Operations executives in education publishing are under intense pressure to evolve their business practices and processes in response to dramatic changes that are having a direct influence on all parts of the business. In operations and production functions, about the only certainty we have for the future is that we must continue to leverage our best practices and our best people. This allows us to deliver the content needed by our internal customers so that they can better meet the needs of their customers-professors, students, administrators and librarians-regardless of where the winds of change take this dynamic industry next. This article will address some of the macro trends reshaping the industry and then will delve into how these shifts are affecting publishing operations, in particular. It will close with some counsel on a few key initiatives that may help publishers successfully navigate the landscape ahead.
From the ongoing impact of the Internet and other advanced technologies, to growing shareholder oversight and pricing pressures, to changes in the make-up of the student and learning community, the education publishing market as a whole is, arguably, in the midst of the most dramatic period of change in the history of the industry. For example:
Content free and increasingly devalued
Content is becoming increasingly free and devalued. While this trend has been in action since the dawn of the Internet, the growth and success of resources such as Google, MSN and Yahoo! have accelerated its effect. Ultimately, the proliferation of free content means that publishers have to find other ways to drive value for their customers.
Changing pricing dynamics
The pricing of learning materials has been an issue in the Higher Education market for quite some time, as increasing prices have driven students to look for cheaper alternatives. This, in turn, has spurred the growth of a used-book market, which reduces the number of units over which development costs can be amortized, reducing the copies sold per edition. For publishers, this means a profit source is eroding that will have to be made up through the introduction of innovative new products and services.
New learning styles
Demographic changes, the cost of higher education and the introduction of new technologies have evolved the base of students and learners. This has caused instructors and professors to seek out new learning materials and tools such as distance learning programs, self-study and other programs in response to the emergence of new learning and teaching needs.
There are very few (if any) publishers left whose owners are indifferent to revenue and profitability growth, cash flow and return on investment. Pressure on financial return has never been higher to do more with less and continue to drive increasing financial performance. Operations and production play a key role in this, controlling the major spend of the company in Plant, PP&B and Operating Expense areas along with major investment in inventory and fixed assets.
Pull versus push content selection
Although it’s tied to learning styles, we’re seeing a move toward pull-based consumption, whether custom publishing, curriculum-driven publishing or standards-based publishing, away from the more traditional method of pushing a textbook out and having professors adopt it and students purchase it.
Web first publishing
With the Web gaining favor as a low-cost, highly accessible publishing medium, publishers need to develop Web publishing models that bring additional revenue without cannibalizing traditional products-no easy feat as every newspaper in the country will attest to.
Facets of publishing operations
With those mega trends as a backdrop, what follows are more specifics about how they are affecting specific facets of the publishing and operations process.
Acquisition of Content
Acquisition of content, essentially acquisition of the rights to content, is clearly an important part of the publishing process and part of the publishing supply chain. It’s also an important part of the economics of a publishing enterprise: for trade publishers it can be the dominant balance sheet factor and a very significant P&L factor. At present, publishers are wrestling with two dominant issues-standards rights agreements and incoming content mark-up-both of which have significant implications for the way publishing will develop in the future.
There’s massive uncertainty around how new formats are going to perform. Often this has led to publishers unwillingness to acquire all of the rights that would be necessary for either a digital future or international operations. The mandate for the future, in our view, is to push for a standard basket of rights, which would help to resolve the aforementioned issues.
In any production cycle, there’s a need to quickly process incoming content. This is best achieved if content is developed in a manner that can be easily integrated into publisher content management systems. The imperative for publishers is to put in place some templates to do that, although I have to say that STM publishers have been operating like this for years…
Development of Content
Content development starts where the completed contract leaves off and stretches from the authoring and editing of the content through page makeup. It stops at the end of prepress where reproduction masters are placed into a content management system for use either in printing or digital distribution. XML-based editing and production, PDF workflows, linkage with rights and metadata systems, collaborative authoring and Digital Asset Management systems are just some of the technologies impacting content development.
One of the key technologies in this area is the integration of XML into the early editorial process – even prior to copy editing of the manuscript. Once the content is expressed in a sufficiently robust XML, it is then possible for it to be output as a normalized typescript, as fully composed pages, or in various digital formats for editing, indexing and further development. There are a number of interesting innovations in this area that are helping publishers get the benefits of content agility and re-use and significantly decrease composition costs.
Acquisition of customers
Acquisition of customers is the development of customers to the point at which they are ready to place an order. In the world of professional, educational, journal and magazine publishing this can look like development of long-term subscription-based relationships ranging from libraries to professors to individual readers or students. In trade publishing, acquisition of customers is primarily the concern of retailers, who are very jealous of the information about those customers. All publishers, however, are interested in generating demand for their products which is a key part of this process. Public search engines and the trend toward personalization are among the thorniest issues impacting customer acquisition.
Most new technologies in customer acquisition are oriented around stimulating demand over the web. Enhanced search technology will increase the ease of finding material that is specifically relevant to the customer’s concerns. Personalization turns this around and allows presentation of material that is most likely to appeal to the customer or be relevant within his/her current context.
A key piece of customer acquisition is distribution of metadata to channel partners, including search engines. Customers will increasingly find you (if you let them), but once they do, it’s important to give them what they want and then see how else to add value.
Processing Customer Orders
Processing customer orders is the process by which customer orders are received, processed and instructions delivered to fulfillment and billing. Orders can range from simple cash transactions, through credit sales, to orders for custom publishing items that must have individual elements of content selected and sequenced. In this arena it is the trends toward on-demand publishing, self-help technology and Web order processing that are having the most impact on publishing processes.
Publishing on demand, for example, is an interesting development in publishing that crosses a variety of functions. It combines the order processing with custom development of content (generally re-assembling previously developed chapters, test questions, etc.). When you think about it, these tools should be very easy to use…and with a slight bit of enhancement, allow internal staff to develop new products, as well.
One of the biggest areas of opportunity in publishing is in integrating eCommerce engines with existing order processing systems. This allows real time processing of financial transactions, more rapid determination of in-stock position, and fewer overall customer service problems.
Fulfilling Customer Demand
This involves taking the orders that were placed in the previous process and delivering them to the customer. There are three variations: Configure to order, found in custom publishing applications in which titles are assembled from components and then printed and delivered (or if eBooks, just delivered), make-to-order, found in true print-on-demand operations, in which the books are printed only in response to a customer order, and make-to-stock, in which books are printed ahead of time and delivered as ordered from stock.
This is one of the most rapidly changing areas within publishing, influenced by ZMR and digital printing, production planning and scheduling, XBITS and EDI and digital distribution. We’ll look at ZMR and digital print technology as an example of the impact new technologies are having on the fulfillment process.
Zero Make Ready (ZMR) and digital print technology significantly alters the economics of printing, making it feasible to produce very small print runs of books, even down to a single unit. This allows not only low quantity replenishment of stock in publisher, distributor and retailer warehouses, but also print-on-demand in which books are printed only in response to customer demand. There is a continued arms race going on here among a number of printing equipment manufacturers and publishers can benefit immensely from if they’re not led astray by their accounting systems. I’m still waiting, however, for the cost of digital color printing to drop sufficiently for its use in textbooks of several hundred pages.
Customer financial transactions
Management of customer financial transactions starts with billing and ends with settled and reconciled accounts. It involves billing, collection, cash application, credit generation, deduction management and account reconciliation. Electronic cash sales and subscription processing are turning traditional transaction models on their heads.
Contributor financial transactions
Author financial transactions involve posting sales and royalties to the correct royalties sub-ledger account so that advance assets can be reduced and royalties paid as appropriate. This involves tracking the amount that is due on any particular kind of sale and generating the appropriate accounting transactions.
The key to doing this efficiently is knowing the rights and royalties structure of each asset and how it ties into the products that are being sold. This is a hugely complex area that gets much more difficult as custom products are developed.
Managing content provider relationships
Managing content provider relationships is critical when moving past transactions to provide a longer term basis for working together. The key here is to develop overall contractual relationships that lay out expectations on both sides. This is much more extensive than a simple permissions agreement and supports both our digital in international initiatives.
Managing customer relationships
Managing customer relationships is key to identifying opportunities for revenue growth and determining how to work with downstream channel partners more effectively. CRM systems were, and still are, the big deal in systematically understanding customers and their needs, but there’s a whole lot more to it than just systems. You need to get inside the heads of customers and understand what their wants and needs are. You don’t really do this via systems. You do it by following them around, looking at what they’re doing on a daily basis, what their challenges are and how they can be resolved.
Manage supplier relationships
This used to be called “purchasing” but goes farther than purchasing in determining the strategy with which suppliers are approached and then managing the relationship in terms of that strategy. Most publishers are driving pretty hard in this area to tie their composition, print and paper suppliers into the planning process, and then integrate them with operational systems, but really the idea here to make this a partnership for testing new ideas so that we’re both parties benefit.
Major Issues and Questions
Now that we’ve gone through the blow-by-blow of each process, let me summarize what I see are the major issues and questions facing publishing production and operations executives:
The big questions revolve around optimizing rights, content and physical supply chains
- What are correct planning, control and operational mechanisms in this new world?
- How do we prep content for an uncertain future without adding cost?
- How do we deal with Web-first publishing?
- How do we integrate all of the different printing technologies and alternatives into our physical supply chain?
- How do we integrate more closely with our suppliers (physical, content and rights)?
- How to capture rights, royalty obligations and flow them back to payables and sales restrictions?
- How do we standardize systems, yet make them flexible enough to handle uncertain future requirements?
Others concern the correct planning, control and transactional mechanisms in this new world? Particularly as it crosses the configure-to-order, make-to-order and make-to-stock frontiers.
While there are many ways to address these issues, there are three critical initiatives that publishers should be pursuing. Each of these can represent a massive investment for the organization in terms of money, management attention, and organizational change, but it is important to have a perspective on each.
Integrated rights, asset and content repository
The first is an integrated rights, asset and content repository. All of a publisher’s assets should be captured, along with how they are used, what rights they have to the asset, and standard description of the assets using controlled vocabularies. As far as how to approach the issues, there’s value in drawing from the Bill of Materials used in manufacturing: essentially publishers should create Product “Bill of Materials” from an asset and rights perspective.
XML-first editorial production process
The second is an XML-first production process that starts preferably with a standard Schema or DTD, flows into your composition systems, whether internal or external, and maintains any changes during the composition process in the source XML. This same XML should be used to generate eBooks, course cartridges, and NIMAS-compliant files to meet accessibility requirements. Publishers get a huge number of benefits from doing things this way. First, it’s cheaper and they get XML files for free as a by-product of composition instead of doing a post-composition conversion. Second, they always have the latest production files and third, by also using XML-based styling instructions they can get away from vendor lock-in that a pure Quark, InDesign, or 3B2 process might result in.
Integrated supply-chain planning
Finally, publishers must integrate their supply chain planning. Standard concepts such as demand-, inventory- and capacity-planning and vendor integration are finally penetrating publishing and will save publishers a huge amount of inventory investment over current processes that look like a ‘We’re almost out! Better print some more’ policy.
There’s no doubt that the challenges facing academic publishing are pronounced and complex to address. But, it’s heartening to know that, largely through technological advancements, viable solutions exist that will allow publishers to evolve their business models in step with market development and technological advancement and stay in the black.
While some of these solutions do require significant up-front investments, it’s more likely the fear of change, rather than the fear of the CFO’s wrath, that’s preventing many publishers from moving forward with these promising initiatives. Publishing has always been a change-wary industry, but the stakes-and market pressures-are simply too high for publishers to let that hold them back any longer. For those that are ready to enter the brave new world ahead, the market holds much promise.