Disruptive Innovation

Why e-readers succeeded as a disruptive innovation in the US, but not in Japan

7 March 2017

From The London School of Economics Business Review:

The concept of disruptive innovation has captured the attention of executives around the world. As explained by Clayton Christensen, a disruptive innovation is initially seen as unattractive by mainstream customers and by the leading firms who serve those customers. Eventually, however, those firms lose their leadership positions to new entrants who are willing to develop and improve the innovation in ways that make it more attractive to mainstream customers.

. . . .

One intriguing example of a bundled disruptive innovation is the e-reader. Many American consumers responded enthusiastically to Amazon’s introduction of the Kindle reader in 2007, in part because, in a relatively short amount of time Kindle customers were able to choose from hundreds of thousands of titles. In contrast, Japanese e-readers introduced both before and after the U.S. Kindle launch received a lukewarm response from Japanese consumers.

One obvious explanation was the relative lack (compared to the US) of best-selling novels and other popular books in e-book form. To try and understand the reasons for the disparity in e-book availability between the U.S. and Japan, we interviewed key figures from both the American and Japanese book industry. Our research revealed a number of interesting insights, which we organise into three categories: organisational, environmental and technological factors.

. . . .

In part, the limited availability of e-books in Japan reflected industry perceptions of Amazon’s critical role in the success of the Kindle. Our informants did not believe any single Japanese company could play an Amazon-like role in Japan, in the sense of developing a Japanese e-reader and securing a supply of hundreds of thousands of e-books for that reader. For this reason, publishers and retailers were unwilling to invest large amounts of money developing e-book editions of popular Japanese books.

The availability of Japanese e-books has also been influenced by the interdependence among book retailers, wholesalers, and publishers in Japan. Japanese wholesalers were most likely to be hurt by the introduction of e-books. Publishers and retailers were heavily dependent on the two major wholesalers for sales of paper books. These concerns were amplified by pricing concerns. In Japan, publishers had the legal right to set the prices of paper books, which eliminated price competition for new books. Although the resale price law does not affect the pricing of e-books, Japanese publishers worried about the potential impact of e-book discounting on the performance of wholesalers and other industry players. For this reason, many publishers were reluctant to offer discounts on e-books, despite the success of Amazon’s aggressive discounting in the US.

. . . .

Another factor that emerged in our research involved differences in the perceptions of Japanese and American consumers. Amazon marketed the Kindle as a “library in one’s pocket.” A number of our informants believed that Japanese readers place less value on this benefit because Japanese publishers already sell paperback books in a size that fit easily in a jacket pocket, and book stores are conveniently located within or near major train stations.

Link to the rest at The London School of Economics

Target’s Painful Lesson: Low Prices Beat Hip Products

1 March 2017

From The Wall Street Journal:

Target Corp.’s chief vowed to invest billions to lower prices and remodel hundreds of stores, an admission that the retailer’s focus on trendy merchandise wasn’t enough to attract shoppers.

Chief Executive Brian Cornell defended his brick-and-mortar-centric strategy Tuesday after Target reported sales and profit declines for the holiday quarter, and gave an even gloomier outlook. The company said its 2017 profits would fall as much as 25% below what Wall Street had forecast.

The warning sent Target shares skidding 12% to $58.87 in Tuesday afternoon trading. The shares have now erased nearly all the gains since Mr. Cornell took the reins in August 2014 in the wake of a massive customer-data breach.

. . . .

The changes come more than a year after rival Wal-Mart Stores Inc. began pouring money into revamping its stores, lowering prices and expanding its e-commerce operations—changes that reversed a sales slump. Target has also been squeezed by the expansion of Amazon.com Inc., which shares many customers and products with Target.

. . . .

Analysts at Credit Suisse said the retailer essentially admitted it has pursued a flawed strategy to avoid competing on price. “The announcement represents confirmation of the company’s difficult position and it’s unclear if there is a winning strategy at this point given how far behind it is from competitors like [Amazon] and even [Wal-Mart] now.”

. . . .

Analysts predict that Target will continue to lose market share to Amazon and other online sellers if it doesn’t do more to adapt to the digital age. In a recent study, Goldman Sachs found that Target customers are more likely to have an Amazon Prime membership than those of Wal-Mart and other discount retailers.

Link to the rest at The Wall Street Journal (Link may expire)

Brave New Booksellers: The Rise of E-reading

20 February 2017

From CKGSB Knowledge:

On November 18, 2007, the book business looked more or less the way it had for decades: an industry dominated by a handful of conglomerates that produced a set of products that hadn’t changed much since the 1940s and distributed those products through a familiar set of sales channels.

The next day, Amazon introduced its Kindle e-reader and everything changed. Not all at once, of course – the Seattle company’s first e-reader retailed for $399, and after selling out in 5.5 hours, remained out of stock until April 2008 – but over the next few years, the numbers grew at the same pace with which many digital innovations, from the Internet to social media, have taken off: by 2014, half of all Americans owned either an e-reader or a computer tablet, and 28% had read an e-book in the prior 12 months, according to a survey by the Pew Research Center.

All over the world, a similar shift has been underway – slower in markets where bookstores and book sales are regulated, such as France and Germany; faster in more open markets, such as China, where more than 2 million digital book titles are now available and nearly half (44%) of all books sold are sold online, according to a report by German Book Office Beijing.

. . . .

So was publishing’s digital revolution just a successful format change, like the invention of the paperback in the 1940s? Not entirely. Digitalization has also driven a much more profound story about how books are made and sold. From production to distribution, virtually every aspect of the publishing business has changed over the past decade.

To begin with, thanks to e-books and print-on-demand technology, the actual process of printing a book has changed. David Kudler, a small publisher in the San Francisco Bay Area, says that e-books and print-on-demand technology have been transformative. “When I first got into publishing, printing was real simple. You got the book ready about six months before you wanted it to go to press, and you sent it off to China – that’s where the good presses were and that’s where the people who knew how to really put together the book were. And whether you were in Europe or in North America you waited the six months that it took for that book to show up in the stores again.”

The growth of e-books and publishing on demand also helped drive changes in how books are sold. In the US, physical bookstores now represent roughly a quarter of all book sales. Since 2007, US brick-and-mortar bookstore sales have fallen from $17 billion to $11.17 billion in 2015, according to US Census figures. All told, 69% of US books are sold online, according to AuthorEarnings.com.

Link to the rest at CKGSB Knowledge and thanks to Dave for the tip.

What News-Writing Bots Mean for the Future of Journalism

17 February 2017

From Wired:

When Republican Steve King beat back Democratic challenger Kim Weaver in the race for Iowa’s 4th congressional district seat in November, The Washington Post snapped into action, covering both the win and the wider electoral trend. “Republicans retained control of the House and lost only a handful of seats from their commanding majority,” the article read, “a stunning reversal of fortune after many GOP leaders feared double-digit losses.” The dispatch came with the clarity and verve for which Post reporters are known, with one key difference: It was generated by Heliograf, a bot that made its debut on the Post’s website last year and marked the most sophisticated use of artificial intelligence in journalism to date.

When Jeff Bezos bought the Post back in 2013, AI-powered journalism was in its infancy. A handful of companies with automated content-generating systems, like Narrative Science and Automated Insights, were capable of producing the bare-bones, data-heavy news items familiar to sports fans and stock analysts. But strategists at the Post saw the potential for an AI system that could generate explanatory, insightful articles. What’s more, they wanted a system that could foster “a seamless interaction” between human and machine, says Jeremy Gilbert, who joined the Post as director of strategic initiatives in 2014. “What we were interested in doing is looking at whether we can evolve stories over time,” he says.

. . . .

It works like this: Editors create narrative templates for the stories, including key phrases that account for a variety of potential outcomes (from “Republicans retained control of the House” to “Democrats regained control of the House”), and then they hook Heliograf up to any source of structured data—in the case of the election, the data clearinghouse VoteSmart.org. The Heliograf software identifies the relevant data, matches it with the corresponding phrases in the template, merges them, and then publishes different versions across different platforms. The system can also alert reporters via Slack of any anomalies it finds in the data—for instance, wider margins than predicted—so they can investigate. “It’s just one more way to get a tip” on a potential scoop, Gilbert says.

The Post’s main goal with the project at this point is twofold. First: Grow its audience. Instead of targeting a big audience with a small number of labor-intensive human-written stories, Heliograf can target many small audiences with a huge number of automated stories about niche or local topics. There may not be a wide audience for stories about the race for the Iowa 4th, but there is some audience, and, with local news outlets floundering, the Post can tap it. “It’s the Bezos concept of the Everything Store,” says Shailesh Prakash, CIO and VP of digital product development at the Post. “But growing is where you need a machine to help you, because we can’t have that many humans. We’d go bankrupt.”

Link to the rest at Wired

The New York Times wants to save itself by becoming like Netflix

16 February 2017

From recode:

You probably know someone who makes sniping remarks like: Old media is dying! They were too stupid to notice the internet! They’re snobs and stuck in the past!

The real story is much more complicated, journalist Gabriel Snyder said on the latest episode of Recode Media with Peter Kafka. In the latest issue of Wired, Snyder wrote about how one of the highest-profile media companies in the world, the New York Times, is “claw[ing] its way into the future.”

“The reason old media companies have so much trouble adapting is not because they don’t know what to do or even that they should do it, it’s [that] the internal politics of it are so difficult to navigate,” Snyder said. He noted that career advancement at the NYT is a “slow-moving treadmill” that rewards loyalty over fresh ideas.

And that’s not to mention the more obvious, public face of the newspaper’s struggle: Where the money comes from.

“Even today, the vast majority of the revenue comes from old streams at the New York Times,” Snyder said. “It comes from the print circulation, even their print advertising. The industry fell off a cliff last year, but it still generates a lot of money. You can’t just turn that off, and if you do, it’s at your peril.”

The NYT initially tried to convince readers to subscribe to separate products based around opinion columns, daily news, crosswords and cooking, but each of those was met with “varying levels of un-success,” Snyder said. So, instead, it’s now thinking it can emulate the Netflix, HBO or Amazon subscription model — packing more and more into one subscription product to increase its perceived value.

Link to the rest at recode and thanks to Joshua for the tip.

PG says the best way to succeed during an era of continuing disruptive innovation is to increase actual value rather than attempt to increase perceived value.

Perceived value sounds like a desperate idea from marketing.

Digital Book World Indie 2017 Wrap-Up

24 January 2017

From author Ron Vitale:

The state of indie publishing is in flux. Is print coming back? Are indie authors losing sales? And with the rise of more competition from traditional publishers, what is an indie author to do?

Based right outside of Philadelphia, I took the train up to New York and went hoping to find answers at Digital Book World Indie 2017. Truth be told, one of the main reasons why I went was to hear Data Guy talk in the Tight Insights: The Indie Universe Quantified session. I wanted to see his data on the big screen. I could have listened to him for hours.

. . . .

How are indie authors going to compete and thrive against huge conglomerate corporations? At the end of the first session, Porter Anderson reminded all of us that when photographers needed to streamline their services, they came together to form a co-op. Professional services (developing the film, marketing, etc.) could be provided by reputable and vetted individuals while the photographers could stay out longer in the field, shooting. Anderson, in his understated way, turned to the audience and said, “Now it’s all on you.”

The biggest take home message from Digital Book World Indie is so simple that I almost missed it while preparing for the next talk. When we as indie authors unite, we have strength. We are the sum of our individual skills.

. . . .

While I sat in the conference room listening to the talks, I had my phone out, sharing information with members of a private Facebook group. And throughout the day, I kept checking in on Michael Anderle’s 20BooksTo50K Facebook group. I joined the 20BooksTo50K group back in December when there were 1,200 members. Less than a month later, there are more than 3,450 members. Fellow indie authors who are sharing their launch plans, screenshots from their sales dashboards, asking for advice on covers they are having designed and talk through the most in-the-weeds details about email lists.

. . . .

The mismatch between the experts at the conference and the brain power available from within the room itself could not have been more pronounced over the course of the day.

. . . .

The second most important lesson I learned at DBW Indie is that traditional publishers, to quote Jane Friedman, “are kicking ass in marketing.” Judith Curr’s (President & Publisher of Atria Books, a division of Simon & Schuster) talk brought that home to all the authors in the room. Not only are publishers creating apps such as Crave, but they are performing A/B tests with their advertising, targeting the appropriate readers with the ads as well as sending out thousands of ARCs in advance to build reviews online.

Judith Curr came to speak to a room full of indie authors with an olive branch, asking us to consider traditional publishing. The word “hybrid” floated throughout many of the sessions and authors were pitched not only by Curr, but by Kobo, Wattpad, Ingramspark and, if you wanted, one-on-one with iBooks. Opportunity flowed throughout the day.

The challenge that I see is that without the deep (for now) pockets of traditional publishers, indie authors will continue to struggle. Although traditional publishers have amazing teams to produce extremely high quality products, the opportunity for indie authors comes in our being able to control our own careers. We have choice. With knowledge, there is power. In today’s publishing, we could license our print book rights, but retain our ebook rights and publish as we like. We have bargaining power that did not exist a few years ago.

Link to the rest at Ron Vitale

Here’s a link to Ron Vitale’s books. If you like an author’s post, you can show your appreciation by checking out their books.

PG doesn’t know Mr. Vitale, but PG does know something about large conglomerates, including publishing conglomerates, pre-internet and internet marketing and technology in general.

Conglomerates are large collections of people and money that are not all the same. Some do reasonably well at attracting capital and running some of their businesses. Others do dumb things all the time.

If you want to rapidly accomplish something innovative, a conglomerate is not the way to go. If you want to attract and keep creative employees, a conglomerate is not the way to go.

No smart entrepreneur tries to start anything inside a conglomerate. Apple would have been killed in the crib inside a conglomerate. So would Amazon and Google.

As a group, publishing conglomerates are among the slowest and least innovative members of the conglomerate class. PG worked for one of the largest (RELX Group, previously known as Reed Elsevier) for three unhappy years and knows of what he speaks.

Specific points mentioned in the OP:

  • Apps such as Crave from big publishers. Do you know how easy it is to build an app? Ten-year-olds build apps. There are over two million apps on Apple’s App Store. PG looked at the most popular book apps on Apple’s App Store. The first page includes a large number of apps. Crave was not among them. Three out of the top five apps were from Amazon.
  • A/B tests for advertising. PG wasn’t one of the Mad Men, but his boss at a very large advertising agency would have qualified. Needless to say, PG’s adventures in advertising occurred centuries ago. A/B tests with advertising were a routine practice during Mad Men days.
  • Sending out ARCs in advance to build reviews online. Publishers have been doing this forever. Smart indie authors have email lists, social media accounts, etc., and use them to do the same thing.

PG agrees with the OP that authors should get together and share ideas, support each other, etc.

However, there’s a key difference when indie authors get together and when traditionally-published authors get together.

When an indie author hears or reads about a great idea for marketing, he/she can implement it immediately and see the results (good or bad) in a few days or weeks by watching their KDP dashboard. When a traditionally-published author hears the same idea, it’s a different experience.

To pirate a saying, an author needs a big publisher like a fish needs a bicycle.

 

How the internet unleashed a burst of cartooning creativity

8 December 2016

From Medium:

In 1989 Bill Watterson, the writer of “Calvin and Hobbes”, a brilliant comic strip about a six-year-old child and his stuffed tiger, denounced his industry. In a searing lecture, he attacked bland, predictable comics, churned out by profit-driven syndicates. Cartooning, said Mr Watterson, “will never be more than a cheap, brainless commodity until it is published differently.”

In 2012 he is finally getting his way. As the newspaper industry continues its decline, the funnies pages have decoupled from print. Instead of working for huge syndicates, or for censored newspapers with touchy editors, cartoonists are now free to create whatever they want. Whether it is cutting satire about Chinese politics, or a simple joke about being a dog, everything can win an audience on the internet.

This burst of new life comes as cartoons seemed to be in terminal decline. Punch, once a fierce political satire magazine whose cartoons feature in almost every British history textbook, finally closed its doors in 2002. The edgier Viz magazine, which sold a million copies an issue in the early 1990s, now sells 65,000. In the United States, of the sprawling EC Comics stable, only Mad magazine remains, its circulation down from 2.1m in 1974 to 180,000. Meanwhile, the American newspaper industry, home of the cartoon strip, now makes less in advertising revenue than at any time since the 1950s.

. . . .

During the second world war, paper rationing forced comic strips to shrink on both sides of the Atlantic. Afterwards, the rise of television news culled the number of dailies and all but wiped out evening papers. With less competition, newspapers relied less on cartoons to sell copies. Comic books filled some of the gap, but unlike the newspapers, these were mostly for children. By the 1980s most newspaper cartoon strips were controlled by a small group of syndicates whose executives saw them primarily as devices to sell licensed merchandise. Childish cartoons with weak, universal jokes thrived — think “Garfield” — while more interesting artists struggled to find an outlet for their work. When authors retired, successful strips were handed down to new artists like real estate to avoid jeopardising merchandise revenues. “Mutt and Jeff” — tired by the 1950s — continued until 1982.

. . . .

The decline of newspapers and the rise of the internet have broken that system. Newspapers no longer have the money to pay big bucks to cartoonists, and the web means anybody can get published. Cartoonists who want to make their name no longer send sketches to syndicates or approach newspapers: they simply set up websites and spread the word on Twitter and Facebook. Randall Munroe, the creator of “XKCD”, left a job at NASA to write his stick men strip, full of science and technology jokes (see above and below). Kate Beaton, a Canadian artist who draws “Hark, A Vagrant”, sketched her cartoons between shifts while working in a museum. Matthew Inman created his comic “The Oatmeal” by accident while trying to promote a dating website he built to escape his job as a computer coder.

Link to the rest at Medium

Silicon Valley’s Culture, Not Its Companies, Dominates in China

5 December 2016
Comments Off on Silicon Valley’s Culture, Not Its Companies, Dominates in China

From The New York Times:

The majesty of the Golden Gate, the windy chill of Alcatraz, the tourist hubbub of Pier 39 — Zhao Haoyu’s itinerary for San Francisco had it all.

Yet when Mr. Zhao, a Chinese tourist, arrived with his wife in September, they spent their first day wandering the humdrum suburban office parks that Facebook and Google call home.

Joining a guided bus tour with a dozen other Chinese visitors, the two became part of the steady flow of Chinese tourists to Silicon Valley that represents — despite pervasive censorship and outright hostility from the Chinese government — the tremendous influence Silicon Valley wields in China.

“You hear so much about these companies in China,” said Mr. Zhao, a native of the southern Chinese city of Kunming who is in his 30s. “We just wanted to experience it.”

. . . .

China in recent years has given rise to a vibrant and innovative tech industry that in some ways surpasses what Americans can do online. But it has done so despite a culture dictated by Confucian conformity and, more recently, the strict rules of the Chinese Communist Party.

Neither prizes rebellion or disruption, so China’s young entrepreneurs and investors have looked for guidance and inspiration in a place that does: Silicon Valley.

. . . .

Silicon Valley’s soft power in China is unlikely to help Facebook or Google get back into China. But it demonstrates the sort of influence China seeks for itself. Despite its innovations, China’s online renaissance has taken place largely within its own borders, and the country’s ambitions to create companies with global influence so far have been largely unsuccessful.

. . . .

“Silicon Valley has become a kind of beacon of cultural change in China,” said David Chao, a partner at the venture capital firm DCM. “Hollywood could impact what kind of handbag a lady buys in China, but it never impacted corporate culture like Silicon Valley has.”

Even so, most Chinese companies have not fully absorbed the culture. Many are still highly top-down and bureaucratic, and open office plans often mask more deeply conservative customs. In place of California’s sunny suburbs, China’s innovation hub sits in the traffic and smog-choked northwestern part of Beijing, crammed into office towers above malls that sell all manner of electronics.

The trend is nonetheless driving young people to take more risks and demand more from employers, even as it brings with it a problem familiar to Silicon Valley: hangers-on more interested in being a part of the scene than anything else.

“There are people choosing technology not because they love it or want to do a start-up,” said Jesse Lu, a Chinese entrepreneur who spent time at Y Combinator, a prominent start-up accelerator in the United States. “They just do it because they enjoy the lifestyle of a start-up. They enjoy choosing their hours, having small teams, not listening to anybody, doing what they think is right. It’s a new fashion.”

Link to the rest at The New York Times and thanks to Jan for the tip.

The myth of the disappearing book

9 November 2016

From The Independent:

After years of sales growth, major publishers reported a fall in their ebook sales for the first time this year, introducing new doubts about the potential of e-books in the publishing industry. A Penguin executive even admitted recently that the e-books hype may have driven unwise investment, with the company losing too much confidence in “the power of the word on the page.”

Yet despite the increasing realisation that digital and print can easily coexist in the market, the question of whether the e-book will “kill” the print book continues to surface. It doesn’t matter if the intention is to predict or dismiss this possibility; the potential disappearance of the book does not cease to stimulate our imagination.

Why is this idea so powerful? Why do we continue to question the encounter between e-books and print books in terms of a struggle, even if all evidence points to their peaceful coexistence?

. . . .

Even before the advent of digital technologies, critics have predicted the demise of existing media. After television was invented, many claimed radio would die. But radio ended up surviving by finding new uses; people started listening in cars, during train rides and on factory floors.

The myth of the disappearing book isn’t new, either. As early as 1894, there was speculationthat the introduction of the phonograph would spell the demise of the books: They’d be replaced by what we today call audiobooks.

This happened again and again. Movies, radio, television, hyperlinks and smartphones – all conspired to destroy print books as a source of culture and entertainment. Some claimed the end of books would result in cultural regression and decline.

Link to the rest at The Independent

PG says the end of printed books and the end of methods and organizations by which printed books are manufactured and sold are not quite the same thing.

It Looks Like Ebooks Won’t Kill Print Books After All

2 November 2016

From Slate:

After years of sales growth, major publishers reported a fall in their ebook sales for the first time this year, introducing new doubts about the potential of ebooks in the publishing industry. A Penguin executive even admitted recently that the ebooks hype may have driven unwise investment, with the company losing too much confidence in “the power of the word on the page.”

Yet despite the increasing realization that digital and print can easily coexist in the market, the question of whether the ebook will “kill” the print book continues to surface. It doesn’t matter if the intention is to predict or dismissthis possibility; the potential disappearance of the book does not cease to stimulate our imagination.
Why is this idea so powerful? Why do we continue to question the encounter between ebooks and print books in terms of a struggle, even if all evidence points to their peaceful coexistence?

The answers to these questions go beyond ebooks and tell us much more about the mixture of excitement and fear we feel about innovation and change. In our research, we discuss how the idea of one medium “killing” another has often followed the unveiling of new technologies.

. . . .

This happened again and again. Movies, radio, television, hyperlinks, and smartphones—all conspired to destroy print books as a source of culture and entertainment. Some claimed the end of books would result in cultural regression and decline. Others envisioned utopian digital futures, overstating the advantages of e-books.

It is not by chance that the idea of the death of the book surfaces in moments of technological change. This narrative, in fact, perfectly conveys the mixture of hopes and fears that characterize our deepest reactions to technological change.

. . . .

To understand why these reactions are so common, one has to consider that we create emotional bonds with media as they become an integral part of our life. Numerous studies have shown how people develop a close relationship with objects such as books, televisions, and computers. Sometimes, we even humanize them, giving a name to our car or shouting at our laptop for not working properly.

. . . .

The ones who still worry for the disappearance of print books may rest assured: Books have endured many technical revolutions and are in the best position to survive this one.
Yet the myth of the disappearing medium will continue to provide an appealing narrative about both the transformative power of technology and our aversion to change.

Link to the rest at Slate and thanks to Dana for the tip.

Next Page »