As someone in the retail channel for physical books, it might be hard to believe that book retailers have much to offer publishers in the way of advice about digital. Indeed, many have already written the physical channel for books off as a quaint piece of history about to go the way of record stores and newspapers. That does not have to be the case. Most of us would not give up our light bulbs for candles, but candles do still have a place. So too, retailers (and in my case, collegiate retailers – i.e., college bookstores) have great opportunities to be the purveyors of light bulbs and candles, digital and print. That is also true for publishers and those opportunities are ours to win or lose as we approach the future. Those of us thinking about that future have spent a great deal of time scanning the environment and talking with our customers (who are also your customers), and some of our observations might prove useful to publishers as well as the channels they use.
Observation 1: You can learn things from books.
Yes, a bit obvious given this audience, but sometimes the best observations are hidden in plain sight. As a former faculty member with interest in how organizations respond to large-scale technology-based change, the pending transformation of publishing and related industries is fascinating. Of course, I turn to books to try to help understand the trends and changes we are observing. In this case, I am thinking specifically of a particular book – Mastering the Dynamics of Innovation by James Utterback (Harvard Business School Press, 1996). This book may perhaps seem dated by publication year, but few references are more relevant to the forces affecting our industry today. I will use some of the concepts from Utterback’s book to frame some of my subsequent observations.
Observation 2: Seeing waves of innovation for what they are.
Utterback talks about innovation occurring in waves across phases. There are two key waves: product innovation and business model innovation. Typically, product innovation occurs first. A new product or technology innovation emerges. As the product matures, companies tend to replicate and expand on the core features that consumers like. To gain critical mass for adoption, as well as economies of scale for suppliers, we begin to see the emergence of standards, and ultimately what might be seen as the “dominant design” upon which the emerging technology or product category is based.
The second wave of innovation focuses on business model innovation. In other words, once we have a better sense of the emerging product or technology, what business models will make that technology commercially successful? This is the window of opportunity for traditional and new players in a market to seize upon an emerging technology and define the future channels. The battle at this point is about market share – gaining enough share of mind and market to direct standards, business models, and shape the new channel for the emerging product.
Observation 3: We see the shift from one wave to the next.
E-readers are converging on a pair of dominant designs: the e-ink, dedicated reader device represented by examples like the Kindle or the Sony Reader; and, multi-function devices, perhaps best represented at this moment by the Apple iPad, or comparable devices like the Entourage Edge or the Kno tablet. With each of these technologies we see migration toward a standard set of features that replicate or enhance the intended reading experience over print books. At the same time we are seeing movement toward standard formats for e-books, such as EPUB.
Over the past six to eight months in particular we have observed a shift away from companies talking about their devices, and instead talking more about their platforms. The companies are as interested (or sometimes more interested) in selling the content than selling the device. As a dominant design emerges among content formats and device capabilities, they tout device agnosticism and push their platform as the business model of choice for capturing the customer flag. We are seeing the late stages of early device wars, and the first volleys of the platform wars.
Observation 4: Sometimes it takes a long time for change to happen quickly.
The emergence of a dominant design is critical. Typically it precedes the rapid adoption of a technology by the early majority of consumers. This point is sometimes referred to as the “knee of the curve” or the point where compound exponential or geometric growth begins to produce real numbers. More importantly, it usually immediately precedes the definition, or redefinition, of the channel and signals to the market that there is a defined window of opportunity. In other words, if you see a window of opportunity spanning the next five years, you do not want to wait four years and 11 months to do something about it. If you do it will be too late and you will have lost all potential market share in the channel to someone else. It is this point in the emergence of e-readers and e-books that we are seeing today.
Publishers, as suppliers of content to emerging platforms, have immense opportunity at this point in time to drive future business models and define their future distribution channels. That opportunity is not on a limitless time horizon. We must pick our partners wisely. We must experiment and pilot, and learn as much as we can, while still acting in a sufficiently expedient manner to have influence over and in fact shape our futures – whether as publishers or retailers, new entrants or incumbents. Our collective choices over the next few years are likely to have strategic implications far beyond our individual organizations. That is one window we cannot afford to leave closed.
Dr. Mark R. Nelson is the Digital Content Strategist for the National Association of College Stores (NACS), and VP for Strategy and Development for NACS Media Solutions. You can follow his blog on Course materials, Innovation, Technology, and Education (The CITE) at thecite.blogspot.com.