current economic activities

(U.S. Department of Commerce, 1995, p. 417)


Over the past 45 years, the US economy has doubled Over the past 45 years, the US economy has doubled from 65 million workers in 1960 to more than from 65 million workers in 1960 to more than

140 million in 2005140 million in 2005


Service dominant view

Three primary elements of service

1.Co-creation of value

2.Relationships

3.Service provisioning


Components of a work as service (formerly a Components of a work as service (formerly a productproduct, i.e. a book):, i.e. a book):

- author’s original manuscript, author’s original manuscript, - authors comments, authors comments, - parts of other related works,parts of other related works,- customer content, customer content, - social media content (added by publisher, social media content (added by publisher, author, customer),author, customer), - urls, urls, - audio/visual content audio/visual content - advertising,advertising,- ??????

Created via: web press, short run, POD, purely Created via: web press, short run, POD, purely digital digital (internet, wireless, audio)(internet, wireless, audio)


““We are aiming to integrate author-generated content We are aiming to integrate author-generated content with the author's own"book" content--through our with the author's own"book" content--through our Author Assistant and our Browse Inside applications Author Assistant and our Browse Inside applications available on harpercollins.com.available on harpercollins.com.

We think it makes the most sense for readers to have We think it makes the most sense for readers to have an an integrated experience of book and authorintegrated experience of book and author--why should --why should they have to go to one site to look at the book, and many they have to go to one site to look at the book, and many others to hear the author's voice?”others to hear the author's voice?”


Steps for service success…Steps for service success…

• • Be clear about your own business. What do Be clear about your own business. What do you want to do in the marketplace?you want to do in the marketplace?

• • Put all that aside, forget it, and listen as Put all that aside, forget it, and listen as attentively as possible to your customers attentively as possible to your customers (consumers (consumers notnot bookstores!) bookstores!)

• • Analyze what they appear to be saying, and Analyze what they appear to be saying, and what they may what they may reallyreally be saying. be saying.

• • Return to who you are, and what you do, and Return to who you are, and what you do, and rigorously, (not slavishly) change may be rigorously, (not slavishly) change may be required to create what customers want.required to create what customers want.


The image of the The image of the antisocial, sunlight-antisocial, sunlight-deprived game geek is deprived game geek is enshrined in the enshrined in the popular consciousness popular consciousness as deeply as any as deeply as any stereotype of recent stereotype of recent decades.decades.

That’s changing. Online That’s changing. Online PC games in which PC games in which thousands of thousands of players players gab and exploregab and explore togethertogether are attracting are attracting tens of millions of tens of millions of subscriberssubscribers


Getting at the customer value propositionGetting at the customer value propositionStart with the “Job”Start with the “Job”

Customer is looking for a Customer is looking for a quarter inch hole, not a quarter inch hole, not a quarter inch drillquarter inch drill

Close observation and deep Close observation and deep interactions with custo- interactions with customers can be key way to mers can be key way to

find targetfind target jobsjobs

““The customer rarely buys what the company The customer rarely buys what the company

thinks it is selling him” thinks it is selling him” - Peter Drucker -

“Kill small snippets of time

productively”

“Make sure I don’t run out of

cash”

© Jim © Jim LichtenbergLichtenberg 2008 2008© 2008 Innosight LLC

36

The ones that succeed have enough money left over to follow new approaches

On average, successful new ventures change business models four times before finding success

More than 90% of successful new ventures start off following the More than 90% of successful new ventures start off following the wrong strategywrong strategy

Success in any uncertain market requires testing, experimenting & adapting

Success in any uncertain market requires testing, experimenting & adapting

Flawed Strategy

Successful Strategy

Point of Learning and Adjustment


© 2008 Innosight LLC

37

Transformation requires changing the Transformation requires changing the game; game changers often breaker game; game changers often breaker

internalinternal rules. rules.

Transformation requires changing the Transformation requires changing the game; game changers often breaker game; game changers often breaker

internalinternal rules. rules.Established companies that Established companies that

master disruption break master disruption break internalinternal rulesrules

Established companies that struggle Established companies that struggle with disruption let with disruption let their their rules rules overwhelm the opportunityoverwhelm the opportunity

We don’t introduce We don’t introduce products on Windows products on Windows platformsplatforms

We must fit into our We must fit into our parent’s route parent’s route structurestructure

New printers must New printers must produce higher-produce higher-quality outputquality output

Our products have to Our products have to compete with the quality compete with the quality of images on silver of images on silver halide filmhalide film


……AND IN CONCLUSIONAND IN CONCLUSION

We are witnesses and midwives at the birth of We are witnesses and midwives at the birth of new business models for our industry. new business models for our industry.

Just as the economy as a whole is moving from a Just as the economy as a whole is moving from a manufacturing to a service model, book publishing manufacturing to a service model, book publishing is moving from bringing physical commodities to is moving from bringing physical commodities to market, to offering services that delivers content market, to offering services that delivers content in a variety of modalities based on consumer in a variety of modalities based on consumer choice...choice...


And as in the context of the broader economy, the And as in the context of the broader economy, the older business model -- producer creates (and older business model -- producer creates (and owns) product and determines the terms of sale, owns) product and determines the terms of sale, via distributors and retailers, to the end user, take via distributors and retailers, to the end user, take it or leave it -- is breaking down. it or leave it -- is breaking down.

Taking its place, as we are seeing, is a more Taking its place, as we are seeing, is a more flexible, if still incomplete (incoherent?) model in flexible, if still incomplete (incoherent?) model in which all parts of the supply chain, including the which all parts of the supply chain, including the customer, work together to optimize benefits.customer, work together to optimize benefits.

© Jim © Jim LichtenbergLichtenberg 2008 2008© 2008 Innosight LLC

40

Assumptions

Knowledge

Transformative opportunities are “high-assumption, Transformative opportunities are “high-assumption, low-knowledge” areaslow-knowledge” areas

Transformative opportunities are “high-assumption, Transformative opportunities are “high-assumption, low-knowledge” areaslow-knowledge” areas

Core(Incremental)

Core(Discontinuous)

Reach New Customer

Create New Market

Extensions/Derivatives Adjacencies Uncharted Territory


Moving from a PRODUCT to a SERVICE Moving from a PRODUCT to a SERVICE Orientation Orientation

Represents a change in BUSINESS MODEL.Represents a change in BUSINESS MODEL.

• The drastically changing landscape of book publishing is The drastically changing landscape of book publishing is driving the emergence of new business models.driving the emergence of new business models.

• This is not a bad thing because:This is not a bad thing because:

Business Model Innovation improves marginsBusiness Model Innovation improves margins

• • The right strategy and execution are keyThe right strategy and execution are key

• Companies should start by understanding their current Companies should start by understanding their current position, the industry and competition, and by defining and position, the industry and competition, and by defining and selecting opportunities.selecting opportunities.

• Experimentation (some failure) is the name of the game.Experimentation (some failure) is the name of the game.


Thank you.Thank you.

Questions?Questions?

[email protected]@mac.com

service innovation the path to book publishing success in the digital age presentation 1

Economy & Finance

product physical

final product

paper product

publisher designs product

business model innovation

digital model

service innovation

cd rw