The purpose of this course is to help individuals and organizations survive when confronted with disruptive technologies that threaten their current way of life. We will look at a general model of survival and use it to analyze companies and industries that have failed or are close to failing. Examples of companies that have not survived include Kodak, a firm over 100 years old, Blockbuster and Borders. It is likely that each of us has done business with all of these firms, and today Kodak and Blockbuster are in bankruptcy and Borders has been liquidated. Disruptions are impacting industries like education; Coursera and others offering these massive open online courses are a challenge for Universities. In addition to firms that have failed, we will look at some that have survived and are doing well. What are their strategies for survival? By highlighting the reasons for the decline of firms and industries, participants can begin to understand how to keep the same thing from happening to them. Through the study of successful organizations, we will try to tease out approaches to disruptions that actually work. Our ultimate objective is to develop a strategy for survival in a world confronting one disruptive technology after another.
6.1 Publishing
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From the course by University of Maryland, College Park
Surviving Disruptive Technologies (On Demand)
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From the lesson
3.2
Social media has transformed the way people relate to each other, but it has a disruptive component that is worrying
Meet the Instructors
Hank C. LucasRobert H. Smith Professor of Information Systems
School of Business
Frankly when we talked about newspapers, we lamented the fact that you aren't able
to read, you miss all the pleasure that brings, But there's a book that's been
very important in your life, though you may not realize it.
When you grow up, when we brought you home from the breeder we bought this book
called dachshunds for dummies because we'd never taken care of a dog before.
And you were such a time little guy, you actually fit in the palm of my hand.
So this book is responsible for a lot of the life you have lived with us.
So the question is what's happening to publishing?
Books have been around since Gutenberg invented the printing press.
And the Kindles been around for much less time, since Amazon introduced it to the
reading public. There are three big disruptions that
publishing has undergone in this country. The first of these is selling traditional
books online, and we've talked about that in past videos, particularly when we've
discussed Amazon. E-books and readers[COUGH] And self
publishing on the internet, that's something new, and we'll discuss that a
little bit in this video and in the one that follows.
I like books, I like the feel of a book. The physical qualities, I like to browse
the pages and I hope we'll always have the option At least in some way to have a
physical book. But what's going to determine that is
really us. It's the consumer, it's the reader who's
going to decide, because what we demand is what the publishers and the
booksellers are going to provide us with. And of course there are limitations to
e-readers. I'm not sure about having my Kindle at
the beach. What's going to happen when we get sand
in the Kindle. E-books are also really nice when
traveling because you can take a lot of books in a short space.
this actually isn't the way I usually travel but it would be nice.
Let's talk about the first big disruption.
We've discussed Borders and, and its demise, which was course Amazon selling
books online. And we said that books are so great to
sell this way because there's no question about the quality of the new book.
The books come from the publisher, they're all the same they're all printed
well, they all have covers, so there's no need to worry about whether you're buying
a lemon or not. Then Amazon did something, I think kind
of innovative, and that is, they started to list used books besides the new books.
And as an author, I suppose I really shouldn't buy a used book.
But, in fact, if I'm working on a research project, and I may need a
chapter from a book or maybe I need a few pages, I confess to having bought used
books in order to conserve my scarce research funds.
Amazon can stock more books than any physical bookstore can, okay?
And so they have a huge real and virtual inventory of books.
And of course, we said Borders is gone now.
So the second disruption, after selling books on the Internet, is e-books.
the Pew Foundation has an Internet Project that explores how the internet is
affecting lives in, in the country and it found that 21% of Americans had read an
e-book in December of 2011, by December of 2011.
That, that people with e-books are more avid readers because they will do
something like read 24 books in a year versus 15 for the non e-book reader.
And it's an unfortunate statistic, but a lot of people don't read any books at all
so now we're looking at the part of the population that likes to read books.
By May of 2011 some 12% of Americans owned an e-book reader which is double
the number from 2010. Barnes and Noble is the only major chain
that is left now selling books, and it's not doing so well.
In fact, it's selling pieces of itself off.
Liberty media and John Malone in 2011 invested a little over 200 million
dollars. B and N wanted them to buy the company
outright, but Malone didn't want to do that.
And then along came Microsoft the next year and invested in a 18% stake, but it
wants the E-Reader unit, which it values at 1.7 billion, which is nearly double
B&N's market cap. So, the action as far as these companies
are concerned, with E-Readers. So, E-books are interesting, they're
relatively inexpensive. Amazon has generally charged, at least,
in the beginning, less than $10. And what's happened is that Amazon has
developed pricing power because of the volume that it has.
So the publishers have been kind of concerned about the fact that Amazon is
able to set these low prices for the electronic copies of best sellers that
are coming out. So a group of publishers an apple got
together to try to force prices up and they did this by publishing books on
itunes at a higher price point and forcing Amazon to raise some of those
prices. However the department of justice said
this is anti trust you cant collude on prices and forced this.
Consortium, this group of people to sign a consent decree to stop doing it.
So this just enhanced the pricing power that Amazon has.
So we know that eBooks are convenient, they're highly portable, and they're
environmentally sound since you don't use a whole lot of paper you save the trees
in the forest by going electronic. The third disruption self publishing.
Why not? What is the value that is added by a
commercial publisher? and that's an interesting question.
We're going to explore this in some more detail in the next video.
I think their commercial publisher will tell you that they serve a quality.
Control function by seeing that books are carefully reviewed and[INAUDIBLE] before
they're published. they will do a, the actual production of
the book. And so, they're, again, they're assuring
quality there with the final product. and there are many beautiful books out
there. The, sort of, the coffee table books with
lots of photography. And, and, and, text that are just a joy
to look at. The publisher is saying "We do that.
It's going to be very hard for an author to create that on their own." In
self-publishing, you create an e-book from the start.
You lower the prices He raised the royalty rates for authors, and with Print
on Demand, if somebody wants a hard copy, you can actually arrange to have hard
copies printed. Okay?
In fact, I have several colleagues who have self published books.
Interesting thing here is the natural progression of this is Amazon becoming a
publisher, they are actually signing authors to write books for them.
So, they're acting the way a commercial publisher used to, but of course, their
books will tend to be e-books or they'll be print on-demand.
And Amazon will give you how to do it guides as well.
So, at this point, let's stop for a minute and get your opinion on how these
changes are affecting the publishing industry.
So in summary, publishers have been hit with three big technological disruptions.
The first of these is selling traditional books online which has been hurting
physical bookstores, e-books and readers having the same impact, and self
publishing. And so the publishers are now caught in,
in a situation where I guess they're being attacked on all sides.
They have a relatively high cost model. They're forced to print books for the
people who want print books and they're forced to turn some of their pricing
power over to Amazon in order to satisfy The ebook market and so the question is
who the publishers go from here and I think the key question here is and it's
one similar to what we ask with newspapers.
What is the future of the physical book, okay.
And I hope that at least that we're able to afford to keep some physical books
available, for those of us who,[LAUGH] may be have a, a, an older approach to
reading. But to really enjoy having a physical
book. Maybe there's enough room in this world
for physical books and electronic books to exist side by side.
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