Oct

31

Giants in Transformation Contrast

Filed Under B2B, Big Data, Blog, data analytics, eBook, Education, eLearning, Financial services, Industry Analysis, internet, Pearson, Publishing, Reed Elsevier, Search, Thomson, Uncategorized, Workflow | Leave a Comment

There are some major similarities and differences between the giant market players in the information/publishing media sector which are not all about markets and competition. For example, Wolters Kluwer and Reed Elsevier have clearly become portfolio strategists. If rumours in New York a month ago about leaving the law market, and rumours in London about a major entry into credit rating are anything to go by, markets clearly see Reed as a player who now has the scope to restructure the portfolio. But Pearson and Thomson Reuters, both in the $6-9 billion USD range in annual revenues, are not at all like that. The transformation they seek is about global markets and building bigger sectoral presence in order to dominate the workflow of professionals with solutions that become a requirement in markets which are duopolistic at most. Perhaps it is time to catch the flavour of “transformation”.

Pearson and Thomson Reuters, despite the differences in their marketplaces, are thus an important comparison in the Transformation Game. T-R have appointed a Chief Transformation Officer, and when they announced third quarter results this week pointed to 3000 job losses as a first transformational step. Let Jim Smith, CEO of Thomson Reuters have the first word (from his quarterly results press release):

“Our improving track record on execution gives me the confidence to now move even faster in our transformation work,” said Smith. “We will pick up the pace of efforts to simplify and streamline our organization, to shift resources behind the most promising growth opportunities and to use every tool at our disposal to drive value creation for all our stakeholders.”

And then again in a leaked memo to staff (www.jimromanesko.com):

“The answer is to accelerate our evolution into a platform company – one that delivers to customers not just a portfolio of products, but the power of our entire enterprise. We have made progress on that front, but there’s still much to be done. To take the next step, today we set aside funding to further accelerate the transformation of our Financial business and to better align resources to our most promising opportunities.”

Here then is a strategy that remains wedded to the idea of cross-selling and cross-solutioning financial services, law and tax professionals, and then moving outwards to the clients of those professionals. It uses the word “platform” both in a technology and marketing sense, and the word becomes a metaphor that suggests that when all the content and all of the customer knowledge is in one place, T-R can use its skills to quickly generate agile services that fit local needs in a global context. To do this you need to eliminate the turf wars which have been such a feature of these great corporations: in my Thomson years it was easier to partner a complete stranger than share a venture with another Thomson division. Mr Smith has indicated that the politicking must stop, and be replaced by an ethic that is mindful of the overall gain, but changing cultures is one of the toughest elements of transformation, and there are few records of success to use for guidance.

But some things are swinging in Mr Smith’s direction. Sluggish early sales of Eikon are now moving forward and have passed the 100,000 installations mark. Job losses will enable the re-organization of skills and assets needed to permit the transformation, as well as improve margins. The share price has risen by a third in the last year, a welcome sign that markets see what is happening and support it, and the latest results seem to underline that. But problems remain. The platform technology architecture is far from in place, and indeed the historical divisions seem locked on historical technological solutions that have real problems in talking to each other. This is surely a frontline issue for a Chief Transformation Officer.

Over at Pearson, John Fallon, chief executive, said: “In trading terms, 2013 has begun much as we expected. In general, good growth in our digital, services and developing-market businesses continues to offset tough conditions for traditional publishing. Our strategy is to transform Pearson into a single operating company that is sharply focussed on the biggest needs in global education and on measurable learning outcomes. With our restructuring programme on track and the reorganisation of the company under way, we are making significant progress towards that goal.”

In other words, investors are invited to see a picture of a new CEO trying to get a global strategy in place (as against a big US core of 10 years ago, plus some good but small geographically dispersed education assets). Today the balance is much more equal, the US is clearly much less influential in the revenues and margins analysis, and the company i.e. recognized as the sector global market leader. Yet every one still gets worried when college textbook sales are described as “soft”. The share price goes off by 6%, even though Pearson is a company that makes most progress in the second half of its financial year. But this year sets challenging targets if they are to end up within reach of their goal.

The big investor question at Pearson was always “can all this globalization, re-platforming and occupancy of the whole education services and solutions niche, not just the learning content bit, be done without a huge debt burden?” So far, this miracle has happened, and with more non-core assets yet to be sold there is great scope for further acquisition-led growth. And education markets in some sectors outside of US College are picking up, so there is a warm reception to the idea of restructuring the company managerially, reducing duplication and unnecessary cost and getting the right technology in place to re -platform for rapid product development.

Nothing in the managerial changes was a surprise except that technology leadership seems to have been dissipated. Investors expect that when markets give Pearson the signal the tech environment will allow product developers anywhere to have access to the whole corpus of Pearson data/content/knowledge to produce very rapid iterations of innovative services and solutions which can be redeveloped and re-iterated in flight. As with Thomson, the fluent use of the whole data environment, of data analytics and of what we might have called Big Data six months ago becomes crucial to the way in which both players relate to their major customers. Does the Pearson divisional structure allow for this, and does the tech unity and architecture exist to permit it? We do not know yet because markets are not quite warm enough to try out a lot of things, but having been sold the idea of Pearson as a global growth vehicle by John Fallon, there will be an expectation of performance over the next 18 months, and a greater degree of immunity to old sectors like college textbooks giving everyone the shivers.

The important fact that investors must now reluctantly accept is that repeat order, edition-based, price-elastic textbook markets have gone forever, and that Pearson are clearing the decks for what comes next even if no one is always quite sure what that is! But for both companies there is a certainty that it is not just change, but “transformation”. And that the market and technology philosophy around “platform” lies at the heart of it. Markets will of course exercise a great deal of concern at the periphery of these momentous changes. They will want to know what assets are core and what are non-core? John Fallon is obviously fed up with being asked when he is going to sell the FT to Bloomberg/Thomson Reuters, even while the MergerMarket side of the FT Group is being broken out and prepared for sale. Jim Smith and his Chief Transformer will no doubt get the same treatment around Thomson Reuters IP and Science activities. But the future of both players is not decided there and for them this is no longer a portfolio game.

Oct

1

Never say Never

Filed Under Blog, eBook, Education, eLearning, Industry Analysis, internet, mobile content, news media, Publishing, social media, Uncategorized | 2 Comments

I really enjoyed a brief stopover in New York last week, en route to the Outsell Signature Event in Northern Virginia. It meant that I was able to respond to a kind invitation from BISG to chair a panel at their annual meeting. And it also meant that I was there on the historic day when they announced that they are moving from being the “book” industry study group to becoming the “content” industry study group. The rationale behind this was brilliantly explained by their CEO, Len Vlahos, a refreshing change from many of his contempories running trade bodies. Here was someone who saw the significance of a web of connected objects, who understood the dynamics of collaboration in the network, and was determined to position his organization at the right place to observe how the network is changing the nature of content in communication. His board, headed by the catalytic figure of Ken Michaels, currently transferring from Hachette to Macmillan, set up a study group to examine the mission of BISG itself, and here was the result, and in my view an admirable first: a trade grouping moving with the times, and not just re-branding or taking over weaker brethren.

Being there on this day was all the more interesting for me because I have always had a huge regard for BISG. When it was deeply unfashionable it positioned itself horizontally to study the supply chain, and inevitably the value chain, of the book. When I became the silent partner of Francis Bennett and David Martin in founding Book Data in the early 1990s, BISG was the only place to go to get studies of what was actually happening in the movement of knowledge and entertainment from the desk of the creator to the eyes of the user. When it comes up with a new title for itself “book” may be a casualty. No bad thing if that means we concentrate on the use and re-use of content, but I also anticipate some push back. Yet I recall that BISG is an ancestor of BIC, and thus a forerunner of the thinking that led to Editeur. If we are to have standards and benchmarks then we must have these orgnizations or others like them. Call it what you will, the BISG mission is now clearly designed around tracking content flows and what happens commercially around them. They tabled the new mission and voted for it.

In a sense therefore the panel that I moderated was a bit of an anti-climax. Ron Schlosser, representing educational companies, fully accepted the thesis that we are now entering the age of educational services and solutions. The textbook was not the answer if we wanted to respond to different speeds and characteristics of learners. How well, I thought, does the world of adaptive learning fit into the new BISG mission. Then I turned to Simon Ross, now New York resident for Cambridge University Press and a true academic publisher. He noted the tendency for students and researchers to want to search across articles and books, to make and retain their own collections of useful excerpts and references and even, I suggested, wrap them up as eBooks, which may themselves attract the IP protection of an anthology. We spoke glowingly, did Ron, Simon and I, as we moved through the prepared questions, of the world of content to come. Then we hit a reef and went down with the loss of all hands.

And the reef was the word “Never”. We had reached the very capable and highly intelligent COO of Penguin Random House, North America, Madeline McIntosh. Since I saw the book as a product format losing its primacy in educational and academic markets, it seemed at least polite if not wholly pertinent to ask about the prospects for fiction writing, and indeed the whole marketplace for non-fiction, from self-help to popular history. It was then that I learnt that the fiction market will Never change. Indeed, while Ms McIntosh’s company have self-publishing and eBook publishing properly covered, their view is that their market will never desert them, because of the respect in which they are held as selectors and editors of the very best fiction. And, that word again, readers will Never give up the fiction that they love so much.

It was no place to pursue the argument, and if time had been available I might have learnt all sorts of clever things that Penguin Random House have up their sleeves to stave off change and preserve the status quo. The novel form as a narrative seems to me to begin with Samuel Richardson and Henry Fielding in the mid-eighteenth century. Much of the last century, from James Joyce and Virginia Woolf onwards was occupied in trying to blow up the form Things that have a beginning often also have an end. Did Sophocles remark to Euripides, “Well, old boy, one thing is certain. We shall always have a job because plebs will always want three act tragedy!” For this Never thing to work for fiction publishers the demographics have to be right, and I see no evidence that the form, if we discount the odd phenomena of Fifty Shades (perhaps itself a pointer to a future?), is growing or diminishing in audience. If I was working in fiction publishing, then I would want a small unit dedicated to second guessing the future – be it multiple media, narrative choice for the reader, the future of smartphone as a narrative platform or any of the other emerging network options for telling stories to each other.

And I would study closely what is happening to television, as networks become stressed by users exercising choice and making downloads a reasonable viewing option. Five years ago I was told this would Never happen. And the music industry would always go on just as before because kids would Never stop buying albums. And, as a newspaper executive once said to me, “Kids don’t read the ‘papers but everyone comes back to them in their 50s – they will never replace our position in local lives”. He has retired early and his former company is in its death throes. All the bad things that have happened to people and companies that I really respected and want to help to change are marked by that one word. Never.

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