Amazon becomes the Wal-Mart of the publishing industry, and other dystopias

Posted by Adam Gordon on Apr 14, 2009 in all, forecast filtering, Future Savvy, lifestyles & values, scenario planning, strategic foresight

There’s been a storm in the past few days over Amazon.com excluding “adult” books from its sales rankings. Among the almost 60,000 books affected was not just Erotica. Feminist books, Gay & Lesbian titles, and books in Health, Mind & Body, and Reproductive & Sexual Medicine also disappeared from the rankings

Amazon the new Wal-Mart? pic:Huffington Post

According to yesterday’s LA Times Amazon says the whole thing was a cataloging error. But when author Mark Probst had previously contacted Amazon for an explanation, he got this: “In consideration of our entire customer base, we exclude “adult” material from appearing in some searches and best seller lists.”

Aside: Everyone is trying to figure out what Twitter is good for, or how it will be used, and it has become clear that one application is to quickly aggregate mass protest, evidenced in the anti-Amazon outrage, see Twitter “Amazonfail.”

Author Maya Reynolds has been connecting the dots in the future of publishing, watching Amazon move via acquisitions such as Abe Books, Audible, BookFinder, BookSurge, Brilliance Audio, FillZ, GoJaba, Library Thing, Mobipocket and Shelfari.

She is among various industry watchers who claim, with fair evidence, that Amazon is following a “Wal-Mart” strategy – the well-documented essence of which is to gain enough retailer power to be able to pressure suppliers (telling them what to make or what to charge, or exacting special discounts) to achieve better retail prices and get more retailer power, in a reinforcing spiral which, inter alia, squeezes all the healthy mom-’n-pop-shop diversity and other balances of power out of the industry.

In a post of July 08 she paints the full dystopia scenario:
“1. First, the smaller presses, POD presses and e-publishers will disappear as Amazon’s margins squeeze them out of business. Amazon will help the process along by offering better terms to authors if they will use BookSurge’s POD press and Kindle’s e-book to publish. Even if authors don’t embrace Amazon initially, as their publishers go out of business, they will be forced to do so.
“2. Brick-and-mortar stores have two constraints which Amazon does not: (1) limited shelf space and (2) a limited geographic range. Bookstores carry books “on spec,” filling their shelves with stock they hope readers will seek. Amazon, on the other hand, has unlimited virtual shelf space and unlimited geographic reach. Amazon does not have to warehouse stock. They can wait until a book is actually ordered and the money is in hand before using a digital file and BookSurge to print the book. Because they cannot match the deep discounts Amazon offers, bricks-and-mortar bookstores–already under siege–will be squeezed out of existence.
“3. Like Wal-Mart, Amazon will continue to apply pressure on publishers to give more favorable terms. Wal-Mart’s suppliers used cheaper materials and out-sourced to cheaper overseas labor. As the publishing houses’ profit margins are squeezed, their cost-cutting efforts will take three directions: (1) Focus even more attention on signing best-selling authors whose work is guaranteed to sell; (2) Begin to pressure their mid-list authors to accept lower advances and lower royalty percentages; and (3) Sign fewer and fewer new authors because of the uncertainty and the expense of growing a new writer.

Where will they go?

“4. Mid-list authors and new authors, unable to either find a publisher or unwilling to accept the low royalties, will seek to self-publish. Where will they go? Since, by that time, most of the self-publishing houses will have gone out of business, they will go to Amazon’s BookSurge or to Amazon’s e-book division, Kindle. Amazon will welcome them.
“5. The next death on the food chain will be the publishers and agents themselves. First the mid-level publishers will die. Well-known agents and the larger houses will be protected for a period of time by their best-selling authors who are loyal to them. However, as those cash cows die off, so will the agents and larger houses. A new paradigm will emerge: Amazon as both publisher and retailer.
“6. Eventually Amazon will have so much power, they will be able to decide WHAT is worthy of being published. Welcome to the future of publishing.”

Is this the future of publishing? The logic of unregulated industry power suggests it is. But Future Savvy says response – regulation – is also likely. As with Microsoft and many before them, when Amazon gets too powerful, anti-trust regulators should be in business. But only if their hand is pushed. Articulate and persuasive dystopias such as Reynolds’ are the single most powerful mechanism by which the word is spread (spread it! forward it, tweet it!) so that enough consumers get to see and believe threatening future outcomes early enough, and pressure regulators to act.

The luxury good sector gets humble about forecasting – but knows what follows “bling”

Posted by Adam Gordon on Mar 30, 2009 in 2015, all, economy & finance, leadership, lifestyles & values, management, managing uncertainty, social change, strategic foresight, trend tracking

The International Herald Tribune (New York Times Global Edition / Reuters Business) last week ran an interesting foresight story headlined ‘Crisis complicates forecasting by luxury brands,’ reporting from the International Herald Tribune’s eighth conference on luxury in New Delhi. The gist was that although most of the famous brands continue to do well despite the recession, luxury sector executives are very uncertain about the future.

Christian Blanckaert, Executive Vice President at Hermès International was quoted as saying: “We have absolutely no visibility into 2009!”

On the one hand, fair enough. This economic downturn is steeper than previous down cycles, and the basic viability of the financial sector has been tested. Access to credit is normally easier in a recession, but in this one it is not. All of which makes luxury spending harder to predict.

No doubt the most unlikely prediction of all would have been that Hermès, Burberry, LVMH, Moët Hennessy, Louis Vuitton, and PPR (Gucci , Yves Saint Laurent) have all recently reported better-than-expected results.

Nevertheless luxury industry leaders have declined to provide investors and analysts with any official outlook. What’s curious, from an industry foresight point of view, is how executives such as Blanckaert thought they really had more “visibility” into any previous year, or that they will somehow gain it again when the financial crisis is over. They will not. The world will continue to surprise them and us. What they will gain, certainly, is a greater likelihood that the standard business-as-usual future assumptions they make will not be upset by reality.

Meanwhile, judging by the conference, the luxury goods industry has a very decent grip on current social and moral trends, and clear insight into the bigger picture of change in its industry over the next five to ten years. As they know from before, what happens in a recession is that luxury goes out of fashion. Conspicuous consumption wanes, or retreats further behind secluded walls. This is a basic pendulum swing that tracks the economy (witness how the early 1990s recession stimulated a return to “values” era after the “me, me, me” 1980s.)

Sustainable luxury

So we are again in a swing to modesty. But we also know that each swing of the pendulum also carries with it the specific issues of its time. Current key issues for consumers in this segment are sustainability, global warming, business ethics, and globalization (or fear thereof).

Therefore the luxury brands will be looking for ways of making, transporting, and displaying goods in an energy-efficient and socially conscious way, including a renewed emphasis on local artisans and traditional craftsmanship that speaks sustainability in both natural and human resources. This will be the basis of the “sustainable luxury,” positioning that the famous houses will define and compete in. Fabulous and renewable  – now there’s something you can charge top dollar for.

Scenario planning orientation and methods interview

Posted by Adam Gordon on Aug 7, 2008 in all, foresight tools & methods, horizon scanning, scenario planning, trend tracking

I was interviewed at length about scenario building by a foresight firm in the UK a few weeks back. They took notes (more than I deserved, no doubt) and here they are, below.
In the notes, which are typed live and necessarily brief, I’m “AG”. The others are participants asking questions and making comments…

1. First, what do you use scenario planning for?
Initially stated everyone did scenario planning, every time you find yourself doing something unusual it implies you’ve done something wrong with scenario planning. We think about the future all the time, constantly making scenarios in head, if move to London think about what need to earn, where live, family, critical uncertainties. We run forward, think about various challenges, we rehearse the future.

CL wondered about ill thought through scenarios?

AG felt it was inevitable that people will disagree. End of day scenarios boil down to politics. Visionary scenario planning gets everyone talking – firstly need to find common threads (if not grounds), that most buy into – even if it is a low common denominator, thus creating a shared vision, then dystopias, but remember the end point is never total agreement.

RS Acknowledgment of importance of politics? Is that your experience of foresight?
AG believes he is a political animal, but no longer involved in protest. Belief is power is absolutely important when thinking about the future. He then amends it to power and money – as often groups without power have public opinions so they can shape the future. There is a danger that they only talk about market forces and technology and that’s it.
RS Is it a struggle working with other foresight groups – is that view not shared?
AG says they can give a shared opinion, but politics mostly overlooked by the groups

RS describes that we all have a political agenda (social inclusion, voices excluded) within this project – it makes it interesting to deal with those who have an economic/gov background, it’s difficult to pretend futures neutral.

2. Could you talk me through a brief overview of your scenario planning method? (How long does each stage take? What preparation is required for each stage? How many people are involved in each step?)

There is an underlying method – but each stage has some degree of flexibility and can use a variety of methods.

A. Handshaking stage
Firstly deciding what you’re doing, basic project stuff – who’s involved, what resources, what deliverables – key is choosing method and who’s involved, may have varying degree of democracy – heads or grass roots, be inter disciplinary or not, have a broad or narrow focus, and what type of input is required. Believes it needs to have mixed agenda. Note that relying totally on academics is bad.
Then you need to decide the dates your final scenarios will relate to – further in the future the more radical but less relevant to other people and harder to action. Most future scenarios are around 10 years ahead – as a rule not less than 5 or more than 20.

To decide the focus you must:
1) Drive management team towards understanding how much influence they have over the future, can they drive future or does external events influence them? Percentage, never exact but idea.
2) Based on the amount of control can decide if creating a visionary scenario or anticipatory (not good word) scenario building. Visionary trying to develop an idea, multiple stakeholders get shared ideal, easier if pressure group, one organisation, as they can develop enrich and jump on to focusing on how we would put this into practice. They create a vision and dystopia. Influence future (money, opinion etc).
In anticipatory, or “Businessy type scenario”, participants don’t mind how things turn out, what they want is to be successful in the world however it turns out. Within organisation goal is to anticipate broad set of possible worlds, particularly critical uncertainties. So they do have research scenarios and different takes on how things emerge, BUT no preferred future. Look at resource and competence so they may have preferences but can adapt. To same extent they look at legacy competencies but this is not a determining factor. Scope alternatives and plan.
The Handshaking stage takes a few meetings to do, small with key meeting, then larger with various stakeholders – perhaps half a day.
In terms of materials one could send out stimulating piece to encourage thought so not stone cold but which doesn’t colour the agenda. Could also have to read a synopsis of what the process is about and the sort of things to think about and expect.

B. Horizon scanning
There are 100s of ways of doing this. Basically need to go into world and do research on what’s going on in key dimensions, technology, markets – broad scan of world relevant to issue area, bring in people outside of own industry. Best tool in this area is “learning journey” – jazzy word for anthropology of own society, structured agenda for talking to people about concerns, what they know, what they’d like, focusing on future – so need to be carefully done to avoid reiteration of now or what they think you want to hear.
Note that you can commission this – but it is not market research.
No answer to how long, dependent on time and resources, but should budget third of total time.

C. Pulling it together
Mulch through the data gathered – preferably in funky creative meetings, collate, output into things like forces, drivers of change, trends, blockers of change, critical uncertainties. What comes out is a picture of world that’s relevant to us.
This activity could be whole group or just the scenario developing team – it’s to pull out what’s important.
The format could be something like workshop, sleep/gap, then another half day or so.

D. Separating critical from predetermined
This could require a Mini Delphi, talk to experts to find out what are the sorts of things in forces of change list that are predetermined – so things we know will happen in 2020, perhaps the number of students, or trends to sustainability.
The various issues will have lifecycles in being a key focus, they’ll always be there but the amount of interest will vary, eg sustainability. In the future sustainability will be less of a concern, but not less important, it will just be integrated into our expectations we won’t focus on it. An example relating to education is how we’ve shifted views on punishment; it was a stick, then detentions, then exclusion…
[Divergent conversation about the failure to correctly predict overpopulation – they just extrapolated – AG argues it was not a failed forecast, just bad forecasting - a failed forecast is interlocked bad assumptions. There was a discussion whether carbon credits will have the same results.]

E. Question all assumptions/Test lists
Note: This stage might highlight the need for more research or stakeholder engagement.
The goal is to end up with two lists that rank for importance. One is about predetermined things – things that we are sure about for our purposes – note that we may, or may not, need to talk about them. Then there are uncertainties (anything we can’t clarify with further research). They are sometimes called “strategic uncertainties”.

F. Create scenarios
These lists form basis of scenarios, they allow us to try out alternate resolutions of the unknowns. AG hates the 2 by 2 matrix approach (from Boston management), but it is sometimes a useful tool. Shell use a fork in the road approach, or possibly a roundabout, where there are clear alternatives. For example, they know sustainability will happen but they have various scenarios predicting the demand for resources. [RS comments that Shell also have a trilemma approach, so deal with three worries.]
More generally scenarios are structured round uncertainties. The van der Heijden approach is to list things and tell stories – NEEDS creative facilitators. He has a pack of cards which people develop stories around. Each group is given part of the puzzle to resolve. Basically you need judgement to choose how.
The groups then write stories and the facilitator ensures the scenarios cover the cone of plausible uncertainties. Note there must be multiple scenarios, a single story is not helpful.
The creation of scenarios will take a minimum of 2 days to talk through, write, draw or tell.

Note: Jump scenarios are conversations over a day. There is no learning journey and it’s hard work for the facilitator. The result is paragraphs rather than stories. These are good for management to emphasis the alternatives and broaden thinking

G. Check and test scenarios
Vital outside people criticise. What could and would work? This stakeholder analysis is meant to be a practical exercise.

H. Put them out
Visioning scenarios (including preferred outcome) get published, they need to get folks on board. Business ones tend to be more internal.
Then test existing strategic agenda within scenarios. They’re a test bed for strategy and choices. How would things work?
Or backcast using the scenarios – so how to reach or avoid scenarios.
AG keen to promote that there needs to be standards, just like testing a pram, you need to exhaust all the things that could happen before it gets its kite mark.
[There was a conversational aside over the time spent on this. AG worried not enough time spent using them and that politics will block change – “if broke don’t fix it”. People need to be desperate to be receptive.]

3. Do you use any tools for scenario planning? If so, can you briefly describe them?

Classic management tools – so getting people to communicate, being experienced based.

4. Are any of those tools online?

Nothing practical is online but there are resources and case studies (see his website). Although then amended that can do Delphi online. Note that learning journey is not market research, not supposed to be investigating people’s mental models – “good foresight is not predictive”.

5. What scenario planning tools would you ideally like to have available?

Something that follows stages explaining steps, timelines, who’s involved, explaining predetermined and uncertainties when listing – basically scaffolding.

6. If time was restricted for a scenario planning exercise, which parts would you keep because they’re the most important?

Would go through all stages (tick all boxes) but go lightly on some. However the less knowledge bought in the more focus on facilitation. The key is to get people to develop interesting motivating diverse stories appropriate to their needs.

7. What tools or approach would you recommend if a non-expert wanted to do scenario planning?

When asked AG said that don’t need a facilitator but would do better if had one. They focus the time and can support the whole process – not just when in workshops. Those involved aren’t experts and have a stake in the present so they’re going to struggle to change their minds.

When asked if it could be done alone AG said yes, BUT that it would be better if one could do at least step G, testing scenarios, with others.

More on “Future Savvy” rationale, and then I’ll stop. Promise.

Posted by Adam Gordon on Jul 11, 2008 in 2015, 2025, all, failed predictions, forecast filtering, foresight tools & methods, Future Savvy, managing uncertainty, Perils of Prediction, strategic foresight, technology change, trend tracking

This is a how-to book: how to evaluate predictions about the future – how to assess which ones are credible and/or how credible they are (how likely the future will turn out similar to the prediction). It is not just a guide to bad forecasts, it is also about how to identify and extract what is valuable in any forecast. This benefits readers who are required to manage professional or  personal situations that depend on correctly anticipating change. Whatever we want to achieve – help a company be more profitable – solve the world’s problems – develop their career – success depends on a good reading of the future. There are many guides to the future (predictions) but no guides to the guides. This book fills that gap. It helps readers assess predictions so they can make better judgments about the future for themselves and their organizations.

Decision success always implies congruence between decisions and the world in which those decisions play out. If we decide today to launch a product, buy a house, study for a degree, build a new light rail system, or take any similar decision of significance, the environment of tomorrow will be a key factor in the success or failure of that decision. What we do will be tested by the future conditions that emerge. Where there is a good “fit” between the initiative and the environment it plays out in — “the right product at the right time” — we can expect success. If not, we should expect to fail. Our decisions are only as good as the view of the future they rest on. All opportunities and successes and profits are realized in the future. All threats, failures, and losses are in the future.

In a fast-moving world, we know that the future environment will be different to that of today in big or small ways. New technologies, market shifts, changes in legislation, or evolving social values damage or destroy the traditional good fit we have between ourselves and the world. To achieve “future fit” we therefore use forecasts to position ourselves and our organizations, creating (or renewing) the fit between our initiatives and environment. In some cases we may be strong enough also to influence future events and outcomes for our own future benefit, and forecasts help us do this too.

All enterprises benefit from narrowing down what they must adapt to and plan for – all effort spent preparing for a future that will not emerge is a waste of personal or organizational resources. Good forecasts are a key ingredient in limiting the vagaries of uncertainty, and therein working smarter not harder, avoiding surprises, exploiting new opportunities and plugging weaknesses in fitting in with the future, and where possible influencing the future to suit the organization. This is true not only of business. People and institutions of all types position themselves for success by anticipating and adapting to events, or shaping them. Whether it is an NGO raising money for developing-world children, an urban planner advocating a light rail system, a homeowner deciding to sell a house, or a student making a career choice, identical principles apply — a higher-quality reading of the future operating environment in which these decisions will play out is what separates winners from losers. We should all be vitally concerned with forecasts as we are all effectively betting significant resources on their validity.