Google & University Presses: On U Presses Cashing in on the Potential of the Web, Potentially

“My company and I would like to give folks a nigh-infinitely scalable digital map of every street in the world that they can 'fly' around in like a video game, and after that we’ll build eyeglasses that surf the web and self-driving cars.

“So, naturally, our first step will be to put a new search algorithm up on the web, in a single framed search box, so folks can find webpages better.”

Google had a good idea and a fine algorithm. But, no one short of shaman-grade crazy saw web-enabled eyeglasses and self-driving cars as likely later/next steps–or as their ultimate goal when first they set out.

Do what you can do now; find out what you can do next, after. Then, do that.

It’s how we learn to walk, run, and build unimaginable things like driver-less cars.

When considering U Presses building a collective immersive online environment, folks often ask "key questions" that only focus on one aspect of what might have been a partial near-term goal (back in the days of the newness of the web); e.g., how will that succeed in selling books (i.e., specifically on such a site that U Presses might build; because all we can imagine are real-world things reconstituted online, such as an "online" bookstore).

However, key questions of strategy depend on what strategic intent/s and ends might be in the near term, in the long term, and beyond. And, in so far as some of those goals may be open ended or a matter of positioning for an unknown future, key questions of strategy can be manifold or moot, in current terms.

For now, I’d suggest that raising customer awareness (no matter where the purchases of those things called books take place) would bring value to the U Press network. Purchase intent is constrained by lack of brand/product awareness; by similar measure, it is often enhanced by increased brand/product awareness. Down the road, being in position to build new models, set new goals, expand into a web-based world (in ways no one else will for presses); that may well be priceless.

In sum: for talented folks in a swiftly changing landscape, landmarks may be less helpful than they used to be; direction may be key. The web is a good direction.

{this is a shameless rehash of a comment, I posted originally on Scholarly Kitchen; but, I like "shaman-grade crazy" so refurnished it here.}

University Presses have the world by the tail - twice: outside-the-books thinking

I'm going to put you in business. I'm not going to tell you what that business is, or what you sell, but, I'll describe some moving parts, and ask you how you like your chances.

It's a not-for-profit business (NFP), but one that engages with customers in open, global retail space to generate revenues in multiple streams; so, market returns are important and good for business: good^2. Your business is well established, not a new concept. You work in media. Your customers are uniformly well-heeled, all earning fine salaries, some extraordinary salaries, they go to live theater, attend museum openings, visit art galleries, they hold respected places in society, they consume mass quantities of media like yours, and they are required to work with your offerings and your competitors' offerings, under penalty of death (publish or perish), for the rest of their professional careers. How do you like your chances?

Before you answer, let me add that some of your expenses and infrastructure will be paid for/provided by a nearby laurelled institution (a university), and, because you're a NFP, you will be held exempt from paying taxes. How do you like your chances now?

Wait: In addition to this customer pool, thanks to your NFP status, you can fund raise to support operations. How do you like your chances now?

The answer to everything in business is, of course, That depends... It depends on what you're selling and if anyone is willing to pay you for it. But, before you get your 'depends' on, you have to stop and take stock of the moving parts described above: that this is a freakishly favorably stacked deck. No entrepreneur gets a play like this, to that kind of customer base, with that kind of support. Most would say, it really doesn't matter what your product is (or are), with a stable bid for the rapt attention of folks like these, you can't miss.

VANS

I've said before that folks contemplating the future of the university press network, branding, and revenues "slash" sustainability should have a look at Vans, in the period described in the Harvard Business Review case study, VANS: Skating on Air. And I'll say it again here:

...Folks contemplating the future of the university press network, branding, and revenues "slash" sustainability should have a look at Vans, in the period described in the Harvard Business Review case study, VANS: Skating on Air.



In brief, it describes Vans' decisions to produce the skateboard movie, Dogtown and Z-Boys, to sponsor myriad extreme sporting events, and develop a line of video games. None of which are shoes. Vans is a shoe company. The answer, for Vans to continue to grow, however, lay outside the shoes.

Monetizing on scholarly content alone is fraught and fragile these days. If a publisher is a book company, with "book" understood broadly as all content the company produces, then maybe it's time to think outside the books.

Profitability for scholarly books - overhead allocation in the world of small numbers

How much overhead does each project (or product) at a small press consume relative to other projects, and how many sales are needed to reach break-even? Why would a scholarly press, in its right mind, ever consider doing a distribution deal (for 40-50% of net revenue), when it can do an original publication (for 90% of net revenue); isn't that roughly half as much money?

I adapted an activity-based costing approach (ABC) to model "average" list dynamics at a fictional press to explore rough answers. After looking at them and living with them in the realm of small numbers (a.k.a., today's sales figures), and as applications of new capabilities advance into the new century, next questions may also include: "What comes next?" I.e., post content-monetization alone; what new products and/or services can be added to a firm's offerings to cover overhead?

ABC is used in high-overhead or high-fixed-cost industries to examine performance across product lines to inform R&D, pricing, and production. I added per-product and total contribution and sales figures to model front-list contribution and Return On Assets (ROA) for the year.

Method: For illustration purposes, I used four "product lines" as examples of titles with different "financial footprints" in a press: 1) Average, 2) Complex, 3) Distribution, and 4) FTPB (first-time paperback). Average is a basic monograph or edited volume; Complex might be a coffee table book or a photography or textbook; Distribution is an inventory-only title, for sale in territory; and, FTPB is a paperback edition for a title that came out in hardback in a prior year. Co-pubs could be added, but four types are enough for illustration purposes. Electronic editions are accounted for by lowering the average per-unit variable costs and adjusting average sales and revenue figures for the line. What we're after here is changes in developmental overhead to publish the list.

Each product line spends more or less time on different desks in a press (on average); so, each will consume more or less overhead at different stages. Which are more profitable; which less; and when?

When scholarly presses sold thousands and thousands of copies of any given text, almost any set of choices was financially viable. These days, a press needs to be mindful at a more granular level. So, after modeling ROUGH list dynamics, I take a look ROA and break-even for sales of 200 copies to 1,500 per product type. Additional charts are on the attached.

Numbers for a real-world press will have slightly different break-even points for each product line, but the relative stature of these categories will be consistent; e.g., a chart of data from our mock press shows that Distributions have higher ROA than original titles, all sales being equal. It also reflects the greater ROA of FTPBs, relative to other products; both Distributions and FTPBs are "in the money" at lower sales volume than other titles. These trends suggest answers to our initial questions.

To estimate average ROA per product line, the sheet linked to above apportioned overhead as a measure of fixed assets consumed by each product, and so shows average overhead per project and per product line, or just how "expensive" one project is relative to another.

This can be an important consideration as a press reaches capacity; with resources stretched thin, adding an "expensive" project that will consume many internal resources could overtax capacity and that could result in delays in times to market across all projects. When a press is at or near capacity, it might be time to add a few "inexpensive" projects in order to add revenue without driving [as many] costs. It is also time to consider which projects tax resources specifically in pipeline departments (EDP) where delays can have the greatest enterprise-wide effects.

However, ROA and margins alone don't tell the whole story. A firm needs volume to cover costs. It also needs original publications, before it can offer FTPBs.

On a tool like the attached, a press can see that projects can have a higher contribution margin but be less profitable than other projects with lower margin (they can deliver lower sales volume, less revenue, and/or have lower return on the assets they consume).

Publishers can also note that Distribution titles have small and fixed contribution margins (fluctuation of contribution margin is largely a result of including a fixed cost like copy-editing in COGS), and yet Distributions deliver very high ROA and have a low break even. These figures in aggregate contribute to the ROA for the front list.

A firm needs to look at all the above when considering profitably of a portfolio of product lines: margin, sales volume, project volume, project compliment (how many of each kind of project), and of course overhead.

The sheet linked to herein, includes measures of per title and total contribution and overhead, and so shows several of these "moving parts" of profitability at a glance for planning purposes. With real-world data and structural enhancements to such a sheet, similar ABC approaches can help model impact of changing "product mix" and sales targets to achieve optimal gains for stakeholders.

That said; at a glance, the current mock-up does provide some insight to questions above and shows that various product lines at a given press can have their own metrics and margins contribute their own value to front-list success. Lines can be sub-divided for greater analytic clarity, and new lines and services can be added to deliver new Rs for the Is.

Caveats:

1) Changing numbers of titles published at the fictional press in the mockup would impact total overhead, and visa versa; so these numbers should not be altered in the attached independently. Sales figures, on the other hand, can be; variable costs are set at an average rate and so will adjust with changes in sales. The attached includes sales-figure data tables and charts like the above.

2) The attached has only four, gross categories (Average, Complex, Distribution, and FTPB); product lines and metrics can and should be added/subtracted to reflect a current portfolio at a press.

3) The attached has grossly simplified numbers, as it is for illustration purposes only; more detail would be added in any real-world analysis.

4) One very important thing that this sheet does not model is the impact on the pipeline or on time to market for adding or subtracting certain titles; as suggested above, adding/subtracting some products has more impact on average time to market than it will for others. E.g., Average and Complex titles drive workload in EDP. Distributions and FTPBS do not. So, as the EDP pipeline fills, opportunity costs rise for each Average and Complex title added; delays increase and sales revenue lost would be accounted for as added costs. These costs could include delays in time to market for all front-list titles. Additional Distributions and FTPBs, on the other hand, largely "skip" EDP and could have other resources such as marketing "spread thin" to cover their launch/soft launch. Another tool would be needed to model relative "next title" impact across product lines at or near capacity.

5) Most importantly: best practices for activity-based costing is to utilize a cost driver to allocate overhead in each department. The most common cost-driver is line-worker hours. Herein, one product was used as a baseline "single-unit" of work. Experts familiar with a process can do an excellent job of "ball parking" relative workload for major product lines, compared to a baseline product; however, data reveal more granular detail, and this detail can be surprising. The adapted model attached will reveal trends in list dynamics. It is also advisable to collect data on hours worked on various products (on average) and re-run the analysis to confirm and explicate trends.

Disclaimer:

This sheet, linked to herein, merely models relative product-profitability dynamics for a MOCK company; this in order to demonstrate a managerial accounting approach to overhead allocation by product line for strategic purposes. A bona-fide tool for an actual firm can be built for any company; however, this sheet is for entertainment and illustration purposes only. Please contact me if you have quesitons on the limitations of this sheet.

SSP = recommended for 2014

Reflecting on all that I am thankful for from 2013, I’d say that getting a chance to attend the annual meeting of the Society for Scholarly Publishing (SSP), meeting all the folks I met, and learning all that the SSP is about – and learning all that attending the SSP’s annual meeting entails for an individual scholarly pub professional – is near the very top of the list. Attending the SSP changed my worldview and enhanced my understanding of the industry.

The SSP comprises leading industry consultants from around the world, heads and key staff of libraries, executives from all the major commercial presses, directors and staff of university and other not-for-profit presses, as well as professionals from third-party vendors (B2B providers). Having diverse populations from the communications ecosystem so well represented makes the SSP meeting a richly flavorful melting pot; not only are expert panel sessions informed and thought provoking, but all conversations in the halls, around exhibits, and in receptions are charged with brains and knowledge of multiple perspectives.

Moreover, in keeping with the principles of the founding members, the SSP is compellingly democratic; each professional, regardless of the “rank” of the individual or the focus of the individual’s firm, is able to and indeed expected to contribute to the SSP, to serve on the board of directors, and to participate in keeping up the high standards of networking and the sharing and development of best-practices in scholarly communication. (Deadline this Friday, 12/6.) This democracy of membership emulates (and accelerates) the cross-pollination and cross-strata flow of ideas that is in keeping with today’s best practices for competitive idea generation in successful firms.

My experience in attending this year’s meeting may have given me a uniquely swift and thorough view into what the SSP is all about: I won one of several Student Travel Grants offered by the SSP, and as a first-time attendee, I was paired with a “Meeting Mentor.” I was also grouped with other first-time attendees, for peer-to-peer networking, and as a group we were all under the further wing of the First-time Attendee Coordinator. My Meeting Mentor was Heather Staines, VP of the Stanford-born startup SIPX, past board member of the SSP, and long-time industry pro. My fellow first-time attendees and grant winners were similarly diverse professionals from library sciences and publishing programs across the country and overseas (I was the only MBA in the mix and the first one to participate in the program, thus far.) Our First-time Attendee Coordinator was none other than Will Wakeling, Dean of University Libraries, Northeastern University, founding member of the SSP, and industry/meeting icon.

The SSP meeting is huge, the orgs in attendance cover the globe (and all the walks of life above-mentioned); it might take several years to learn where the ropes are, let alone learn how to use them. Having a meeting mentor and first-time attendee coordinator accelerated the process for all of us and, for me, having a Meeting Mentor so versed and experienced as Heather Staines and a First-time Attendee Coordinator so knowledgeable and widely respected as Will Wakeling meant that I got to chat with international professionals at every level of the ecosystem, meet nearly all the past presidents of the SSP (and a host of the Chefs from the Scholarly Kitchen), and learn about the founding principles and history of the organization.

The sessions and conversations I had at the meeting were amazing; each more informative and eye opening than the last, and I could go on at dizzying length (as is my apparent wont) about the best-practices I learned of and the ideas I came away with – many of which have informed new initiatives I’ve begun since – and I will no doubt post some thoughts born of those takeaways. However, this post is about what I am truly grateful for from this experience, and that is getting to learn what the SSP is about: the people I met.

In the SSP logo, it says: “innovative people advancing scholarly communication.” I can say that the emphasis there is on “innovative people.” I met a dynamic, driven, and welcoming worldly horde of people. I’ve been to a number of meetings and attended some “schooling” here and there. In the first few minutes of the SSP, I met dozens of folks from a host of organizations and backgrounds, all of whom I look forward to seeing again and continuing to learn from, as we advance in our careers.

CENTRAL TAKEWAY/LEARNING:

The wealth and diversity of backgrounds and perspectives (commercial execs, consultants, vendors-as-members!, librarians en masse, and not-for-profits), the democratic nature of the organization (a focus on you as an individual professional), and the generous disposition of the members (founders, Presidents, attendees, mentors, and colleagues) are what distinguishes the SSP at heart; these elements make the SSP exceptionally welcoming and engaging and make discussions at the meeting uniquely generative of new thinking and opportunities.

THANKSGIVING:

I am thankful for getting to meet all my fellow grant recipients, and for getting to meet so many of the best and brightest in scholarly communications (the many chefs, heads, and execs). I owe special thanks to Heather and Will and other SSP stalwarts who all took such a personal interest in our experience – I can’t thank you enough! On that broader front, I would be remiss if I didn’t back up and say thank you to the SSP itself for giving me the opportunity to attend this year’s meeting and to everyone I met who made the experience so rewarding.

Given my experience, I would be further remiss if I did not say to all my fellow colleagues in scholarly communication, whom I have not met yet (and likely already talked your ear off in this regard) and who are planning professional development activities for the coming year: I’m renewing my membership in the SSP and making plans for Boston. I recommend, whole-heartedly, that all seeking new ways to advance scholarly communication do the same and join the polyglot discussions at the SSP next year. When you do, I look forward to meeting you there!