Why disruption goes unchecked

Good advice goes counter to established common sense

A few months ago, while I was filling an unexpected surplus of free time, I asked myself the following question:

—Hypothetically, what would your advice be if a medium-to-large publishing company came to you asking how they should handle the shift to digital?

On face value, this is an easy question with an easy answer because the literature and research tells us exactly what they should do.

Kevin Charman-Anderson, in an excellent blog post on the impact of digital on news organisations, outlines the answer neatly:

In April, I heard Gilbert speak at the International Symposium of Online Journalism in Austin about how he has applied the insights from the Innovator’s Dilemma to the Deseret News in Utah, and he laid out why integration was absolutely the wrong approach to disruption.

“In industries that are being disrupted, 9 percent of companies make it,” he said. Of the 9 percent that made it, 100 percent had set up a separate disruptive business unit.

Clayton Christensen, Clark Gilbert, and a host of others have established with a fair amount of certainty that there is only really one effective way to respond to a disruptive innovation. The incumbent needs to create a new business unit that is insulated from the rest of the company. The reason for the need for insulation is that existing business values are exactly what prevents the company from responding adequately to a disruptive innovation. The company prioritises existing business relationships over unproven new ones and existing processes over those with little testing and so, unless the new business unit is properly protected from the legacy business, the incumbent’s response to the disruption will always be compromised.

The problem, obviously, is the same issue that holds back every incumbent response to disruptive innovations: the best tactics for the new context go counter to common sense established in the old context.

A few examples from publishing:

• Separating digital from the rest feels like spinning paperbacks back out into their on business units, a step back in the ladder of progress.

• Having a firewall between print production and ebook production might compromise quality and result in an ebook that’s out of sync in some way with the print product.

• Print and ebooks should be a part of a unified strategy. Ebook pricing should be set with print in mind.

• ‘We tried separating ebooks out from print—we outsourced it to a company in India. It didn’t work.’

• ‘We’re getting the hang of producing ebooks. Our QA processes hold them to a higher standard than anybody else. Our processes are top notch and well integrated into our Indesign process.’

The problem with all of these responses is that they assume that ebooks are the disruptive innovation and the extent of how book publishing will be affected by digital. I don’t think they are—not if you take them on their own. Digital on the whole—the web, apps and ebooks—are the disruption. (Yes, this is a refinement on my earlier thoughts on the issue based on feedback and pushback I’ve received.) Only focusing on ebooks is like facing an army and thinking you can pick which soldier you want to fight while ignoring the rest.

I think the web and apps are going to be more disruptive in the long run than ebooks. Today, they are targeting the low end and less profitable niches in publishing:

• Subscription sites for specialised, high value, fields (photography, wine-tasting, investment).

• The integration of tools with content (e.g. birdwatching apps, travel guide apps).

• Niche artists that use Mike Masnick’s Connect with Fans and then give them a Reason to Buy (e.g. Thrillbent and too many web cartoonists and musicians to count).

Most of these tactics start with little to no investment and then iterate in response to feedback from their customers. These new entrants also sometimes combine approaches, e.g. both a subscription site and an app, both free website (CwF) and ebooks (RtB). They are often considered to be low quality, unprofessional, or even just plain rubbish by the publishing industry.

This should not be your response to the above list:

—None of those tactics work in my bit of the world so I’m safe

This should be your response:

—That’s a scary variety of approaches. Digital seems to come up with a tailored business model and approach for every market segment.

Don’t assume that the tactic a new digital competitor would use against your segment is going to be one of the existing ones.

Because that’s what digital has over print. There is no one fixed way that digital has to use to address a particular market segment. Print has only one solution for every problem: a book. In digital you can choose the most appropriate medium (ebook, web, app, all of the above) and the most effective business model. Publishers only offer two solutions (ebooks and print) and one business model (sell the damn thing).

This has already begun to affect existing publishers in minor ways. I know of one example where what was in my opinion the most effective tactic for that genre (subscription website) was taken off the table before the conversation even started. Why? Because one of the authors was already running a subscription website in that niche and they were doing it much much better on their own than the publisher ever would have.

Like I’ve said before:

It’s unrealistic to expect profitable niches to remain uncontested.

That competition won’t be coming from other publishers but from your own authors, self-published authors, web and app developers, tech companies, and specialists looking to capitalise on their expertise without involving a middleman.

They won’t be held back by established best practices and they won’t have to worry about complementing or integrating with a print process.

Aside on ebooks

The role of ebooks in this is, I think, going to be interesting. Ebooks are an excellent complementary product. They are relatively easy to produce as long as you don’t buy into existing tools within the publishing industry (namely Word and Indesign). Making an ebook can be incredibly easy if you aren’t making a print product in tandem (e.g. step one: write in Scrivener, step two: compile to ebook). They are cheap to distribute and sell (hosting is dirt cheap, most ecommerce solutions support them with ease, only four to five major ecommerce outlets). They make an excellent Reason to Buy for a variety of creators and fields.

However, they are extremely limited as a primary product. Their design capabilities will be limited for years to come, even if EPUB3 does get properly implemented. Apps and devices based on old versions of Adobe RMSDK will be around for years, if not a decade. Old Kindles will remain in substantial use for what will seem like an eternity. For a very long time it’s going to be very difficult for anybody to roll out an ebook with ambitious design and interactivity while still retaining the ebook’s biggest advantages (cheap production, wide reach). They are bound to one very limited business model (unit sales), one that seems to becoming less and less relevant in the digital age. They are bound by a tight vertical integration in separate stacks (the Kindle stack, Adobe stack, Readium SDK stack). Their silos prevent integration into other products, apps, or websites.

Even in the publishing industry context, ebooks add the most value when they complement something else:

1. Print and ebook bundles.

2. Synced ebooks and audiobooks.

3. An economically efficient replacement to paperbacks that compliment hardcovers nicely, price-wise.

On the third point, the optimum for print would be a four-layered price stack:

1. Expensive special edition hardcover.

2. Just a hardcover.

3. Hardcover plus ebook at the same price as a hardcover on its own.

4. Just an ebook.

This would almost certainly result in a sales increase for hardcovers as the bundle would suck up a lot of ebook sales. The two layers above the bundle would make it look like a really, really good deal.

In short: ebooks are a complementary product that work best when the primary value is created elsewhere.

Edited to Add:

Suw Charman-Anderson wrote a blog post prompted by the same piece but focusing on the parallels between news media and the publishing industry. Recommended.