For he that gets hurt
Will be he who has stalled
There’s a battle outside
And it’s ragin’It’ll shake your windows
And rattle your walls
For the times they are-a-changin’Bob Dylan
Recently PCI’s Executive Team went offsite for a day to reflect on the state of the market and the business. When we stepped back and were rigorous about cataloging the all the affected parts of education publishing I was surprised at the breadth of disruption already under way. More is on the way.
We used Michael Porter’s Competitive Analysis as a foundation for our discussions. Close reading of this book will get you 50% of an MBA (i.e. fancy ways of saying buy low, sell high). It is accessible to the general business person and provides a framework that has stood the test of time.
Porter posited that there are five fundamental forces that act on an industry and that a change in any one of them can force a realignment. Our analysis surfaced changes in ALL 5.
Porter’s Model Applied to Education Publishing
I’ve highlighted some of the more significant changes we face as they relate to each force. I’ve ranked them according to the degree of change we expect to see from each force.
Threat of new entrants. Are there new players entering the space with different business models, product offerings, or marketing strategies?
- Technology players are entering the space in large numbers funded by Venture Capital and inexpensive toolsets.
- Privatization players are expanding the Charter School Market. Some of these are writing their own curricula.
- The industry is globalizing.
- The iPad and Andriod tablets are coming.
Threat of substitutions. Are there products that satisfy the same function but which are in different industries? If they have a cost advantage watch out.
- Open Education Resources are becoming more sophisticated and better organized. These products are free and funded by large infrastructure companies trying to create demand for their products (e.g. Oracle, Apple, etc.)
- States and Universities are exploring bespoke curriculum independent of publishers. Common Core could fuel this change.
- Wiki’s and other web based resources are serving as repositories of static information (traditional role of textbooks). See iPad above..
- Parents are taking a more proactive role in securing learning services outside of school
Rivaly amongst the players in the industry. For example, process improvements in one company can force others to respond or face a cost disadvantage.
- Competition for scarce dollars post stimulus will increase the aggressiveness of marketing.
- Education is largely a zero sum game, so as new well funded players enter they will drive for share by competing on price.
- Digital production processes allow smaller players to match the development cost basis of large publishing houses.
Buying power of customers. Are there changes in how they purchase that give them more leverage over the industry?
- NCLB forced consolidation of decision making at the district level. This has changed both what is being bought (more comprehensive solutions) and how it is being purchased (more RFPs).
- Disruptions in the adoption process due to short term funding crises may become permanent as technology permeates schools.
- Common Core may give rise to new consortia to counter balance the traditional big 3 states (CA, TX, FL).
Buying power of suppliers. Are their inputs critical to you but insignificant to them?
- Consolidation of large publishers has created a large cadre of editorial and design professionals who are doing work for hire.
- Indian and other low wage spots are competing for production work.
- Technology specialists are in high demand as companies transition from print to digital.
That is a boatload of change. And it is accelerating.
We’ve all wrestled with each of them at one time or another over the past 4-5 years so there isn’t much here that should be a surprise to anyone in the industry. But I hadn’t sat down and put them all up on the board at the same time. That was a sobering moment.
We Are Not The First
The only thing new in this world is the history you don’t know. – Harry Truman
It isn’t much of a consolation but we have witnessed other intellectual property based businesses stagger through digitization. Trade books, newspapers, movies, and music have already walked the path we are setting out on. There are many lessons we can learn from their mistakes.
Some of the lessons I take from their experience are:
• Pricing models will rationalize to the unit of appreciation
• We need to learn to co-exist and compete with free
• Focus on your true value-add (there is still high demand for music producers)
• Distribution still matters, even if it changes
• Nothing ever goes away in the classroom, but new tools are added all the time
• New entrants usually under-appreciate the scale at which education works
• Institutional buyers will not act like consumers (the iTunes fallacy)
There are more – but the key is to pay attention to what is happening elsewhere. I’ve found blogs to be the best source of insights from industry insiders.
What To Do?
Let him who would move the world first move himself. – Socrates
Every company will have to chart their own course through this maze. One of the advantages of a massive realignment is that there will be lots of room for experimentation and exploration. We will see a flowering of business models, product concepts, and distribution networks as companies scramble to stay ahead of the curve in the coming years.
Sadly, we are also likely to see venerable companies unable to adapt.
The most important thing is to raise your own awareness of the forces of change and to think before you respond. Can you proactively get ahead of the curve? Are there defensive moves to buy yourself time? Do you have the right resources to survive? What do you know that the new guys don’t?
Bottom line – map out a strategy and then make sure your company is fully aligned to executing it. You may need to invest in training, you may need to overhaul your production process, you may need to secure financing. You may need to do all of this and more.
Half measures will avail you nothing.
On that note lets have a young Mr. Dylan play us out where we started. The original – still the best version.