AFKInsider: You grew up in South Africa. What was that experience like? In what ways did it prepare you for the work you’re doing now?
Arthur Attwell: I was lucky that – unlike many young white South Africans – my parents made sure I knew what was going on: we were living a safe and privileged life compared to most South Africans, and we all had to work hard to fix it. White guilt is often unfairly maligned; it’s one of the most powerful forces for good in South Africa, and I’m very happy to say that I work hard at building businesses with positive social outcomes because I owe it to my fellow South Africans.
AFKInsider: Where did you get the idea for Paperight?
Arthur Attwell: I was a textbook publisher for many years, and it depressed and frustrated me that something as important as a book was absurdly expensive only because it was inefficiently produced and clumsily distributed. In my first company, Electric Book Works, I tried to tackle these problems with technology and ebooks. We could make ebooks cheaply, but we couldn’t distribute them, because very few South Africans are in a financial position to buy and read ebooks — they need devices, data, electricity, credit cards, and know-how.
During a research project in 2008, I was looking for cheaper ways to print books, and as I looked for smaller, local book printers, it became blindingly obvious: copy shops are the most ubiquitous book printers around. We just need them to print out the ebooks on demand. There is nothing magical about the idea, I’m no genius. I’m just the guy who decided it was worth trying, and found great partners to help.
The world is gripped by a startup fetish. And from it, or so it seems to me, more and more startups are looking for popularity before money: “Get big first, and figure out how to make money later.” For a time, Paperight was among them, till the end of our funding runway filled the horizon.
This way of thinking is cannon fodder for cynics. “That sounds like a really bad idea,” they’ll say. Of course it’s a bad idea – it’s a terrible idea! For the founders and their investors, at least, their odds of failure are enormous. Their families, too, face the prospect of catastrophic losses.
But for the rest of the world, it may be just what we need most.
We’re seeing the rise of an entirely new sector: a new kind of organisation, funded by speculators, that isn’t operating as a for-profit company and isn’t a formal non-profit. We might call it a ‘not-yet-for-profit’.
This kind of organisation can address problems in the world that others can’t. It doesn’t have to chase higher margins or short-term sales targets. It doesn’t have to fit the straitjacket of philanthropic money. It’s driven by committed entrepreneurs – not day-job managers or floppy volunteers – and these champions are aiming to do enough good for people that perhaps, one day, someone might pay them to do it.
A NYPF can and must be wildly ambitious. And it must build an audience not of customers but of followers: an army of believers in a grand movement, a new and better way, a growing crowd on a journey to a happier world. And to keep its following, it must remain true to its mission, or lose its hard-won support to the next NYFP.
This growing sector may already be attracting billions of dollars in investment: money going into enterprises that often have direct or cumulative social impact. This is a very good thing.
Of course they’re not all making a difference, or a difference you’d care about. Many can seem entirely meaningless. But very few, if any, are harmful.
Is this sustainable? The NYFPs themselves are almost never sustainable. Most will burn out in a couple of years. But others will take their place.
The real question is whether the investors funding them will all give up and go home. We can’t know, but I like to think that well-heeled people will always be looking to put a lottery ticket on a startup in the hope that they’re backing the next Facebook. Many want to do something meaningful with their money, too. And for as long as they do, the world’s better for it.
I was honored to speak at the recent launch of Yellowwood’s white paper on transformative innovation in Johannesburg and Cape Town. Here’s my talk.[youtube http://www.youtube.com/watch?v=iSSR4j8nL7w]
I used to be a textbook publisher for two multinational companies. And when you’re a book publisher you realise pretty quickly that you either make books for rich people, or you sell cookie-cutter textbooks to government. Most people in the world – perhaps six or seven billion – could never buy the books you make. Most South Africans, we can be fairly sure, live their entire lives without owning a book.
Take all the knowledge and experience in your brain that you got from books, and imagine you’re holding it here like a little package. Now, imagine you just threw it away. Gone. What’s left is a life without books. Maybe six billion people live like that, and that is a frightening waste of human potential.
So why is the world like this?
Well, all traditional publishing works like this:
- The publisher develops a finished product, based on their best guess of market needs.
- Then manufactures it.
- Stores it.
- Ships it.
- Then a retailer displays it.
- Sells a few copies.
- And returns or destroys the copies not sold.
This is very expensive: not only are there multiple links in the supply chain adding costs and very little value, but the risk of getting the initial product design wrong is high. Many publishers will tell you that only one in ten books makes money. So, as a result, the industry’s customers must be wealthy to pay for all this, and its retailers must be located close to those wealthy consumers. This is as true online as it is in bricks.
The industry can’t expand beyond these little clusters of wealthy consumers. It’s stuck. And in this form it can’t even live up to its name, ‘publishing’: to make public, and so to spread stories and education and professional knowledge. It’s a problem that, in South Africa, we might call the trap of very exclusive books.
Only a disruptive innovation could solve this problem. And in big publishing companies that would be hard to achieve, because of what Clayton Christensen famously described as the innovator’s dilemma: big companies must meet current customers’ needs, and this prevents them from investing in disruptive innovations, especially in low-margin markets.
And since most of Africa is made of low-margin markets, we need disruptive innovations more than anything.
In 2006 I had left big publishing to start Electric Book Works, a small consultancy that would set examples for innovative publishing, with a focus on technology.
Over the next few years, we failed again and again at creating good examples of inclusive books. It took several years to realise that the innovation we needed would not come from a new, first-world technology. New technologies require disposable income and new behaviours, and human beings are stingy and don’t change quickly. For example, even in the US, fourteen years since ebooks became widely available, and after seven years of massive investment and ebook cost-cutting by Amazon, still fewer than 30% of books purchased there are ebooks.
And given the ecosystem of devices, data, support and credit cards that they require, ebooks are just as exclusive as traditional books.
So I realised we wouldn’t solve the problem in South Africa by throwing ereaders at schoolchildren, or asking everyone to read their textbooks on tiny feature phone screens. We needed something simpler. Something that required no new infrastructure or technology. Something that built on the energy of entrepreneurs and small businesses. It had to work for established publishers, but not rely on them to change much at all about their businesses.
The answer: copy shops
When the answer finally arrived during a research project, it seemed blindingly obvious: there are thousands of photocopy shops around South Africa, printing CVs and flyers and booklets, and photocopying books every day. These shops are in city streets, townships, and rural villages. They’re in schools and churches, at the backs of hair salons and in converted shipping containers. We only needed to harness their power, and make it legal and easy for them to print and sell books.
The key is ‘legal’: copy shops have long had a reputation for copying and selling books illegally. Where that is true, it’s because they are meeting the needs of their communities in ways the formal book industry can’t. So you might say we wanted to turn pirates into partners: to bring an informal market into the formal distribution chain, for everyone’s benefit.
So in 2011, with the Shuttleworth Foundation as our investors, I gathered a team and began building Paperight: a network of independent copy shops that print books out for customers quickly and legally.
Our B2B site, paperight.com, enables any business with a printer and an Internet connection to print out and sell books, paying only a small licence fee per book from a prepaid account. Amazingly, publishers can make the same margins that they do from their fancy editions, and still the total cost to the customer is usually less than a traditional book.
More importantly, the customer just walks to their local copy shop for it: no long trips to the bookstore to discover they’re out of stock, or waiting weeks for a delivery. No need for a credit card.
The copy-printer as intermediate technology
Our innovation is built on what EF Schumacher, over fifty years ago, called an ‘intermediate technology’: a technology that’s more advanced than the poor are used to, but cheaper to set up than the first world’s cutting-edge stuff. Base of pyramid initiatives will always rely on intermediate technologies to be sustainable.
But it takes humility to innovate with intermediate technologies. In this way, ours is a humble innovation. It is not sexy to sell printouts from copy shops. But the power of Paperight is in that simplicity.
Africa as a whole needs more humble innovations using intermediate technologies, or we will continue to limp forward through the rubble of a thousand failed attempts to roll out fancy technology that existing economies can’t support.
Intermediate technologies work today. Our member copy shops across the country have delivered thousands of books, many in places where no bookstores exist, like Peddie in the rural Eastern Cape, and the CBDs of Khayelitsha.
While we’re still small, the potential impact is immense. We’ve just signed an MOU with copier manufacturer Riso, whose low-power, high-volume machines are perfect for schools. Any school that leases a Riso machine will be able to print books from as needed, and Riso will contribute to the licence fees. This could change the face of schoolbook distribution forever, completely sidestepping the problems of textbook shortfalls in classrooms.
And it can all be done with good old photocopiers.
How we innovate
We believe that when innovation is humble, it becomes very straightforward: you simply focus on finding the real problem and solving it today. You can waste a lot of time innovating around the wrong problems, or on tomorrow’s problems, sticking glamorous technology where it isn’t appropriate.
We also believe wholeheartedly in the value of openness: transparency and sharing is built into our team’s DNA. The company is fully transparent internally, right down to knowing each others’ salaries. We’re open-sourcing our code. We love sharing stories of failure as much as success.
This openness many benefits: we waste no resources trying to keep secrets; we are forced to confront our failures bravely; and others share with us and trust us.
Openness helped us overcome our first big challenge: getting traditional publishers on board and willing to work with copy shops that they’d always mistrusted.
Challenges and bright spots
We’ve won a bunch of awards and accolades around the world over the last year. But quite frankly, what really matters is whether our model is delivering books. Which it is, of course, but we’re impatient, and we want to deliver far more books much faster.
So we’re continually looking for partners, specifically organisations ready to invest CSR or enterprise-development money in getting books to needy schools and early-childhood-development programmes, and in supporting small printing businesses.
It’s still early days for us and for truly accessible books, but as more and more partners join us on the journey, the better the chances are that we’ll look back in ten years and say that together we fixed a dent in the universe, and put books within walking distance of every home.
Yesterday, I spoke at the inaugural Footnote Summit, South Africa’s new digital-publishing conference. Here’s my talk. Over the last seven years, I’ve pitched technical or otherwise innovative services to publishers over and over again, and learned some hard truths along the way. Here I list my top five, and what they mean for startups and publishers.
As many of you know, I used to be with Oxford and Pearson, so I know what it takes to get through any given year as a textbook publisher.
In 2006 I left to start a little publishing-technology consulting company called Electric Book Works. We wanted to help publishers use existing technology better: from using styles properly in MS Word to turning printed catalogues into databases. But most of the time, publishers wouldn’t pay us to solve a problem they didn’t think they had, and so necessity led to invention as it does, and we experimented wildly, with mixed success, until Paperight was born: a way to turn ordinary copy shops into print-on-demand bookstores.
On paperight.com, we provide a library of books that copy shops can print out for customers on demand, and we work with publishers to license their content to our member copy shops. Some of you are already working with us.
Copy shops pay publishers a small fee for each copy. In the last eighteen months, we’ve added 200 print-on-demand bookstores to South African towns and villages, listing almost 2000 different books from over 100 publishers.
We believe we’ve achieved something important here. But in doing it, and over the last seven years, one of the hardest things I’ve had to do, strategically and emotionally, is to remain patient while pitching to publishers over and over again when, quite frankly, most of the time, their companies seem utterly impervious to technological change or innovation.
So I’ve tried to define why it’s been so difficult, and I think I can list five hard truths about pitching to publishers as a startup. Perhaps the publishers here today can tell me whether any of this rings true from your perspective.
1. People love you. Their organisations don’t.
When I first pitched Paperight to publishers, I didn’t know what would make them interested in working with us.
- Would it be the money we could make for them by opening up a new market?
- Would it be the environmental appeal of not shipping books to and fro in trucks and ships?
- Or would it be the social impact of making books accessible to people in poor and remote areas?
As it happens, I can’t remember a single publisher who was excited by the idea of making more money. When people buy a product or buy into an idea, it’s emotion that makes them do it. (Logic is just how they justify the emotional decision after they’ve made it.) And emotionally, publishers just don’t respond to the promise of more cash.
Oh, they’ll say they do because it’s their job to be financially prudent. But, as far as I can tell, money really leaves them cold.
Some publishers responded well to the environmental angle. But not enough to get them really fired up.
So I was happy to discover that, in the end, social impact really is what gets publishing people excited. In almost every meeting I’ve ever pitched in, the person across the table lights up when we talk about the possibility of putting every book within walking distance of every home.
But after I’ve left and the glow has worn off, they have to actually get a decision through their organisation. And the emotion I whipped up in the meeting just melts away. And all that is left is a cold hard day of noise and to-dos.
And the embers that remain in my poor contact have no chance against the anxiety of having to get the decision past colleagues, or the general covering of asses.
The point is that convincing a person is very different from convincing an organisation. The only way through is either to find an untiring champion in the company or to just keep pitching, again and again, till you’ve raised enough of a spark to survive the organisation’s decision-making process.
2. The right person is rarely the right person.
One of the main reasons pitches go nowhere is that you’re not speaking to the right person. This is a common problem for innovative startups because most of the time there is no person for the thing you’re pitching.
When we pitch Paperight, we get bounced from the rights-and-licensing manager to the sales manager to the digital manager, and none of them are sure they can just sign up their company.
It’s even worse when you’re offering a service that crosses borders: the local office thinks you should speak to the international office, and the international office tells you to work it out with the local office. It’s a grand game of international pinball. We’ve spent months bouncing between local and international offices of major publishing companies, waiting for someone to decide they have the authority to make something happen.
In the end, when it does resolve, it seems less a matter of figuring out who is responsible and more a case of someone, somewhere just getting on with it. Our job seems to be to bounce around till that happens.
3. Most people don’t speak XML.
Most of the services we sell to publishers as startups involve something technical. But most publishers won’t understand our technical jargon. They have their own vocabulary to describe their needs.
For instance, you might be pitching a web-based collaborative metadata-editing tool that runs a highly optimised AJAX-driven UI and maps to ONIX under the hood. You know that that would literally change people’s lives in publishing companies. But to the person you’re pitching to you might as well be selling thermonuclear reactor parts.
For me, the only way around this is to ask sensible questions, listening carefully till they describe the product they need in their terms. Then you can explain why what you’re offering solves their problem. This sounds obvious, but it’s really hard to do and takes lots of practice.
4. Anchored numbers are sticky
Here’s a number: 55%.
Many publishers in the audience may recognise this number. It’s the gross margin that most publishers aim for on each book. In many companies, it’s a sacred number. The rule is: “Do not propose publishing a book that does not hit this number.”
Sacred numbers are very useful if you want people to produce the same kind of product over and over again, to sustain an established business that must please its current market. But when you want to innovate, especially if you want to do things very differently, sacred numbers like this are big obstacles.
Another set of numbers publishers know well is this: 1000, 1500, 2000. Those are common print runs. Also 5000, 10000: sales figures that define a bestseller in local trade publishing.
In management terms, these kinds of numbers define a company’s values. As Clayton Christensen and Michael Overdorf describe them, they are “the standards by which employees set priorities that enable them to judge whether an order is attractive or unattractive, whether a customer is more important or less important”.
So a 55% gross margin allows employees to consider a project worthwhile.
If you string a bunch of values together, you get company culture. This is different in a way from what you and I might mean when we talk casually about ‘company culture’, but it’s actually closely related. When the ways that a company’s staff can move are circumscribed by specific numbers, they define how a company thinks. In short, these numbers, and the extent to which they are followed and enforced, define the company’s culture.
In psychology, these sacred numbers cause what’s called anchoring. When a number is an anchor, we use it to evaluate any other number by comparison. For instance, you might think that a Coke costs about R10. If I try sell you a Coke for R100, you’re going to think that’s very strange, because R10 is your anchor for the price of Coke. Likewise if I sell it for 10 cents. Even though none of these prices may bear any real relation to the cost or value of Coke itself, it’s the anchor that matters.
In the case of a 55% margin, or a standard print run, publishers compare any number you give them to these anchors. So if you pitch a project that will make a million sales at a gross margin of 10%, they’re going to have trouble believing in it. Their anchors make it hard to fit those numbers into their company culture.
Every innovative publishing service or startup is trying to offer publishers a new set of numbers. But company values are big rocks to move.
At Paperight, we’ve found one number in our model that matches publisher numbers: net receipts less printing and distribution costs. Publishers usually make about 30% of the retail price after printing and distribution costs on a traditional edition. On Paperight they can make almost the same amount in the form of a licence fee. So when we pitch, we focus loads of attention on that, and pay less attention to other numbers in our model that would be new to publishers.
Of course, this works best when the person you’re speaking to actually knows their business’s numbers, and can do basic cost calculations. Often, publishers I speak to don’t know the real costs and margins on their products, especially costs like warehousing, wastage and other provisions that don’t appear on their standard costings spreadsheets.
As a result, they simply aren’t empowered to make the kinds of decisions that innovations require.
5. Risk and regret loom large.
We all fear losing stuff. In fact, we fear losing stuff much more than we desire a corresponding gain. For instance, as the parent of a one-year-old, I fear losing CBeebies much more than I wanted it in the first place.
We also fear regret, especially the regret that comes from doing something that might turn out to be a loss. So, when you’re pitching a service to a publisher, they fear regretting their decision much, much more than they want your product. Even if they want your product a lot.
How the heck do you get around that?
I think you have to make their decision not feel like a final decision. For instance, we separate the signing of our Paperight distribution agreement from actually listing which books the publisher will license to us. That way, our contact can sign the agreement without actually putting any books on Paperight.
Once that’s in place, we can start an entirely separate discussion about which books to put on the system.
Except there’s another challenge: the publisher tries to ease their anxiety by giving us low-value, low-selling content, thinking this reduces their risk of failure. Ironically, this has the opposite effect: by putting low-selling content on our platform, they actually increase their risk of failure, because the chances are this low-value content will not sell at all. To make an innovation work, you have to maximise your chances of success by using it for the best content you have.
We’ve found that these five problems, and perhaps many others, mean that we interact with a given publisher at least seven times before they work with us, and that’s if things go well in the first interaction. There are several major publishers who took over three years for my colleagues and I to get on board, and several others we’re still inching along with.
The risk for publishers is that while these five issues hold you back, faster, more active companies are changing your market for you, and stealing your lunch. Amazon and Google are the usual examples, but smaller players like Siyavula and FunDza are increasingly influential, too.
Of course, it would be crazy to work with every startup that knocks on your door. But the only thing that’s crazier is taking months or years to decide whether to work with them. It’s better to decide quickly one way or another than to waste time. Progress requires forward motion.
If you recognise any of these five issues in your organisation, perhaps just knowing they’re there will make it easier to move forward in future. At the very least, you’ll save entrepreneurs like me a few grey hairs.
And let me know what you think. Fixing publishing is a group effort.
These days I’ve got my head down at Paperight, putting ebooks back on paper. But I still get asked a lot about how ebooks are made in the first place. Where does a person even start to learn? So at the suggestion of friend and mentor Kate McCallum,* I wrote up, in a few brief slides, ten things you need to know more about if you’re going to make ebooks.
* Kate McCallum is probably the best publishing trainer in South Africa (perhaps the world) – certainly anything sensible I know about the financials of publishing I owe to her mentorship when she was MD at Oxford University Press Southern Africa ten years ago.