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thinking outside the tank

Publishing Value Influence Model

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Cometh the hour, cometh the model…

I wrote some time ago about the Value Influence Model (How’s your strategy? Does your business have VIM?) and the powerful synoptic view of a business that it can provide. Essentially, the outputs of a range of strategic analyses – STEP, SWOT, 5 forces, Boston Matrix etc., are drawn on the Value Chain as either positive or negative influences. Its power lies in the ability to visualise which parts of the business are affected by which influences.

Pradip Kumar (Head- Media & Information Services BPO at Tata Consultancy Services) posted the question recently in LinkedIn’s Tools of Change for Publishing group – Can you draw up a value chain for the publishing industry?

It’s not actually that difficult to do and one example of a value chain was soon identified. For me, that model is static, predictable, and tells you nothing about what to do in rapidly changing business environments. By maintaining a Value Influence Model you can easily add, remove, and weight influences. The model can guide your thinking about how to change your organisation to adapt to the changing business climate.

Figure 1. shows a bare bones Publishing Value Influence Model. You can see a fuller example in the earlier blog. The model shows a value chain and a number of lines emanating above and below each activity. This is where the influences are added – above the line for positive influences, below for negative.

Figure 1. Publishing Value Influence Model

My problem is that I’m not an industry insider; I don’t work for a publishing business, so I don’t have the insights of a publishing strategist – including the ability to put numbers against topics – that’s what’s needed to get the best out of the model. However, I offer below an outsider’s ‘armchair strategic analysis’ of the publishing industry.

Where might we go from there? I’m happy to make this a collaborative exercise in which, together, we identify and gauge the strength of strategic influences, and then plot them on the VIM – or you can take the ideas away and develop them yourselves.

STEP analysis

Recall that the STEP analysis looks at social, technological, economic, and political trends that are impacting, or are soon expected to impact, the business environment. Some analysts extend this to STEEPV to include environmental and ‘value’ trends, the latter relating to corporate responsibility rather than financial value.

Social Trends

  1. Are people reading less? Steve Jobs thinks so. Or are they reading more – just not books? Newsprint is dwindling; online reading is growing.
  2. Printed matter is in stiff competition against other uses for the eye and brain – TV, cinema, computer games, web browsing, mobile technology, social networking.
  3. More people than ever are writing rather than reading; they write blogs, and they write and self-publish novels.
  4. The digital natives of Web 3.0 expect everything for free (well, their parents have all the money so it’s to be expected).  Jeff Jarvis has described the emergence of ‘free as a business model’ in his book What Would Google Do?
  5. any more…?

Technological Trends

  1. Machinery, and an online business model with global scope, have enabled the creation of sites like Lulu which offer writers the tools to self-publish and market their creations. To some extent this takes talent away from traditional publishing, but it also provides employment opportunities for freelance editors and illustrators.
  2. The increasing range and availability of reading systems – combinations of hardware and software – which allow content to be viewed on screens ranging in size from the smallest smartphone to the largest computer monitor – Kindle, Sony Reader, iPhone, iPad, and a multitude of others. Potentially, these are bad news for printed books but, maybe, good news for publishing overall.
  3. Print On Demand offers the potential to save costs on logistics – delivery, collection, and pulping.
  4. More?

Economic trends (UK)

  1. RECESSION is the big influence at the moment. We may be on the way out but there is fear of a double-dip.
  2. Unemployment is rising.
  3. Disposable income is falling.
  4. Inflation is rising.
  5. Anything positive?

Political trends (UK)

  1. Government action to cut the budget deficit may involve higher taxation, further reducing disposable income.
  2. The long history of high levies on fuel, combined with environmental policies, may increase the cost of logistics. On the other hand, concern for the environment may, finally, encourage a culture of reading electronic books rather than printed ones.
  3. The legal position of the Google book project, with respect to the intellectual property of authors and publishers, is ongoing.
  4. etc?

SWOT Analysis

The SWOT analysis looks at the strengths and weaknesses of an organisation, the opportunities available to it, and the threats which it faces. The analysis is internal and external – strengths and weaknesses are internal to an organisation – opportunities and threats are external. The results of a SWOT analysis are particular to a business. Features like corporate culture and the efficiency of support systems and working processes are unique to each business and must be determined by introspection. Opportunities and threats are more general, tending to affect all businesses equally, but not necessarily. For instance a large, rigid organisation may not have the agility to take advantage of a technological opportunity, but they may be able to resist a threat more easily than a small, cash poor organisation.

The following SWOT factors may apply to a business, but only internal strategic analysis will reveal the truth.

Strengths

  1. Large businesses have economies of scale – their unit cost of production is lower.
  2. Large businesses have the ability to take larger (financial) risks than smaller businesses. So far, publishing has been all about taking the risk that the returns from producing and marketing printed content will exceed the costs. The cost structure of publishing is changing with the growth of digital workflows and electronic delivery. The rewards are also changing, negatively.
  3. Smaller businesses can more easily take advantage of technological trends.
  4. Smaller organisations can also much more easily reorganise, reshape, and resize to match the demands of their niche markets.

Weaknesses

  1. One man’s weakness is another man’s strength, so it’s possible to reverse the strengths of large businesses and call them the weaknesses of small organisations – and vice versa.
  2. What are the weaknesses of your organisation? Work ethic, motivation, ‘hygiene factors’ – you know your business better than I.

…etc.

Porter’s 5 forces model

Are they really still teaching this stuff to MBA students? My MBA study with the Open Business School was about 20 years ago (I didn’t complete the course) and Michael Porter was very big at the time. Let’s see what it shows.

Power of suppliers

The poor old content providers – writers and their intermediaries – mostly have very little power in the traditional publishing industry. There is an abundance of talent and a superfluity of hopefuls (including me). The supply of content is almost limitless. The balance is changing, with the ability to self-publish and self-market using the internet, but effectively a lot of the slush – raw, unedited content – is out there on Smashwords and Lulu.

Power of consumers

Traditionally, the power that consumers have is through their ability to dictate what gets published. If people don’t want to read it, it doesn’t make it to print. They have some influence over price – if they won’t pay it, it won’t sell. However, whereas the marketing department of the publisher understands the reader, the sales department sees Waterstones, ASDA, and Tesco. These businesses, which are giants in their field, do have the power to command discounts, and sometimes very large ones.

Ease of entry

On the web, it is now very easy and quite cheap to set up a storefront. You can become a publisher in a few days if you want to. You don’t need a large organisation because you can buy services as you need them – copy editors, illustrators, design and print services. You won’t be a threat to Penguin or Harper Collins, but they started somewhere.

Threat of substitute products

If you think you’re in the printing-on-paper industry and will stick to it come what may, you probably have a vinyl record collection and you buy 35mm film for your camera. With the exceptions of pop-up books and the glossier photographic productions, I can think of no content that cannot be delivered electronically. Digital photography and the music download must surely tell the publisher of books that change is on the way. Ebooks are the future.

However, it’s not all doom and gloom. The dross available free on the web makes it clear that the key activities in the publishing value chain are those which ensure the quality of the end-product, however it’s delivered – editing, design, proof-reading, backed by marketing to understand consumer desires. In my opinion there is no substitute for the quality control that the publisher provides.

Jockeying for position

This feature of the competitive environment is about market share, market power, and survival. In publishing, as in many other industries, size matters. Consolidation, mergers and acquisitions, these are the means by which big publishers get bigger. Smaller names disappear, and start-ups are created by those who are discarded.

Conclusions

So far this post has proposed the creation of a Value Influence Model for the publishing industry. A number of (dubious) observations have been made about publishing which industry insiders are well placed to correct. Each business really needs to personalise the model to describe its own situation. Each identified influence needs to be categorised as positive or negative, and the part of the value chain which is affected should be identified. Only then can the Value Influence Model be completed and its usefulness begins.

As suggested earlier, if you want to submit comments about the model or about specific influences or to make corrections to my analysis, please do so.

Copyright © Colin Hazlehurst, 2010

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Written by netkingcol

February 25, 2010 at 11:10 pm

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  7. Social comments and analytics for this post…

    This post was mentioned on Twitter by netkingcol: Publishing Industry Value Influence Model – a dynamic model to guide your strategy at times of rapid change: http://wp.me/ppazE-f1

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    February 26, 2010 at 5:07 pm


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