Revisiting "The Innovator's Dilemma"

What's the most impactful business book you've ever read? Mine is Clayton Christensen's The Innovator's Dilemma. I first read it many years ago and I figure now would be a good time to read it again. I must have given my original copy away, so I stopped by the used book store and picked up another for $8.99.

What was so memorable about my first read of this classic? Christensen opened my eyes to think like a startup, an innovator and a disruptor. One of the key takeaways is that many innovators chip away at the low end of the market, causing entrenched market leaders to ignore them, figuring they can have that less profitable segment but they'll never truly compete with me in the more lucrative segment. By the time the leader realizes their mistake, the innovator has already stolen much of the market and is on their way toward total domination.

OK, it doesn't always end that way but this book describes many examples of significant disruption by new market entrants. I've referred to this book countless times in my career and I'm confident the lessons it offers are as relevant today as they were when it was originally published.

I'm looking forward to starting the reading journey again on this one and I hope you'll join me. I'll be sure to share my thoughts, as well as my preferred method of book highlighting in an upcoming article. (Hint: the highlighting approach involves Evernote...)

The digital content scalability problem

Screen Shot 2018-05-20 at 3.04.46 PMWhy are ebooks still stuck in the print-under-glass model? Why haven't we seen anything new and exciting in the digital book transformation process?

Those are questions I've been asking myself a lot lately. Ebooks are convenient in that you can carry an entire library on a phone or tablet. They're also more readily available for browsing or purchase, right from the comfort of home. But the reading experience features nothing more than a digital version of the print edition.

I've spent a lot of time evaluating content transformation platforms over the past several years in the hopes that I'll discover the path forward from today's world of dumb books on smart devices. I'm disappointed to say we're at roughly the same stage as we were at more than 10 years ago when the Kindle first hit the scene.

The problem? Scalability.

There are countless books which could be greatly enriched by leveraging technology. Everything from the simple insertion of video to the addition of more interactive elements would turn a static experience into a much more memorable (and probably more effective) experience. These enrichment platforms are becoming easier to use, enabling drag-and-drop functionality so you don't have to be a programmer to create a rich user experience. However, the cost of creating these next-gen products is typically more than what the publisher invested in the creation of the original print product.

Think about that for a minute. As a publisher, you have a pretty good sense of the ROI for your next new title. Most of the variables involved operate within a fairly tight range (e.g., author advance, editing expense, manufacturing cost, sell-in level, etc.) Even the total sales, and therefore resulting revenue, are fairly predictable, within a given range. All this predictability provides the publisher with a P&L model without a lot of surprises.

Now think about asking a publisher to spend two or three times that initial product investment to create an enriched version of the same title. The product development expenses are higher, and may even result in cost overruns due to the newness of the approach. More importantly, the resulting revenue projection is a total shot in the dark. Until the publisher has created enough of these new products, they have no idea what sort of sales range to project.

Scalability should lead to better efficiencies. We saw this with ebooks; an ebook can be created today at a fraction of what publishers used to pay for the service 5-10 years ago. The same thing needs to happen with enriched content. Vendors need to have a path to a model where the transformation cost is less than half the original print/ebook product cost. If they're unable to get there, they might as well abandon ship and get into a different business.

Whatever happened to innovation in the publishing industry?

Creativity-819371_1920Remember the excitement surrounding the launch of Amazon’s Kindle eight years ago? It was a clunky device, even by 2007 standards, but it was revolutionary. One of the original Kindle’s breakthrough features was the ability to download books via cellular network. The eInk display and extremely long battery life also led to its popularity despite the device’s hefty $399 price tag.

That was eight years ago and it’s hard to name even two or three other innovations that have had as significant an impact as the first-gen Kindle. Sure, the iPad was noteworthy but it didn’t exactly reinvent reading. And while today’s devices are faster and cheaper than yesterday’s they feature incremental improvements, not groundbreaking innovations.

The same can be said for all aspects of the digital publishing ecosystem, not just devices. The most interesting development over the past few years is probably the all-you-can-read subscription model. But any momentum there has been halted as Oyster is about to disappear and Amazon’s offering has no Big Five content. FWIW, I still believe in all-you-can-read models but only if they’re focused around a topic/genre and they avoid the unsustainable business model that crushed Oyster.

Why has there been almost no innovation in the book publishing industry since the original Kindle?

As I meet with publishers I hear a lot of conservatism and anxiety in their voices. Many are just trying to survive revenue shortfalls and staff downsizings. They’re also afraid of doing anything that might be perceived as a threat to the key retailers.

I believe most publishers are relying too much on the industry leader, Amazon, to also serve as innovation leader. Given that books (print and e) represent less than 10% of Amazon’s overall revenue I’m not convinced they’re motivated to innovate. Amazon is more focused on building other areas of the business and not so much on the book industry they currently dominate. They want to protect and grow their book market share, of course, but I doubt they want to pour a lot of money into reinvention breakthroughs. Amazon didn’t invent the all-you-can-read model, for example; they simply launched a service in reaction to Oyster and Scribd.

This is why I’ve always been a huge fan of the startup community. But it seems as though there are fewer and fewer new, interesting startups in the publishing space. Perhaps it’s because techies see more upside in other industries or maybe they too are afraid of getting squashed by the dominant player. Whatever the reason, there seems to be less startup innovation focused on publishing than ever before.

One interesting development on this front is the Ingram Content Group’s 1440 accelerator program. It’s great seeing an industry leader like Ingram stepping in to help drive and encourage innovation. I plan to keep a close eye on the startups who make the 1440 cut and I hope other publishers and leaders in the publishing ecosystem will work to support and develop similar initiatives.

5 things we learned from the demise of Oyster Books

Oyster logoThe news from Oyster Books was disappointing but hardly surprising. They recently announced plans to “sunset” the service in the coming months, a fancy way of saying their all-you-can-read experiment is over. It’s unfortunate, as I believe there are both a market demand and a viable business model to be found for book subscriptions.

I’ve been an Oyster subscriber since early 2014 and have been quite pleased with the service. As both an Oyster customer and a member of the publishing industry community, I offer these five lessons from the Oyster experience:

  1. Unsustainable business models are, well, unsustainable – Oyster had to find a way to attract readers as well as publishers. To address the latter, they made the mistake of promising to pay publishers their portion of the full digital list price as soon as a subscriber read a certain percentage of the book. This percentage was set far too low, so publishers jumped at the opportunity and Oyster ended up losing money on subscribers who exceeded the threshold on two or more books in a month. Approximately 14 months ago I suggested Oyster (and competitor Scribd) were on borrowed time and that they had about 18 months to adjust or fade away. It appears at least one of them will disappear within that 18-month window.
  2. Adjusting business models is hard – Oyster tried to address the mounting financial pressure earlier this year when they announced plans to sell books as well as rent them. Even though Oyster was hardly a household brand name, the niche they carved out was clearly defined in the all-you-can-read space. It’s nice to think you can add buying to the rental model, especially when it creates one common bookshelf for the reader. The problem though is that one company already dominates the ebook selling business, so without a compelling advantage over existing models there was no reason for consumers to buy as well as rent from Oyster. 
  3. Content sampling remains broken – Everyone in the industry should applaud Oyster’s efforts to solve the content sampling problem. My wife and I share our Oyster subscription, btw. When I told her that Oyster is circling the drain her biggest disappointment is that she’ll no longer be able to explore so many new books and authors. Like many, she loved the fact that you could read part of an Oyster ebook, abandon it at any point and never feel guilty. The x% free sampling model that exists elsewhere, and sometimes barely gives you something to read beyond the frontmatter, is weak at best.
  4. Think depth, not breadth – Oyster wasn’t the first all-you-can-read ebook subscription and it won’t be the last. The ones that have thrived for years tend to focus on a particular genre or audience. They don’t try to lure customers in for the low, low price of $9.95 per month and they don’t pay publishers as though the book was sold. So in addition to working with a more viable business model, they tend to focus on a specific customer and offer enough depth to keep them engaged.
  5. All-you-can-read subscriptions devalue content – It’s true. When you’re only paying $9.95 per month to read as much as you want you start questioning the purchase price on $10 ebooks. If you’re a publisher and you already cringe when your ebooks are discounted to $9.95 or less you’ll feel even more uncomfortable participating in all-you-can-read platforms. Then again, re-read the previous point about depth and monthly pricing before you completely opt out of subscription services down the road.

It’s unclear when Oyster will disappear but I’m glad they at least warned us and didn’t abruptly shut down one morning. As I race to finish a couple of lengthy books I started a few weeks ago I’m hoping Oyster might grant a final wish to subscribers: Let us keep the books we’ve almost completed. Publishers have already been made whole on these so I’d like to think they would support the concept as well.

Blinkist and the “read less, learn more” movement

Remember the “info snacking” phrase that was somewhat buzzworthy several years ago? The thinking was that everyone was too focused on reading short bursts of content and soon no one would have the attention span to read an entire book. In fact, info snacking was one of the terms Jeff Bezos mentioned when the Kindle launched; he suggested that the Kindle would encourage more deeply engaging, long-form reading.

And now we have Blinkist. Think of Blinkist as info snacking for books. Blinkist summaries are so short they make Cliffs Notes seem like long and boring tomes.

Let’s leave fiction off the table for a moment and talk about books on business strategy, investing, management, marketing, etc. How may of those 300-page books have you finished and immediately realized the author could have conveyed the critical points in about 5 pages?

You can almost see the editor telling the author, “this is great stuff, but we need you to double/triple/quadruple the length.” That (sort of) made sense in the brick-and-mortar days when a shelf presence drove discovery but now these books feel like they’re artificially inflated.

I’ve only read a few book summaries on Blinkist but I think they’re onto something. Yes, I remember (and once subscribed to) other summary services including getAbstract and Executive Book Summaries. I always found those to be nothing more than glorified tipsheets. If you really wanted to learn the key elements of the book you still had to read the whole thing. Blinkist’s summaries are definitely superior to others that I’ve read before.

10-15 minutes is all it takes to read one of the many well-written Blinkist summaries. Have you always wanted to read The Lean Startup? Why spend hours reading 300+ pages when you can get the gist in about 10 minutes? How about Business Adventures, that classic book Bill Gates recommends every business leader read? You can knock out that summary in less than 15 minutes.

I think we can all agree that every book doesn’t lend itself to a good summary format experience. Some authors, even non-fiction authors, are wonderful storytellers. Bill Bryson is a great example. I read his A Short History of Nearly Everything several years ago and found it to be an amazing journey from start to finish. When I saw Blinkist offers a summary of that one I have to admit I cringed. That’s a book you should read in its entirety and there are, of course, countless others that should never be read only in summary format. So while there are exceptions to the summaries formula I tend to believe most non-fiction books are excellent candidates for an abbreviated alternative.

The big question I have is why aren’t publishers taking control of this model? Why rely on a third-party to write and distribute these summaries? Who is better qualified to do the job than the original author or editor? I could see publishers selling these summaries, standalone or as a subscription, direct on their websites.

We all know why publishers won’t do this though. Most publishers view this as cannibalization and replacing a higher-priced sale with a lower-priced one. That’s unfortunate but far from surprising. Smarter publishers will consider bundling the summary with the full ebook at a slightly higher price than the ebook alone. Others might find opportunities to actually charge more for the summary figuring it’s a time-saver and some readers will be willing to pay a premium for a faster read. Still others will use the summary as an upsell to the full ebook: When consumers buy the summary they also get a special, limited-time discounted offer for the full ebook.

Most will just sit and watch though. It’s a textbook example of The Innovator’s Dilemma, which, I might add, is also available as a summary on Blinkist. :-)