Tools of Change talk.

Title: No such thing as a book, or rethinking publishing in the age of the Internet.

TOC talk. Today, Feb 15, 2012,  http://www.toccon.com/toc2012

Had the great pleasure to be invited to talk to the Tools of Change conference in New York City today.   It is an O’Reilly & Associates conference studying the changing publishing industry.  

I’m not much at writing speeches,  you will note the lack of connection between the talk title I was supposed to speak to and what I spoke about,  but here’s a rough idea of what I tried to communicate today:

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Back in the good old days only us C students started businesses.   We were too dumb, or at least too poorly educated to get a “real” job at a bank, law firm, or large corporation.   So we started businesses because it was the best job we could get.

Now every university on the planet is trying to turn their students into entrepreneurs.  There are even textbooks  on “Entrepreneurialism”.  The problem is that us C students still can’t get a job with a major corporation and now we also have to compete with all the A students starting businesses.  It’s just not fair.

So don’t start an Internet publishing business, please.   While we are at it: don’t start a business at all.   I’m tired of all the additional competition. 

Even worse there are all the damned VC’s wooing all those runny-nosed new start-ups.   So just when you think you have your business all figured out your customers are being stolen by a whole new set of well-financed competitors.  

In the good old days every parent would lecture their wayward offspring to keep their heads down, study hard, get As.  Because they could then get a good job, work 60 hours a week for “the man”, and, after a forty year career they too could retire in comfort, buy a Winnepago, and drive it to Florida .

The reason these were “the good old days” is because in the 40 years between graduating and Florida those scared A students were hard-working loyal employees that us C student entrepreneurs could build our businesses around.

Today, even if you can get those smart kids working for you, you know they are skipping off early to work on their own start-up in their parents basement.  Now their parents are insisting that they should not waste their talents working for some slave wage when all the money is in capital appreciation of founders shares.

Look at Lulu.com.   We started it on a shoe-string eight years ago or so.   We invested tens of millions of dollars to build the world’s best print-on-demand global network of printers.  

Lulu’s remarkable technology enables you to set up an account and publish your book –for free-.   When your mother comes to buy your book (we all have at least one customer for our book) you make money and Lulu makes money on a single copy.  We do this through a network of print partners around the world in seven languages and five currencies, not counting Paypal.

We attract and serve millions of happy online customers, and what thanks do we get?

We get a dozen new competitors every day.  From start-ups who enable book discovery to start-ups who make it possible for every proud parent to record every waking gurgle of their precious and precocious little darlings.

And I’m not even going to waste time on the trouble Jeff-the-Darth-Vader-of-publishing has been causing us…

Oh, that’s right  -  I was supposed to be giving you an upbeat positive message around how everything is possible in this exciting new age of the Internet.

Ok. So here are the magic secrets as to how this is all going to work out for the best for Lulu.com and you, despite the stupidly fast rate of change we all have to suffer through and the myriad of new competitors.

The two rules are:

1.  Enjoy the ride.

When the history of this Internet revolution is finally written it will read like the old swashbuckling novels of the Spanish main.   We all grew up wishing we had been born in a more exciting era when we could have commanded our own frigate and had a jolly time raiding the bad guys and rescuing damsels and collecting a boat load of gold doubloons for our efforts.

This sounds remarkably like what the Facebook guys, the Google guys, and you and me are  trying to do.   Plunder big established industries, rescue damsels*, and make money.  Is this a great country or what?

2.  Follow your customers

Customers know what they want not what they need.  Given their lack of expertise about the options available to them they can articulate what they think they need - ie they have “wants” but they don’t really know what they “need”, beyond the timeless two, namely:  a. make money,  b. reduce cost.

So your job is to figure out what your customers need, not just respond to what they say they want.   This is in fact one of the most difficult tasks in business.

Here’s an example: In Lulu’s case our business was doing just fine, we had grown rapidly and were making good money.   But we weren’t doing anything larger competitors, such as Darth Vader,  could not do as well as we could and all the noise from all the new little start-ups was hurting margins for everyone.

So we started to think about our customers.  We went out and asked them what they wanted.   Like all customers they wanted better products at lower cost.  The more technically advanced of our customers kept pointing at some start-up or other and suggesting we should be more like plucky start-up X or clever start-up Y.  While we were making good money we were having problems coming up with our next act or breakthrough.

And then the penny dropped.   We were defining our customers incorrectly.   Worse we we were allowing ourselves to become Darth Vaders to them.   But we are the good guys!  

We recognized we needed to treat all these new plucky start-ups as customers instead of competitors.

And that’s what we decided to do.   Lulu is just coming off a nearly two-year re-write of our core application.  It has been a good thing Lulu had achieved the profitability  necessary to be able to afford this investment – VC’s don’t invest in 8 year old companies doing tens of millions of dollars of profitable business – just too boring. 

The principal benefit of this multi-million dollar investment is Lulu is now a series of highly modular APIs.   So as the plucky start-up you too can have a global print network, without the millions of dollars in investment that we had to put into creating one.

[As an aside to all those plucky start up executives listening: Who knows - by using infrastructure built by Lulu and others, you may be able to get to millions of dollars of high margin revenue without having to take the VC’s money.   More founders share for your parents!]

To summarize:

Have fun.   This is one of the great eras in human history to be alive, and it is the most exciting period in human history to be building businesses.

It is all about your customers.  Just make sure you pick the right customers.

Quit worrying about your competitors.   Most of the world wants to see you succeed.  Define your competitors as narrowly as possible and treat the rest of the world as your allies, or better yet - your potential customers.

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* I’m a guy.   I can only speak to what motivates us guys.  I’ll rely on my female cohorts to write the female version of  "Plunder the establishment, rescue damsels, and make money."

I’m giving a short talk at the O’Reilly Tools of Change (TOC) conference in New York on Feb. 15th.

I’ll post more on this later this week:

There Is No Such Thing As A Book, Or Re-thinking Publishing In The Age Of The Internet

While we have all grown up thinking we know what a book is—we don’t. Once you separate the content from the paper, and you judge content by the use the readers make of the content, then you have to conclude that a hard-cover romantic work of fiction is as similar to a hard cover Economics 101 textbook as shoes are to a hat. The only similarity is that they have traditionally come in the same paper-based format.

The new Internet publishing technologies are changing everything except people. We still want what humans have always wanted, and we need what we have always needed. Your business needs to focus on the value you can deliver to your customers, not the technology. You are the world expert on the value you can provide. Here are a few rules to help you adapt your book, or your publishing service, or your business to better serve your readers or customers in the Age of the Internet.”