Jun
24
On Barriers to Entry
Filed Under B2B, Big Data, Blog, data analytics, Education, eLearning, Financial services, healthcare, Industry Analysis, internet, Publishing, Reed Elsevier, Search, STM, Thomson, Uncategorized, Workflow | Leave a Comment
On the morning after the British electorate performed the largest mass suicide attempt in even our eccentric history, thoughts naturally turn to the future. Will a Europe that envies English as a Lingua Franca and which would like Start-up City Europe to be Berlin or Barcelona instead of London’s Silicon Round-about, find ways, in this messy divorce, to challenge the status quo in European information marketplaces? Like everything else I have heard this morning, it is “too early to tell”, but while thinking about competition and competition rules, it may be worth speculating on something else. Is competition what it used to be, and what has happened to the “barriers to market entry” that seemed so important to us all in pre-digital non-networked marketplaces.
And it may be necessary to remind those under a certain age what those historical barriers to entry were. The greatest of them was Ownership. Primarily the ownership of Intellectual Property. And first and foremost the possession of Copyright in Proprietory Information, Data or Content. For 70 years from the death of the author. This Ownership position was also reflected in Brand, and with luck one could combine the two to create quasi-monopolistic positions. Then add domination of distribution networks, exclusive positions with third party agents in important subsidiary markets. Then look at the Know-how created to run these businesses, and the way it was passed like an inheritance from generation to generation of long-serving staff and one can easily see how intimidating and expensive it was to attempt to compete. As the tyro CEO of the European Law Centre in 1980, I looked at Sweet and Maxwell (late eighteenth century) and Butterworth (late nineteenth century) and wondered, although my online product was a wonderful innovation, how I could possibly compete.
The short answer is that you couldn’t. Thomson bought one and Reed the other, acknowledging that if you wanted market share you had to buy it, or condemn yourself to niche plays in subsidiary markets that these Titans disdained. But now turn your mind to market entry today. Established plays who have put down roots are almost a challenge to disruptive start-ups rather than a threat. I grapple now with the opposite problem of valuation: how do you place value on ex-print – migrating – to digital companies when it is easier for a start-up to enter their markets than it is to rent a garage in London from which to do the disrupting? In an amazingly short time, the Age of Content has collapsed around us in all but entertainment marketplaces. It is not just that content became commoditised. It is also to do with our expectations. As the costs of computing and storage continue to collapse in relative terms, volume is no longer a factor here. I read the suggestion in Ars Technica this week that it will soon be possible to download major data collections like Elsevier’s ScienceDirect and provide them to every user. Which reminded me that you could download major collections (SciHub) a and provide them free in Kazakstan.
While major publishers still own the copyrights, theses ownerships no longer present barriers to entry. As I have so often written here, users want solutions, and preferably ones that slot into workflow. So where do we look now for barriers? In a world where users want a comprehensive view of all of the content/data/information which may be pertinent to solution, we can always simulate the content we do not have even if we cannot acquire it as Open Data or find it on the Open Web. But we can add value to it, both in terms of semantic web treatment, and entity extraction for building taxonomies and ontologies. Our knowledge system is both a differentiator and a barrier if it becomes a market standard. Indeed, much of our software performs barrier roles – even if it is hard to protect and, even if our techniques achieved patent protection, that is a short term gain at best.
But where else can we turn? Well, for some an acquired skills base may be a barrier against raw star-up competition. With many players seriously concerned about price competition from well-funded second stage offerings seeking to buy market share on price, it is also important to inspect the state of the Golden Handcuffs that hold the employed skills base in place. And the same applies to the customer relationships. Since customers are a very likely source of competitive pressure, it becomes important to “value” the customer and his relationship with you – are you so expensive that it will soon be cheaper for him to acquire your technology on the market and do your process internally for himself? What was the cost of acquiring that relationship and how quickly could you build another one? What parts of the relationship are defensible from competitive attack on either price or value?
It now becomes harder to value a company in terms of barriers to entry because many of these elements involve valuing intangibles. In a networked society location is no longer a very important factor, and in a network where brands can be created and built in a remarkably short time there is little sacred about trust and brand authority in the abstract. Yet markets still keep asking about defensible value positions, and none of the old answers work anymore.
Jun
4
In Praise of Elsevier
Filed Under Big Data, Blog, data analytics, Industry Analysis, internet, Publishing, Reed Elsevier, Search, semantic web, STM, Thomson, Uncategorized, Workflow | Leave a Comment
How do I explain not blogging in May? Too much to do and too little thinking time. I shall try harder. How do I explain the title of this blog? I want to write about people who understand change, and despite the complaints of a vigorous minority of academics and the banshee wailing of the professional OA zealots, Elsevier, from Mendeley to SSRN, can certainly be reckoned to read the directional signs. And have done so over many years – from BioMedNet (memory test for younger readers!) onwards. And the fact that they have always pre-emtively bought in front of the market direction has earnt them no praise from academics (“buying innovation and institutionalising it”) or their conventional competitors (“buying innovation before it has grown real margins at prices we could not have paid”). Since both of these are just what market leaders do in all sorts of markets I imagine that Elsevier management are unmoved: since they have been market leader since they swallowed Robert Maxwell’s Pergamon empire over 20 years ago they have huge experience at being unmoved.
And they have been unmoved in their own peculiar, schizophrenic way. It always seems to me as if two companies struggle inside the corporate cloak. I imagine one as a hugely successful and conservative journal publisher, still defending the ramparts of paid-for journals by crouching in the slit trench of peer review and high impact branded publications. But that of course is just one aspect: the online ideological long march of Elsevier’s techno-Maoists displays quite another. Is there any former publishing company in any information sector who can point to a record of technology application and successful re-investment that matches the story which starts with Science Direct, then goes to Scirus, to Scopus and at length to SciVal. This comprehensive re-assessment of the needs of scientists and researchers for databased content, for advanced search, for consistent abstracting and indexing across the entire industry production, and for evaluation and measurement tools that matched and competed with Web of Science is one of the heroic stories in the awakening of scientific publishing to the digital age and its realities.
Why is this important? Since it now becomes clearer every year that the age of journal publishing has ended, and article publishing itself is becoming deeply commoditised, Elsevier have to conjure up a new company which represents the direction of flow in scholarly communications. In this age of increasing investment in global research, and the importance of publication in the cycle of tenure and gaining research funding, researchers are being set genuine problems in handling the crush of articles and distinguishing what is important. In a data-driven society, with an emphasis on the analysis of results and the repeatability of experimentation, evidential data can be more important to other researchers than the editorial state of the finished article. And with branded journals moving ever closer to selecting offerings from what is already available on pre-print servers and project or institutional repositories, the end-product emphasis changes. And when peer review is post publication in many sectors, another element of the old defensive system falls apart.
But it has not fallen apart yet. And, as ever in the information industry, management find that they have one leg astride the old nag which despite a threadbare appearance still produces revenues and high margins, while the other is across a skittish mare who bucks and plunges in all directions and whose gyrations need more corn to fuel than revenues created from races won. While Wiley, though a good internal innovator, looks more to education for acquisition than STM, and Springer-Nature is hog tied by the need to wait for its IPO, now postponed for a further year, before dreaming of competitive acquisition, Elsevier has the field to itself. Mendeley gave it invaluable data on who is reading what and it is now beginning to exploit the advantage that real data about downloads brings. SSRN brings experience of pre-print servers and the way they work and can be turned into publishing platforms. While Web of Science and the Thomson Science stable is available, an Elsevier bid would probably not survive a competition enquiry in Europe. And anyway, they have built much of that already. And ReserchGate and Academia.edu are clearly buy-able, if one needed to…
The only feasible competitive innovation nexus lies in Macmillan Digital Science (separated from Springer-Nature by the need to exclude their losses from the IPO, though presumably in line to be re-united whenever an IPO is concluded). Here start-ups like ReadCube and figshare are beginning to move powerfully. And F1000 is also presumably available as a play in the post publication peer review and data publishing sectors. But as Elsevier have found several times already in the past 20 years change can come up rapidly from the blind spot in the rear view mirror. In a marketplace now unclothed of its aspirational scholarly lineaments and more nakedly directed by reputation management on the input side, and discoverability and relevance on the output side, the real competitor is not other publishers, but the market itself, its readiness to create co-operative institutions by scholars for scholars, and its willingness to allow Elsevier to co-invest and create margins.
As Elsevier ponders its latest data-mining licences in the context of scientists who want to search an entire scholarly corpus of knowledge in one sweep across all published content, it is as well to rethink the nature of networked communication and outmoded ideas like products, content ownership, IP and “barriers to entry”. In the fashionable metaphor, think of science as a mycelium, a vast, unseen connectivity with the power of such an organism (the largest organisms on Earth) to recreate, innovate and grow from the edge. The Elsevier question may not be old style competition but how much, in the networked service economy of scholarly communication, they will be allowed to do to facilitate the way the network runs and its services function.