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On Innovation & Disruption

Baldur Bjarnason has a great post on his blog this week, Which kind of innovation? In it, he asks whether ebooks can be considered a true disruptive innovation (as per the work of Clayton Christensen’s The Innovator’s Dilemma) or whether they should be considered a sustaining innovation that the publishing industry flubbed.

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.

On Disruption
The error Baldur makes in looking at ebooks as the disruptive innovation rather than considering ebooks as part of a wider context. I would contend that ebooks themselves are simply one symptom of a much wider and radical transformation that is underway, digital creation and distribution of content.

This process has actually been ongoing for quite some time and began with the emergence of tools that digitized the back-end of the business; word processors, computers, design software, email and much more (which changed writing, editing, typesetting, design etc) and has over time moved from there towards more front facing aspects of the industry (production, distribution, selling) before starting to make a large impact on the consumer side of the industry, consumption in the form of ebooks and web-reading (not to mention making many other forms of content from music to games available to those consumers).

It is this process which is causing the disruption, not ebooks which are merely one, now obvious, fork that it enables. What’s more this process is very much a disruptive one. It enables self publishing, which Baldur points out has the potential to be very disruptive and I would argue already has been and will continue to be. It also makes real the competition between all forms of content in a very cutthroat way. Digital creation and digital distribution pits amateur against professional, curated against random, quality against crap and, probably most importantly of all, form against form and past creation against current creation. It makes accessible all things ever created (once digitized) and pits them against all other things ever created.

So yes, the ebook is just a format change, but it is not a sustaining innovation in any true sense of the word. Rather it is a symptom of an ongoing, radical and endless disruption of the creative content industry in all its guises (and one which is replicated across most industries that have an information/content/data/entertainment component which is to say, them all).

On Trade Publishing
But let us move beyond the argument of whether it is or isn’t disruptive in itself and onto Baldur’s case of why eooks are just a format change the industry flubbed. One of Baldur’s key points is this:

Unlike most disruptive innovations, ebooks were very quickly adopted by the publishing industry’s most profitable customers, people who buy the most, spend the most, and talk the most about books.

The problem here is that those consumers are not publishers’ most profitable customers, rather they are the customers of their most profitable customers, bookstores.

So when Baldur says:

Amazon’s release of the Kindle was like the iteration of the Thinkpad or the Powerbook that first made them viable as desktop replacements, not a disruptive innovation but a discontinuous sustaining one.

He needs to consider  the impact on bookstores before he can say the Kindle was a sustaining innovation. Ebooks might be just a format change but they are a format change which would, if they were adopted by a large enough group of consumers, wipe out publisher’s key trading partners. That is what makes them so disruptive to the industry even though they are only a symptom of the real change.

To ignore this key fact is to misunderstand the trade publishing industry as a whole.

Baldur also says that:

Ebooks are a sustaining technology that are being mismanaged into devaluing an entire industry (that mismanagement is a subject worthy of a series blog posts) while the true disruptors get to work in peace. (In the long run, Google is the real winner here.)

I have much to fault in this section.

First Baldur notes that ebooks have brought about a considerable devaluation across the industry (which presumably has been a boon for readers) something I question and isn’t really held up by the figures either even if you look at the most recent figures from the UK, print sales were down modestly but digital sales more than made up for it.

He rests the fault for this at the door of publishers who have flubbed the transition to a new format. BUT how else might they have acted? Ebooks threatened, and still threaten, to close  their most profitable route to market, bookstores.

The only booksellers who have successfully launched rival ebook offerings have done so only with great difficulty. Barnes & Noble has sunk considerable cash into the project and struggles to gain further traction in the US or any beyond the US, even as it has successfully spun out the entity and sucked in money from Microsoft. Kobo was started as an independent entity and recently sold by Indigo to a non-booktrade player.

If Ebooks were indeed sustaining and just a format change, we should be seeing the old order of trade publishing flourishing, we are not, our bookstores are dying. Publishers can and will survive ebooks, but their major customers look almost certain not to. Print booksellers are looking like the major casualty of a “format change” which seems to me an unlikely occurrence of that “format change” were indeed sustaining.

One thing Baldur certainly gets right about the implication of this true disruption wreaking havoc up and down the supply chain is that Google is happily egging the disruption on, but he misses that Amazon is too. if he got that, he might see this for what it is.

Go Read This | Sathianathan to head Tesco’s blinkboxbooks | The Bookseller

It will be fascinating to see if big retailers (as distinct from booksellers) can further ebook adoption. I suspect they can and probably will, publishers should be hoping so anyway:

Sathianathan said it was a good time to join Tesco and lead its digital book service. “Technology is changing how people read,” he said. “Offering a digital book service is an example of what Tesco does best – focusing on the customer and anticipating their needs as the market evolves.”

via Sathianathan to head Tesco’s blinkboxbooks | The Bookseller.

Go Read This | If you’re in marketing, kill yourself now | FutureBook

Snarky and brilliant piece on discoverability from Chris McVeigh over at FutureBook:

Discoverability is a problem for publishers precisely because it’s NOT a problem for readers. There are so many books, so many places to buy them, so many routes to the checkout, so many subtle nudges towards choosing a title – the fact is, what remains is that publishers need to find some way of getting their products in front of potential customers.

The problem with the discoverability debate is that it’s often been framed the wrong way around. The real discoverability problem for publishers is how to they can discover their audience, not the other way around.

via If you’re in marketing, kill yourself now | FutureBook.

Go Read This | Amazon Is Not A Commerce Company

Fascinating stuff:

One common element ties Amazon’s online retail, cloud services and foray into the tablet market: data. For Amazon, the hardware does not matter. The goal is not to make margins on selling fancy consumer hardware and expensive equipment. Through efficiency, Amazon can experiment in retail, publishing and its enterprise service offerings.

I still have my doubts, though.  AWS is not infallible. Its repeated outages have given its competition plenty of room to differentiate against AWS.  And low margins do not necessarily mean success. It impacts revenues and its overall stock price — factors that can’t be ignored.

via Amazon Is Not A Commerce Company | TechCrunch.

Go Read This | The Biggest Lie in Publishing | brett sandusky

Great post from Brett Sandusky here. I disagree with some of it, but the main thrust I agree with very much:

What I hope will be coming down the pike is not just an acceptance of direct-to-consumer as an necessary channel, but what I’ll call for now the curated distribution experience. Right now, we take so much time to polish our content and our products, and then we just throw away. All this content curation we’re doing or at the very least talking about makes no sense at all if we simply hand over the UX ownership to retailers and their locked devices. In fact, not owning the whole customer experience with regards to digital has basically reduced us to little more than book packagers for our retail partners. And, we’re not even getting paid for it.

via The Biggest Lie in Publishing | brett sandusky.

Why Storia Is Important

You may have read this piece (or one of the several pieces on the topic) yesterday or this morning:

Storia is in beta now and available for Windows PC through the website; an iPad version is coming later this month. The app itself is free and comes with five free e-books. A store contains over 1,000 other children’s e-books—many available in digital format for the first time—that can be sorted by grade level, reading level, age and character/series.

When the app officially launches in the fall, it will contain over 2,000 titles, reports the AP, “that can be bought directly from the publisher or from retailers.” But the Storia website also says, “Since Storia eBooks come with special features to enhance your child’s reading experience, Storia eBooks can only be read on the Storia eReading app.” I’m clarifying this with Scholastic—if these books are essentially apps that won’t be sold through e-bookstores like Kindle and Nook, that is certainly noteworthy.

via In Major Digitization Effort, Scholastic Launches E-Reading App For Kids | paidContent.

It is  a pretty interesting move and one that I am not surprised by. The shift by Apple some time go makes this kind of move very attractive to publishers of large lists, as I wrote some time ago Apple has created an opportunity in the App space for publishers:

Apple’s more recent decision to enforce tough rules on in-App sales of content has been less popular. It has forced Amazon, Google, B&N and Kobo among others in publishing and other creative industries, to change their Apps to disable links to their ebook or content stores. Further it made it impossible for an ebook retailer to sell an ebook through the Apple in-App purchase system without giving 30% to Apple. Nasty eh?

The opportunity this created and that everyone missed , even me (till this weekend when it dawned on me), is for publishers to go direct to consumers and launch their own apps selling ebooks to readers.

Think about it, ebook retailers cannot make money from selling ebooks via Apple’s in-App sales because their margins simply won’t stretch that far. In the case of Agency titles they would be losing money, even on self-published works they might be losing money. However, a publisher, selling direct through their own app, or even a branded app in partnership with a number of other publishers in a given genre, could easily afford the 30% charge and even an administration charge too so long as it was kept low.

Apple has shifted the economics of the App-economy to disintermediate the distributors and empower the content producer. Sure, in doing so they have gained power and revenue potential for themselves, but they have created an opportunity for a savvy publisher who has a brand that readers identify with.

I would expect to see more of these from larger publishers as well as specialist ones (Witness for instance Amber Books’ Military History app). They make sense and they will hopefully sell books.

The question is whether they lead to the building of relationships with readers, a crucial gap in what iOS offers publishers. That lack of customer data was reportedly one reason why the FT eschews the app store for their own HTML based apps and subscription options.

There are many angles to cover and such apps can only form part of an overall strategy but I think Storia suggests large publishers are looking for opportunities and acting when they seem them!

Eoin