The Power of Observation: Applying the Heisenberg Principle to Consulting

January 31, 2012 § 2 Comments

I firmly believe in the power of external consulting to cause change in companies.  I say that from experience, but can explain it with a scientific principle.   It is the Heisenberg principle of the observer effect–the impact that an observer has on the observed.

According to Wikipedia, “The observer effect …, relates to the influence the observer has on a system… This means that the type of       measurement that we do on the system affects the end state of the system.”

Consultants are obvious observers, newly and consciously introduced into the enterprise eco-system by management.    Consultants have an immediate, sometimes  visceral impact, on the organizations that deploy them .  The question is, how can the impact be leveraged for best effect?

The best clients leverage the presence that consultants have to best effect.  They communicate proactively about the pending engagement with the key players in their company.  They show their organization that they are serious and willing to commit resources.

The best consultants harness their presence to get information and connect with the key players.  They channel positive energy and try to use it to uncover barriers.  As they absorb more information, they begin to test hypotheses about how to orchestrate the changes needed, whether process or organizational.

The best results bring the observed into a new state, one that is more cohesive, productive, and committed to achieving common goals.  The strength of the Heisenberg principle, and consulting in general, is in leveraging the impact made to organizations by observers.

Publishing Management: The Next Generation

January 17, 2012 § 3 Comments

We’ve heard a lot about the need for publishers to “re-skill” (what a terrible word!) their staffs to be able to take on the challenges of the digital age. Project managers, coders, enhanced ebook designers, app-makers, game designers, SEO experts, transmedia people, and other non-traditional publishing personnel are being added to meet needs the business has never faced before. This is a good thing both in terms of new talent and in helping to shift internal cultures.

We would, however, propose that another kind of re-skilling is necessary at many (if not most) publishing houses in preparation for the future. That is training in basic management skills. Without casting aspersions on anyone at any publisher, we’ve noted in our work with clients that many individuals, particularly those in middle and junior management roles, lack many of the basic tools needed to be effective managers. This shortcoming can become a real weakness as they rise to more senior positions. The lack of these skills is the result of several factors:

  • First, not a lot of freshly-minted business majors and MBA’s enter publishing since compensation levels are generally low relative to alternate career paths. Most liberal arts majors don’t get a lot of exposure to business skills before they’re thrust into the fray. An MBA is not a prerequisite for being a good business person, but a bit of knowledge is;
  • Second, career paths for senior managers in publishing have often run through the editorial or sales side of the business with only brief stopovers (if any) in other parts of the company. While this makes sense (as those areas are the key drivers to a publisher’s success), it doesn’t necessarily prepare the individual for running bigger groups or the entire enterprise;
  • Finally, with several years of  budget and staff cuts, even the minimal amount of training that might have been provided in the past has been largely eliminated.

We believe that most publishers would more than recoup an investment in providing basic training for rising managers in fundamental business disciplines such as Business Strategy, Accounting and Finance, Sales and Marketing, Organizational Development, Human Resource Management, and Business Communication. A few hours a month on each of these topics (and/or others the individual publisher believes need more focus in her organization) could have a disproportionately large impact on the short and long term health of the company.

Don’t get us wrong. We’re certainly not suggesting turning creative people into “Suits”  or McKinsey consultants, and we know what can happen when the bean counters take control of a creative enterprise. We do, however, feel strongly that good management will be at least as important as technical skills for those publishers who survive and prosper going forward.

For Publishers, a New Customer?

January 5, 2012 § 5 Comments

There’s been a great deal of conversation in publishing circles recently about the decline of traditional distribution channels and the recognition that Readers (rather than Wholesalers and Retailers) must become Publishers’ customers. Among the reasons cited for this shift are the need to establish direct relationships for community building, data gathering, opportunities to cross-sell and up-sell, and, it’s hoped, improved margins resulting from the disintermediation of traditional middlemen and the elimination of their fees and expenses. The increasing market share of digital book sales has accelerated the call for this change.

Direct relationships with customers are great, whether in a traditional sales relationship or in some of the newer proposed business models (such as rentals and subscriptions), but Publishers shouldn’t underestimate the challenges associated with dealing directly with Reader/Customers.
The most obvious challenges are infrastructure-related. Most publishers lack both structure and expertise in the following:

  • Receiving, ingesting, processing and reporting on individual orders. Compared with a relative handful of orders from traditional channels (submitted – mostly – via systems that ‘talk’ directly with publishers’ systems, processing individual orders adds significant complexity;
  • What’s true about orders is also true of fulfillment. While publishers and distributors have a great depth of knowledge and experience in fulfilling (and accepting returns) for bulk orders, dealing with ‘onesies and twosies’ is more complicated, time-consuming and expensive;
  • An item most overlook when discussing direct-to-consumer models is customer service. Receiving and handling inquiries from thousands of individual customers is an entirely different sport from dealing with professional retailers and wholesalers.

There are others, but beyond the infrastructure issues there are economic matters to be considered:

  • What are the costs of acquiring a customer? If it costs, say, $20.00 in marketing expense (fully-loaded) to sell a $19.95 title, have we really accomplished anything? Magazine publishers have, for years, had sophisticated models to determine and measure such costs.
  • Related to the above, what is the value of the customer? If it costs $20.00 to acquire her, and she buys multiple products over time, then perhaps $20.00 is a bargain. Again, these things can be modeled at a relatively sophisticated level, but it’s not a skill-set most book publishers have in-house.
  • Another critical issue is pricing direct to consumer vis-à-vis traditional channels. While the ‘old’ distribution may be shrinking, it’s not going away anytime soon. What’s the optimal price for direct customers that maximizes income from them without (a) alienating the traditional trade and (b) cannibalizing sales from other channels? The goal after all, is to grow the pie, not merely to shift customers from one channel to another.

These are just a few considerations. There are others we can think of and we’re sure you can name still more. The punch line here is that developing new business models affects the entire organization and publishers who think all the way through the processes and people that need to be built and added before plowing ahead are much more likely to avoid pitfalls and ultimately to succeed.

Introducing: From the Whiteboard

January 3, 2012 § Leave a comment

Welcome to “From the Whiteboard”.

This blog is the creation of Firebrand Associates and is intended as a place where we can share thoughts on the issues confronting the publishing industry.

As we collectively move through this period of disruption, the need for practical, clear-headed thinking has never been greater.  Which issues are strategic? Which are tactical? Which ones should we worry about? When should we take action? How should we take action?

Our aim in this blog is to help publishers tackle these questions and move forward successfully with their businesses.

We invite our readers to comment and challenge everything we write.  None of us in the industry has all the answers, but through dialog, we may find ourselves seeing a clearer picture.

Thanks for reading, and we look forward to the road ahead!

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