Tough truths about selling to publishers

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.

Tough truths about selling to publishers 1

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.

Tough truths about selling to publishers 2

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.

Tough truths about selling to publishers 3

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.

Tough truths about selling to publishers 4

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

Tough truths about selling to publishers 5

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.

Tough truths about selling to publishers 6

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.

Conclusion

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.

Thank you.

Tough truths about selling to publishers 7

Open educational publishing is commercial publishing

Recently I spoke on a panel at the Education Week conference about developing open educational resources. It was great to share a stage with innovators like Mark Horner of Siyavula, Andrew Einhorn of Numeric, and Brett Simpson of Breadbin Interactive. I spoke about the relationship between OER publishing and proprietary publishing – sometimes called mainstream, traditional or commercial, though those labels are neither useful nor accurate. Here are my speaking notes.

I’m Arthur. I’m a fellow with the Shuttleworth Foundation, so you know I’m going to be a fan of open educational resources. I’ve also founded two companies in book publishing that work with OERs: Bettercare and Paperight.

I wasn’t always this way. About ten years ago I was working as an editor for a big textbook company, Oxford University Press. One day I heard about this guy at UCT who was getting students to write free high-school science textbooks. Hah hah hah! What a lunatic, I thought. He sounded quite brave but a little naive. I reckoned his band of enthusiasts would never be able to produce books as good as mine, or get people to actually use them.

Siyavula Grade 10 Physical ScienceToday, those textbooks are on more learners’ desks than any other textbook in maths or science. They’re beautiful. And you can read them on paper or on your computer or on your phone. Wow, I’ve had to eat my words. And now he’s sitting here beside me, as the founder of Siyavula. Hi Mark.

To make matters worse, he married my cousin, so now we’re related. Hayi. Life is funny.

So I’ve learned from his example now. At Bettercare we publish some of the best nursing textbooks in the country. We can get dozens of leading experts to contribute to our books because we open-licence them. Those experts know that their work will be able to spread freely. We can do this because we make money selling the printed versions to hospitals and universities.

At Paperight, we make money distributing OERs from many publishers, because we work with photocopy shops to sell print-outs in their stores. (We earn a service fee for bringing the copy shops the extra business.) So in photocopy shops from Khayelitsha to Peddie to Petrus Steyn, people pay for print-outs of all kinds of OERs (and other books), because we make it easy for them.

What I’m saying is that open-licensed publishing is not the zero-revenue opposite of ‘commercial’, proprietary publishing. Open-licensing can be a powerful add-on to commercial models.

A few weeks ago the International Publishers Association released a press release and position paper on OERs. Despite its title (‘Publishers and Open Educational Resources can work together‘), it was a disappointing, deeply flawed, reactionary piece, which argues that books published under closed licensing models are inevitably better than OERs. It says the same kinds of silly things that said I myself when I first encountered Mark Horner’s work ten years ago.

This misunderstanding is based on the notion that OERs are produced in a kind of financial vacuum; that they emerge clumsily – through ‘untested content creation mechanisms’ – without any costs being incurred. Whereas ‘commercial’ publishers, they say, invest lots of money in proprietary books, and this makes the books better.

That’s not true.

Open resources are just as expensive to produce. But they’re paid for in the time of volunteers, by grants from philanthropists, and from commercial CSR or advertising funding. It’s not that the costs are different. What’s different is the customer.

Who benefits from a textbook, and therefore will pay for its development?

For proprietary books, the publisher’s customer is an individual school child and their parents, who must pay for textbooks for their child’s sole benefit. (Sometimes not directly in cash, but in school fees or by choosing lesser schools with state subsidies.) Development costs are bundled into that price.

For OERs, the publisher’s customer is civil society, who will benefit over and over again from that child being educated. In the forms of volunteer time, philanthropy and corporate sponsorship, civil society picks up the book-development tab as an investment in its collective future.

Eventually, this could reduce costs, because the more open-licensed material there is, the more we share and reuse it, and the less authors and publishers have to spend reinventing the wheel. Or civil society could just keep investing in making those resources better and better.

Traditional publishers have a tremendous opportunity to use their expertise to contribute here, by changing who their customer is. And if they can’t do that, then more and more organisations just like Siyavula will step in and do it instead. Open educational publishing is commercial publishing.

Thank you.

PS For more on the usefulness and high quality of OERs, follow the work of Shuttleworth Fellow David Wiley at Lumen Learning.

Disruptive innovations in emerging markets: Mxit, Siyavula, Paperight and Worldreader

At the superb publishing-technology conference Tools of Change for Publishing last week, Michael Smith of Worldreader and I presented a session called ‘Disruptive Innovations in Emerging Markets: Mxit, Siyavula, Paperight and Worldreader’. Here are my notes, and you can see Michael’s slides on Slideshare.

arthur-attwell_toc_disruptive-innovations_20130211-intro-slide

I come from Cape Town, South Africa, and my background’s in educational publishing and ebook production. South Africa is like two different countries: about 2 million wealthy people who support the publishing industry (excluding schools publishing, where the state is the largest client by far), and about 48 million people who could never afford an ereader, don’t have credit cards to buy things online, or can’t afford to physically travel to a bookstore. So to make it possible for most people to read books, we need to totally rethink how we sell books. And that’s going to take some disruptive innovations. Continue reading

At TEDxAIMS: “Tech spreads slowly”

Arthur Attwell at TEDxAIMSYesterday’s TEDxAIMS was incredible. AIMS is the African Institute for Mathematical Sciences, an institution that provides full one-year, live-in scholarships to post-grad sciences students from around Africa, and leads the inspiring Next Einstein Initiative. I spoke about my experiences trying to build fancy-tech products in South Africa, and my belief that for as long as we think “technology spreads quickly”, we’ll be working on the wrong problems.

Update 19 Feb 2013: I’ve now added the video. The text of the talk is below.

Continue reading

Disruptive innovations at Tools of Change

Tools of ChangeI’m thrilled to be heading to New York for this year’s Tools of Change for Publishing conference. I’ll be presenting along with Michael Smith of Worldreader in a session called “Disruptive Innovations In Emerging Markets: Mxit, Siyavula, Paperight and Worldreader“.

Here is an excerpt from my notes for the talk.

I think the real challenge for publishing is to appeal to new markets of young people in places where there are no bookstores or libraries or electronics stores or affordable Internet data. The size of the markets we’ve been selling to for the last hundred years are a drop in the ocean compared to this audience. Most are in developing countries.
We have to introduce completely new value propositions for these markets. A value proposition means: what do you get for how much money and in what way?
Clayton Christensen explained in The Innovator’s Dilemma fifteen years ago why it’s extremely difficult for established companies to create new value propositions. Often, the only way to do it is through acquisition or by spinning out entirely independent business units that can experiment freely and fail with confidence.
So the most promising innovations are most likely going to come from small players, who are able to grow in emerging markets with low margins.
No market needs a new value proposition more than the poor in developing countries, like the forty million people in South Africa who’ve likely never bought a book, but who all have a mobile phone and limited access to data. There is today simply no compelling reason for them to buy a printed book or an ebook given current prices and processes.
Three South African platforms in particular are tackling low literacy and book-purchasing rates in this market by changing the traditional publishing value proposition:
1. The first is a family of projects publishing stories on mobile phone app Mxit;
2. the second integrates textbooks with online media optimised for phones; and
3. the third is my own project, helping the ubiquitous photocopy shop legally print books out anywhere.