The Future of Publishing: Print on Demand

I spent the weekend at BEA, networking and doing research for my new book.

On Sunday, I spent quite a bit of time visiting Lightning Source to learn about their printing model. They are the print-on-demand subsidiary of Ingram, the largest book distribution company. If you buy books from Amazon or barnesandnoble.com, your book passed through Ingram on its way to you.

Lightning Source operates plants that have digital presses capable of doing short runs (<1000 copies) at a reasonable price, down to single copies. They service everyone from the major publishers to university presses to self-published authors, helping them all produce only the copies that customers want to buy. Oxford University Press has put its entire backlist (books from earlier years) on Lightning Source, making it possible for them to keep many more books in print than they could when they had to have large print runs.

There are thousands upon thousands of new books released every year, and under the old model, few of them made money. The long print runs required to get the per-unit cost down to a reasonable level created a high barrier to entry and a ton of non-value-added waste, in its most visible forms: books printed and then pulped without ever leaving the publisher’s warehouse, books shipped to the retailer to support a major push, and then shipped back unsold, a huge remainders market for the ones that didn’t sell.

That is a lot of trees and a lot of oil being saved.

For the major publishers, this may not lower their costs all that much - marketing, editing and design still consume a lot of money and energy. An author will still need to produce a book that will justify that investment. But it does lower their risk and give them the ability to maintain much larger backlists, since the electronic files associated with them are essentially free. It replaces one of the most rigid parts of the publishing process with a flow that is much more adaptable: they can print a small number of copies, and if the book takes off like a rocket, they can make more.

That’s good news for everyone, except maybe the pulping plants.

The Importance of Failed Innovation

Scott Anderson wrote a post today: The Importance of Failed Innovation. He writes,

(O)ne way out of this problem is to increase the innovation success rate. A noble aspiration for sure. But be careful. Following that seemingly sensible path can lead to some perverse behavior.

He's right about that: fear of failure can drive innovation towards the tyranny of incrementalism, where breakthrough ideas get filtered out before they have a chance to prove themselves.

He lists countermeasures like "Lower the cost of experiments," "Change the order of experiments" and "Increase the pace of decision-making."

Of course, a well-designed set-based process that evaluates multiple options to burn down risk accomplishes all three - while also increasing the likelihood of success.

I agree with Scott that innovation needs the freedom to generate lots of ideas that fail. But if you know what your strategic objectives are going in and you evaluate a set of ideas that will meet those objectives at the same time, your likelihood of achieving the results that you desire increase dramatically - which is what we all really care about.

Million Dollar Consultant® Hall of Fame Award

I'm proud to announce that yesterday, I was inducted into the Million Dollar Consultant® Hall of Fame, the only product development or lean consultant honored to date.

Here is my citation:

Katherine Radeka: An outstanding professional in lean management and business processes, who has created significant intellectual property and become the “go to person” in her field through her highly effective promotion of her value in her marketplace.

The Million Dollar Consultant® Hall of Fame is bestowed by Alan Weiss, the original Million Dollar Consultant® with over thirty years of experience working with top companies such as Merck, GE and Mercedes Benz, and author of more books on the consulting profession than any other person. The New York Post calls him "one of the most highly regarded independent consultants in America."

Alan says, "These consultants are regarded by peers as being among the world leaders in consulting, as evidenced by empirical accomplishments in client results, professional contributions, and intellectual property."

When Alan's webmaster adds the 2009 inductees to the online roster, I will join professionals like Ed Poll, the person who knows more about running law practices than anyone in the country, Alan Fortier, a strategic planning consultant to the Fortune 50 for over twenty years, and Libby Wagner, whose Influencing Options® is one of the most practical and effective leadership workshop experiences around.

On a personal level, Alan is my mentor in this profession and a trusted friend. My clients and I have benefited from his wisdom in more ways than I can count, and I am deeply honored by this recognition.

Do Labor Laws Foster or Inhibit Innovation?

The latest MIT Sloan Management Review reports on a new study that surprised me.

Researchers Viral Acharya, Ramin Baghai-Wadji, and Krishnamurthy V. Subramanian correlated labor laws with patent and economic data to show that labor policies that make it harder to let people go seem to correlate with more innovation and greater economic growth:

Why would laws that make it more complicated for employers to let workers go have a positive effect on innovation? One reason, the authors suggest, is that such laws may make employees more willing to take the greater risks associated with attempting innovation.

I have to admit that I'm skeptical about the authors' reasoning. For one thing, the quantity of patents is not a good measure for innovation or risk-taking, although I see it used frequently. Perhaps the engineers are producing a lot of "incremental improvement" patents because they have to keep themselves busy during slow times.

You also have to look at the economic utilization of the patented ideas, and how many of the patents represented true breakthroughs vs. incremental improvements.

Personally, I'll take flexibility any day.

To Thrive, Invest More Now - Not Less

In today's workshop, the topic of the recession came up, and I learned about a research project that demonstrated that companies that advertise more heavily in a recession come out ahead afterwords - sometimes dramatically so.

McGraw-Hill Research did the study about the 1981-82 recession - the most severe we had had after the Great Depression. This study is widely available online - I chose this quote from a commentary in Arkansas Business because the author nicely summarized the findings:

McGraw-Hill Research studied the marketing spending of 600 U.S. companies during 1980-85. After the 1987 numbers were available, McGraw-Hill concluded that the companies that maintained or increased their advertising during the 1981-82 recession showed an average sales gain of 275 percent during the subsequent five-year period. Those companies that cut advertising during 1981-82 grew sales by an average of only 19 percent during the same period.

This study only looked at advertising dollars - the most short-term component of marketing. But it makes sense that if this is true for advertising, it would be true in spades for long term investments in marketing and product development.

As far as I know, no one's researched the impact of R & D investment, but I"m going to do some poking around to see if I can find one.

"Let's Choose To Be Among The Winners"

Adam Zak over at Lean Connections has a wonderful post talking about the links between lean thinking and opportunity thinking. Here's a choice snippet:

“A recession creates winners and losers just like a boom,” observed Mauro F. Guillen, a professor of international management at the University of Pennsylvania’s Wharton School in BusinessWeek. Let’s choose to be among the winners.

We get enough people thinking like this and we could all emerge from this recession much stronger than before!!

Follow Me on Twitter for New Developments at Whittier Consulting Group

I joined Twitter a couple of weeks ago, at the urging of some coaching clients, who use Twitter themselves. It helps us stay better connected.

You can follow me here: @kradeka

I go to some interesting places in the next six months: three countries, over two dozen states, six conferences and more airport club lounges than I'll care to admit (thank you, Priority Pass.) In general, I update only once or twice a day.

This week, I have some major announcements coming up about new products and services to help your company benefit from my experience and expertise to improve product development performance.

Some of these offerings will have limited capacity, and my Twitter friends will be the first to know.

Jim Womack: Lean's Origins in an Economic Crisis

From Jim Womack of the Lean Enterprise Institute in his latest email letter about lean's roots in the Japanese financial crisis of 1950:

A few [Toyota] line managers had some very simple ideas and an extreme sense of urgency: Minimize lead time from order to delivery (to free up scarce cash.) Remove waste from every step in every process (to reduce costs and enhance quality.) Take action now (because there wasn’t much time.) But what they also had – and this was critical – was a tight scientific discipline. While they did act quickly, they also took the necessary time to document the current state, to state their hypothesis very clearly, to conduct a rigorous experiment, to measure the results, and to reflect on what they had actually achieved, sharing their findings widely....Toyota's remarkable act of creation – based on a scientific process of systematic discovery – was conducted by line managers as the most important part of their daily work. And – here’s the really inspiring part – they did most of their research in midst of a fierce battle for survival.

President Obama's Chief of Staff, Rahm Emanuel, recently said, "A crisis should never go to waste."

What he meant - and what Toyota learned - is that crises have the potential to drive momentum for change. It's easy to stay with the status quo when business is booming. It's admittedly easier to freeze expenses, cut budgets and lay off staff when profit margins erode than it is to develop innovative ways to preserve and even grow the firm's human capital and stay true to the rigors of the scientific method.

Yet Toyota's example shows that is the path to sustainable competitive advantage and even greatness.

Innovation Thrives in Difficult Times

Innovation thrives in difficult times.

HP, the original garage start up, launched in the middle of the Great Depression. Television, nylon and many of the fundamental technologies that led to computers also had their beginnings in those times - partly because the times were so unfavorable to traditional business. If companies and entrepreneurs could find it within themselves to innovate then - when things were much, much worse than they are today, what's your excuse for holding back now?

The entire lean movement grew out of a severe economic crisis. In post-World War II Japan, Toyota had to figure out how to make cars when the money wasn't there to invest in mass production manufacturing processes. The creative means they developed to eliminate cash-consuming inventory from their production system became the foundations of the Toyota Production System, which became Lean.

Difficult times bring out the scrappiness - the "let's go down to Fry's and see what we can put together" spirit - that creates breakthroughs by forcing people to challenge their assumptions if they want to see their ideas come to fruition.

Right now, good people are available who were too busy two years ago. Office space is easier to get. Vendors are more willing to give good deals to secure customers. A little cash can go a lot farther.

Is this time to launch the skunkworks you've always dreamed of, but couldn't afford the distraction? Is this time to take advantage of the need to slow production to decommission inefficient equipment and bring in new green technology? What opportunities do you have now that you don't have during boom times? What can you do today that will drive your personal recovery?

If you need inspiration, here is an article from December's Wired Magazine"" Back to the Garage: How Economic Turmoil Breeds Innovation.

When Co-Brand Partners Go Bad

How healthy are your co-branding partners? If they are not healthy, what will be the impact on your customers? Add one more thing to the to-do list for shepherding the company's product lines through this downturn: watch your partners to ensure that they treat your loyal customers with the same care that you do.

JPMorgan Chase® is struggling financially, and it has decided to increase revenues by squeezing its credit card holders: increasing credit card rates and making its terms more onerous for people who either don't charge frequently or who carry a balance.

Until today, I was a happy Chase customer with two credit card accounts: one Amazon.com® co-branded account and one Marriott Rewards® account. Today, in my post office box, there was a message saying that my terms had changed: my interest rate was going up and the other changes were unfavorable to me and not competitive with my other credit card accounts. I had not done anything to trigger this action that I have been able to identify. Fortunately, they did offer an "opt out" option to close the accounts, so I took them up on it.

I know that Amazon and Marriott have no control over Chase's behavior. They have done nothing but license their brand to Chase and link up their rewards programs. But that doesn't get them in the clear.

Here is the problem for Amazon and especially Marriott: their brands are now linked with a distasteful experience in my mind. I travel at least half the time in a given month, and until now, I had preferred Marriott hotels. But the Hilton hotel across the street doesn't remind me of the hassle I had to go through to cancel my rewards credit card. That's enough to change a frequent traveler's behavior, at least some of the time, when the hotel chain can least afford to lose a loyal guest.

From news accounts, this is happening to a lot of people all over the country - the kind of people who would normally be considered model customers in normal times. Given that the people who have taken the trouble to get a hotel chain's rewards card are probably in the upper quartile of frequent travelers, this has the potential to hit Marriott where it hurts.

What safeguards are in place to ensure that your company's loyal customers will be treated well, and your brand will be protected from this sort of harm?