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.

Jul

24

Royal Line Diluted Online

Filed Under B2B, Cengage, eBook, Education, eLearning, Industry Analysis, internet, Pearson, Publishing, Uncategorized, Workflow | Leave a Comment

In a land where one cannot move for Royal baby hysteria, I seem to have found myself reading a great many “Death of the Textbook” stories in the past week. A good series from the Economist on the inexorable rise of educational technologies (29 June 2013), a weak and woolly piece from Reuters, and an endless supply of “MOOCs are good for you” announcements. As a textbook publisher and author (1967- 1979) I admit to a nostalgia for a market even then enthralled with the lore of its own heritage. In a swoop on Royal branding that would never be tolerated today, I have before me, as I write this, copies of the Nelson New Royal Primers and the Nelson Royal Readers, published by Thomas Nelson and Sons in Edinburgh, and carrying, without any authority that I can detect, the Royal coat of arms. These books were published to catch the popular enthusiasm derived from the 1870 Education Act. I was still, incredibly enough, reprinting them in the 1960s. I doubt that the new-born Prince of the House of Windsor will be brought up upon them, though they do describe a world closer to his than ours. As his father says to little Willie in Royal Readers 3 “I want you, my boy, to do your duty in the station, whatever it may be, to which it will please God to call you , and not to set your heart on any mere earthly success…”.

Now the longevity of the textbook – an invention really of the 1840s unless you see it as a lineal descendant of the chapbook – is seriously called into question. Reuters quote surveys that indicate student conservatism around change, and indicate that the real pressure is pricing (http://www.euronews.com/business-newswires). Other surveys seem to show a real fear of buying into the digital and then not having access to downloads after upgrading devices (sounds like a case for the Personal Cloud Library!). All seem agreed that print pricing has lost touch with student buying power, even in learning environments in Europe where the textbook is more peripheral to the whole learning experience. But particularly striking was a survey conducted for BISG by Bowker (Student Attitudes Toward Content in Higher Education Vol 3, Part 2) (http://www.bisg.org/news-5-847-press-release-now-available-student-attitudes-toward-content-in-higher-education-volume-3.php). Here we learn that in the last two years students who admit to downloading course content from unauthorized websites has risen from 20% of students interviewed to 34%, and that those who admitted scanning or photocopying textbook materials rose from 21% to 31%. Two years, and these are only those who admit to this allegedly victimless crime. In another two years we shall be beyond 50% on both counts. And, despite valiant efforts like CourseSmart, few people seem to see this as a slow motion car crash. We will not fix the textbook, in print or digitally, so where do we go now?

Textbook publishers have been politely snooty about teaching resource exchange sites for years. Even when www.teacherspayteachers.com announced that a teacher member had earned a million dollars from lesson plan sales this was regarded as a strictly limited application, and certainly confined to k-12. When Nelson’s Royal Readers were youngsters so was the Times Educational Supplement, and in its re-incarnation as TES Connect (www.tesconnect.com) is showing every sign of providing the transformative power which will enable it to succeed while textbook publishers, migrating digitally, fail. The launch of TES Australia this week comes hard on the development of TES India, and the launch in the US of www.sharemylesson.com with the American Federation of Teachers. The service based from the UK has 2.5m registered users and claims to connect 52 m teachers from over 200 countries downloading 3.6 m resources a week from a store of material that now tops 636 thousand. Last month TPG bought this property from Charterhouse for £400m ($600m). Reflect that McGraw Hill sold this year to Apollo for $2.4 billion. Add in the fact that the last net profit figure anyone ever saw on TSL, the parent of TES Connect, was £45m, and you have a picture of the way in which textbook assets are being depreciated. Is TSL worth 25% of McGraw Hill Education? Almost certainly not, but at least TPG have an asset that they can exit to a distressed ex-textbook publisher in due course (though not Pearson, who have effectively made their own exit through diversification.

So why are there no real community networks in higher education? There seem to be a hundred reasons, but the one that interests me is the MOOC argument. Perhaps indeed Coursera will turn into the community resource, but at present the course competition is what drives the market. I note this week that I can now do a Masters in Computer Science from Georgia Tech for $6600, with all learning materials attached. The way for publishers to survive in this market is surely to move beyond personalized publishing (light adaptation of courseware for particular teachers or institutions) towards making all of their material available as downloadable learning objects, for inclusion in MOOCs and elsewhere. And concentrating on areas where they have subject/author brand strengths to build MOOC inclusive communities there. But nobody wants to do this for fear of disembowelling the existing business model. In fact, come to think of it, its only when we are truly desperate, like TES when its recruitment advertising markets fell over in the recession, that we have the courage to stop “migrating” and start “transforming”.

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