Latched onto that argument was the observation that despite all of the changes the publishing industry has seen over the past few years the actual shape of the market hasn’t changed that much.
Amazon was the dominant force in the market before ebooks. Indigo, Kobo’s former parent company was a dominant force in Canadian book retail. Barnes & Noble were number two after Amazon in book retail.
We’ve lost Borders but the new top dogs are very much industry incumbents that predate the arrival of the Kindle. They are not scrappy disruptive startups.
Now, one of the major counterarguments to my spiel is that the industry has actually changed a lot and that change was caused by ebooks. The most eloquent of these counterarguments was made by Eoin Purcell
It’s a great question and he supports it well, but I think he’s wrong in his assessment for a number of reasons. Firstly his premise is mistaken, ebooks are not the disruption, merely the manifestation of the disruption (of which more below) and secondly even if we are to accept his categorization of ebooks as the disruption/sustaining innovation, he misses a key point about the nature of the trade publishing industry that undermines his argument.
He makes a lot of good points and you should definitely go read it before you read further.
I actually agree with a lot of what Eoin is saying. The points he makes are quite good. And I do agree with him that booksellers are being disrupted by ebooks which in turn is making a hash out of many major publishers (mainly mid-sized publishers, as I understand it, the big ones and the small ones are, as recent industry numbers demonstrate, doing all right).
That still doesn’t mean I was wrong in my earlier post. If you think that, then the fault is mine for not explaining myself properly.
So, how can I both agree with his major point and still claim that my earlier points were right?
- By being a pedant (if X doesn’t have the characteristics associated with group Y then X is unlikely to be a member of group Y) and…
- Because the timeline of events is wrong.
First, my pedantry.
A disruptive innovation has a very specific set of characteristics as described by Clayton Christensen (I quoted bits of his explanation on this in my earlier post).
The reason why it has these characteristics has to do with how he discovered the phenomenon in the first place. Namely, these were changes in the market that not only did not take the incumbents by surprise but were often often first invented by the incumbents themselves. These companies then, for sound business reasons, decided not to develop these innovations, letting smaller startups build on them and grow in such a way that those startups often ended up replacing the incumbent.
These were well-run companies, managed by competent, experienced, and smart people, with plenty of capital, and they still got rumbled by this new thing, a thing they had often first invented themselves, no less.
For this to happen the disruptive innovation had to have characteristics that let it fly under the radar of the incumbent corporations and let the startup grow and develop without interference. Which is what Clayton Christensen discovered.
The specific characteristics of disruptive innovations are exactly what caused them to disrupt a well-run, well-capitalised, and healthy competitor. If a new product in the market doesn’t have these characteristics then it isn’t a disruptive innovation as defined.
I argued in my earlier post that ebooks have very few of these specific characteristics (read the post for details) and so they must be something else. I argued that they fit Clayton Christensen’s other type of innovation, a sustaining one, much better. Ebooks were developed by a major incumbent to further its core business, which is basically how Christensen defines a sustaining innovation. (No matter how loudly people shout, Amazon was a dominant force in the publishing industry before it released the Kindle. They are and were then the very definition of a publishing industry incumbent. It’s been years and years since it was a scrappy startup.)
Despite all of the above, ebooks can still be disruptive and, as Eoin argues, they probably are.
I’m going to repeat myself, so pay attention:
The specific characteristics of disruptive innovations are exactly what caused them to disrupt a well-run, well-capitalised, and healthy competitor.
If ebooks, which aren’t a disruptive innovation as defined by Clayton Christensen, are disrupting incumbent businesses then we’ve either discovered a completely new type of disruptive innovation (unlikely) or these companies weren’t well-run, well-capitalised, or healthy before ebooks came onto the scene.
Given the state that booksellers were in before ebooks arrived, I think there’s a strong case to be made that they were very unhealthy businesses.
The timeline of bookseller crises worldwide doesn’t fit the thesis that the crises are caused by ebooks. They may well be exacerbated by ebooks, but ebooks are more playing the role of the pneumonia virus killing an AIDS patient than they are a lethal pathogen on their own.
For example, throughout the 2000s, booksellers (in fact, the entire offline retail sector) have been facing problems in many countries. Borders UK collapsed in 2009 but Amazon didn’t launch the Kindle UK store until mid–2010. Ebooks simply didn’t have enough of a presence in the UK for them to be the cause of the crises Borders, Blackwell, and Waterstone’s had been facing prior to the 2010 launch.
Healthy businesses quite simply aren’t rumbled this quickly by a change in the market. Even disruptive innovations take time. Ergo, booksellers were a dying business even before ebooks entered the market.
So, why weren’t these businesses healthy enough to respond to ebooks? My theory is that they had already been struck a terminal blow by online retail well before ebooks first made their stab.
Notably, the first to fall, Borders, was exactly the bookseller that had tried to stay out of the online retail business entirely by outsourcing it to Amazon.
Somebody who is unhealthy and whose body is failing can die from a rough and sudden sneeze. That doesn’t mean that the sneeze is the cause of death.
—But aren’t ebooks a part of a major society-wide shift to digital media?
Sure. But that doesn’t mean that print and selling printed books can’t still be a good business. Books aren’t music or movies. The book artefact has a much longer history and it will take a lot more for it to be displaced completely. I seriously doubt that ebooks will ever drive print out of the market. Unlike its digital video and music counterparts, ebooks are going to coexist with print for a long time.
Let’s imagine that online retail had never taken off and ebooks had come in 2007, launched by a major incumbent or a bookseller, and over the next few years taken 30–40% of the market. Let’s imagine that the market had transitioned directly from solely offline retail to a mix of offline sales and digital downloads.
First of all, booksellers would have had much greater resources to combat ebooks. They would have had a much easier time of both presenting the value of printed books and capturing that value (instead of losing print sales to Amazon). They would also have been healthy, well-capitalised businesses with the resources to properly enter the ebook market. We would have almost guaranteed seen print/ebook bundles as a standard offering.
Booksellers were blindsided by online retail because online retail is one of the canonical examples of a disruptive innovation. It has all of the characteristics of its species. That’s what disruptive innovations look like. But the industry should have been able to deal better with ebooks, and it’s my belief that booksellers would have if they hadn’t been weakened by online retail.
That still doesn’t answer the question why publishers (that is, not booksellers or authors) haven’t managed deal well with the arrival of ebooks.
My pet theory on that is that they have let themselves be held hostage by a couple of software companies: Adobe and Microsoft. Almost all of the process problems publishers face when dealing with ebooks can be traced to the fact that they have locked themselves and their processes into using Word and Indesign. Two tools that are not and will never be suitable for purpose once you add ebooks into the mix.
Few other industries of this size let this sort of tools monopoly hijack the market. I still have no idea why anybody finds the Word-Indesign status quo acceptable.
While I don’t think ebooks are a disruptive innovation, I do think the web and apps are potential disruptive innovations for the media industries. Hence my Google remark in my earlier post.