Presented at the 2008 O'Reilly Tools of Change for Publishing Conference (http://toc.oreilly.com)

1. Service innovation : the path to success in the Internet age - Jim Lichtenberg O’Reilly Tools of Change , 2008 New York, NY February Gozanoishi Shrine, on the north shore of Lake Tazawa

2. Many mountains to climb -- no matter what part of the book publishing industry you are involved with -- to reach the peak of successful and profitable publishing.

3. Originally: graphically-rendered thoughts were a rare or privileged communications for specific purposes.

4. After Gutenberg: Textual content as a popular commodity… ...created and (eventually) owned by “rightsholders.”

5. In the age of the Internet: content is a “free for all,” {which is not the same as “free” for all…} for no single player controls it.

6. What is a book publisher? “… an editorial board with a bank.” P. Jovanovich - 1999 What is the publishing value chain? Companies to which publishers have outsourced many of the original publishers’ functions: - printers - manufacturers - distributor/wholesalers - retailers (new, used, online)

8. The solution, Google says, is to give users the ability to search and browse their own content, and receive an electronic or hard copy version of the final product. And that final product will (could?) include advertisements highly relevant to the user.

9. Is this a product or a service? “ An automobile is actually art, entertainment and mobile sculpture, which, coincidently, also happens to provide transportation.” Robert Lutz, Chairman, GM

10. Is this a product or a service? The Kindle's real breakthrough springs from a feature that its predecessors never offered: wireless connectivity... As a result, says Bezos: "This isn't a device, it's a service ."

11. So... is this a product or a service?

13. Department of ‘nothing new under the sun’ “ Publishing Models for Internet Commerce ” Tim O’Reilly 6/19/1995 • Same technology available to everyone • Rich ecology of successful players • Niches abound “ A key part of what we established with Global Network Navigator was a brand and a subscriber list. The actual content is valuable -- but far more valuable is the relationship with the people… “ In an information glut … ‘context’ is king.” {…..‘context’ is itself a service .}

15. During the deployment phase following technological advances, we see unprecedented opportunities and new business models Installation Deployment Irruption The Industrial Revolution Age of Steam and Railways Age of Steel, Electricity and Heavy Engineering Age of Oil, Automobiles and Mass Production Age of Information and Telecommunications Frenzy Synergy Maturity Panic 1797 Depression 1893 Crash 1929 Dot.com Collapse Institutional and Organizational Adjustment 1 2 3 4 5 Panic 1847 1771 1829 1875 1908 1971 1873 1920 1974 1829 Source: Perez, C., “ Technological Revolutions and Financial Capital ”, 2002 Crash

18. The days of yesteryear.. The “T-Word” CD-R , CD-R OM , CD -RW , SV CD , C D+G , CD- Text , CD-R OM X A , CD- i Bridg e , CD-i

19. The future is curled up in the past as a hidden dimension. - scientific breakthroughs are fundamentally intuitive “artistic” leaps ( Einstein: time is variable, the speed of light is a constant ) - innovation requires: attraction to complexity, intuition, aesthetic sensitivity and toleration of ambiguity - Apple, Google: sensing what customers want before they know they want it.

20. The digital model is customer-centric multi-directional, and interactive,... author creates work - (if desired with customer feed back via web 2.0 exchanges blogs, wiki’s etc.) publisher designs product in a variety of physical and digital formats publisher / printer create product (physical or digital file) customer informs publisher of format(s), content elements, and delivery / business model desired publisher / distributor / retailer fulfills order ... and remains flexible across formats and will continue to evolve .

21. (digital) Source File web press digital audio file (phone) e-book short run pod-cast chapter (chunk) POD search result + citizen content blog review annotation play list + new flexible business models (ads?)

23. Digital prototyping: create, integrate, collaborate. This approach gives manufacturers the ability to explore a complete product before it is built — so they can create, validate, optimize, and manage designs from concept through manufacturing. “ The digital prototype is shared among designers, engineers, and even customers so the (product) can be refined earlier in the process. Why not publishers’ content? A “service” transformation in design and manufacturing...

24. Since IBM first started experimenting with virtual worlds almost a year ago, progress has been rapid… These experimentations are part of an IBM-led initiative to collaborate with clients and partners on both conducting business inside virtual worlds and connecting the virtual world with the real world to create a richer, more immersive Web environment - thereby solving business problems in a new way.

26. Over the past 45 years, the US economy has doubled from 65 million workers in 1960 to more than 140 million in 2005

32. “ We are aiming to integrate author-generated content with the author's own"book" content--through our Author Assistant and our Browse Inside applications available on harpercollins.com. We think it makes the most sense for readers to have an integrated experience of book and author --why should they have to go to one site to look at the book, and many others to hear the author's voice?”

33. Steps for service success… • Be clear about your own business. What do you want to do in the marketplace? • Put all that aside, forget it, and listen as attentively as possible to your customers (consumers not bookstores!) • Analyze what they appear to be saying, and what they may really be saying. • Return to who you are, and what you do, and rigorously, (not slavishly) change may be required to create what customers want.

34. The image of the antisocial, sunlight-deprived game geek is enshrined in the popular consciousness as deeply as any stereotype of recent decades. That’s changing. Online PC games in which thousands of players gab and explore together are attracting tens of millions of subscribers

35. Getting at the customer value proposition Start with the “Job” Customer is looking for a quarter inch hole, not a quarter inch drill Close observation and deep interactions with custo- mers can be key way to find target jobs “ The customer rarely buys what the company thinks it is selling him” - Peter Drucker - “ Kill small snippets of time productively” “ Make sure I don’t run out of cash”

36. Success in any uncertain market requires testing, experimenting & adapting © 2008 Innosight LLC The ones that succeed have enough money left over to follow new approaches On average, successful new ventures change business models four times before finding success More than 90% of successful new ventures start off following the wrong strategy Flawed Strategy Successful Strategy Point of Learning and Adjustment

38. … AND IN CONCLUSION We are witnesses and midwives at the birth of new business models for our industry. Just as the economy as a whole is moving from a manufacturing to a service model, book publishing is moving from bringing physical commodities to market, to offering services that delivers content in a variety of modalities based on consumer choice...

39. And as in the context of the broader economy, the older business model -- producer creates (and owns) product and determines the terms of sale, via distributors and retailers, to the end user, take it or leave it -- is breaking down. Taking its place, as we are seeing, is a more flexible, if still incomplete (incoherent?) model in which all parts of the supply chain, including the customer, work together to optimize benefits.

40. Transformative opportunities are “high-assumption, low-knowledge” areas © 2008 Innosight LLC Assumptions Knowledge Core (Incremental) Core (Discontinuous) Reach New Customer Create New Market Extensions/Derivatives Adjacencies Uncharted Territory

42. Thank you. Questions? [email_address]