The soon-to-be death of paperback books has generated a wonderful-mess for the book publishing industry and created a clear Blue Ocean opportunity.
Well – the Blue Ocean opportunity is clearly there, but who and what is not. And book publishing industry executives are far from happy at the moment. Blue Ocean opportunity refers to Blue Ocean Strategy, the proven system for making the competition irrelevant by creating new market spaces through simultaneous achievement of differentiation and low cost. Instead of being locked in red oceans of fierce bloody competition, Blue Ocean Strategy moves to clear, uncontested waters of highly profitable growth.
The book publishing industry, now more than ever, faces its toughest competition to date. The book publishing industry has survived books on tape and books on phones. However, Amazon.com’s Kindle, which offers the innovative alternative to paperback books through its 3G Wireless capability to download electronic books in less than 60 seconds, can hold up to 1,500 books…not to mention its large selection of over 450,000 books.
Moreover, the recent release of Apple’s iPad – The iPad’s easy-to-use interface allows consumers to play games, navigate the internet and download electronic books. The ameliorating electronic movement through technological innovation has created a crowded red ocean of competition for the book publishing industry. Amazon and Apple continue to take huge bites of profit out of the book publishing industry requiring an inevitable Blue Ocean Strategy, value-innovation driven, change.
“Traditional trade book publishers are scared,” says Harvard Business school professor (and former CEO of Random House) Peter Olson. “The world that they have known, of print books and brick-and-mortar bookstores – the whole physical distribution system – is on the cusp of changing fundamentally.”
Recently, Macmillan, privately-held international publishing company, battled with leading online retailer Amazon over e-pricing as the biggest source of friction. Amazon briefly removed the publisher’s Kindle editions and print book from its site after Macmillan indicated it would begin setting higher consumer prices for e-books than Amazon’s standard charge. Amazon eventually renegotiated terms with Macmillan, but the confrontation reflects publishers’ concern that more and more customers are going to get used to cheap electronic pricing that will undercut print books. Publishers believe that consumers’ perception of things that are digital should be less expensive or free.
The ongoing power struggle between publishers and key online retailers like Amazon remains an open question. Odd enough, the focus of publishers and retailers is primarily on the amount of resources dedicated to the manufacturing and physical distribution of books. Blue Ocean Strategy focuses on customers and non customers as a source for value innovation to make the competition irrelevant.
The current industry concerns are confrontation versus cooperation with retailers and e-pricing and royalty rates. But, consider the solution from a different approach – a Blue Ocean Strategy approach. The major publishing companies and online retailers are competing and worrying about the strategies for competing. For example, publishing companies are pricing their books based not on what is costs or what people want to pay for it, but based on another format that is completely different, just because they want to keep the old format alive. Macmillan was able to win the shot-term pricing battle with Amazon, but couldn’t Amazon just retaliate by promoting other publishers’ titles more?
The electronic movement has resulted in the inevitable – disruption happens. But, what company in the book publishing industry is going to create a Blue Ocean of highly profitable growth and how will they do it? Can the book publishing make the market more attractive with additional electronic features, packages, etc? With the central focus of the publishers’ and retailers’ debate on price and the adoption of the e-reader it will require the application of the fundamental aspects of Blue Ocean Strategy – differentiation and low cost to survive.
Brendan Murphy is an Associate at Strategize Blue( www.strategizeblue.com). He works under Dr. Zunaira Munir, the internationally acclaimed expert and keynote speaker on Blue Ocean Strategy.
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