"Are we blinded by e-light"

Martyn Daniels, Strategic Development Director, VISTA Computer Services

International Distribution and Supply Chain Specialist Meeting Frankfurt, October 2000

We can all relate to the driver, but today we now have to relate to the rabbits. We are caught in the glare of e-light of the e-revolutions that are bearing down on us at an alarming rate. What is certain, is that we can’t all expect this vehicle to brake and give us time to move.

Change within publishing is taking place at an alarming rate. Today, we all face many challenges in our business journeys. The question is, how we respond.

Do we:

• prepare against surprise - and build defence mechanism against the change
• prepare for surprise - and adapt to respond quickly to the changes as they occur
• or do we, recognizing the potential opportunities available, prepare the surprise itself

Today I intend to overview some of the traffic, that is bearing down on us and to offer some insights that may help us on our journeys and avoid us being caught, transfixed and blinded by the lights

The changes taking place today are significant. Larger players are getting larger and are changing the economies of scale and scope, vertical integration is blurring the roles of some within the supply chain, media convergence is introducing new players and globalization is challenging many of the traditional publishing "rules". Convergence and consolidation, is by itself, reshaping the supply chain.

We are all familiar with the impact that the likes of Guttenberg, Ingram and others had in shaping today's publishing environment. You may not be as familiar with the changes that effected the UK market in the 18th century. However, the 18th century literacy revolution completely changed the roles of booksellers, authors, printers and publishers. It redefined the value chain and removed a number of significant players. Like Guttenberg, Ingram and others, the likes of Robert Dodsley prepared the surprise in this revolution. The question we all must now ask is, who is preparing the surprise today?

Today, everyone is grappling with movement on these Product and Market axis. We all start from different positions, we all have different goals and different time-scales in which we aim to achieve them. Each of the following axis has a different impact, according to our roles within the value chain and the sector in which we operate:

The questions we now all need to ask are:

Where exactly are we? What is the position of the marketplace? Where do we want to go and in what timescales? What are the associated actions and risks.

Digitization is a subject in itself. The question of whether the ebook as we see it to today is a mere transitional stage like the CDROM and that broadband online technologies are the end game is another debate. The impact of the ebook alone is however forcing us to revisit standard such as the ISBN and the internet can clearly claim credit for the long overdue emergence of ONIX / EPICS standards. The jury remains out on the DOI.

In many cases we are not dealing with a future we can predict or control. We can't adopt a wait and see policy, if we do will not have the competencies to compete and more importantly will probably find others, sitting in our seat and eating our dinner.

Earlier this year I asked a similar audience to this, the following questions:

• When Simon and Schuster published “Riding the Bullet” by Stephen King and made it only available by digital download over the Internet, how many downloads were achieved in the first 24 hours?
• How many digital and e-articles appeared in The Bookseller in the first quarter of this year?
• How many online e-tailers databases are updated daily and weekly online with rich Bibliographic information via BookData?

The answers now seem dated, but when asked less than half the audience got any one question correct and they were extremely conservative in their responses.

We only need to open up our press today it see that the publishing e-lights are switched on.

The speed of change should not be doubted. A recent article in "wired" pointed out that technology is now outstripping Moore's law, which to-date, has accurately predicted the exponential rise computing processing power to time.

That change is happening should not be doubted. That all change costs money is a fact.

I think Terry McGraw captures the issue perfectly when he says its now about the speed of change.

However, we also have to remember that for some time the current traditional environment will still be the major revenue generator and will still require continued support and investment

In 1996, as a result of our research programme "Publishing in the 21ts Century", we predicted that the shift from physical to digital product would gather momentum in the year 2000, but that it would still represent the minority of the overall product mix. We also predicted that by 2020 the position would flip, with physical product becoming the minority of the mix. We are clearly moving in this direction and therefore face with an interesting quandary?

If we accept that overall growth in the market is at a marginal, say 3% to 5% and we take a hypothetical books and journals publisher with revenues around $80 million, we see marginal growth across the total business over the next 5 years. However we must respect that the e-publishing revenues will grow.

We could expect e-publishing growth over the same period to rise to 25% of revenues. Some may say this is conservative, others that it is generous. The point is that if we accept the principle, we have to accept that revenues from the physical product must decline to compensate the switch to electronic product. The principle is simple, if the revenues remain relative flat and electronic revenues is growing, then physical revenues must reduce

The publishers now find themselves having to continue to support the cost of the declining physical product overhead with declining revenues. Whilst at the other end they are having to invest heavily to make the e-publishing transition in order to realize the new potential revenues. A clear double wammy and new squeeze on the margins.

In this new environment we need to step back and realize we need to re-evaluate how we do business, the marketplace in which we do business, partners we do business with, our competitors etc. This is not an IT or logistics issue it is a corporate one that clearly forces strategic vision, corporate consensus and corporate action if we are to avoid being paralyzed by e-lights. Piecemeal actions are no longer the answer

I have drawn up 7 principles of e-business that I believe you should consider when formulating or reviewing your corporate e-business strategy. They are not comprehensive neither are they mandatory. They just make a lot of sense in this brave new world.

First is a focus on your core competency.

Recognizing the key elements of trading involve:

• Content the product in a digital, physical or any combination of media
• Context the bibliographic information that describes the product
• Commerce the commercials and customer information and processes

Just as within any environment, all are essential within the e-business world, 2 out of 3 will not do. All are linked irrespective of whether you are selling virtual or physical product or servicing customers the on the Internet

The key question to ask is where is your core competency, where do you add value in the evolving value chain and proposition?

Some may believe that they provided added value and competitive advantage by doing all three themselves and that they are truly self-sufficient.

You may develop and publish content, but can you provide it in every format, every type of ebook, Digitally distribute it, and provide it on demand? Or do you recognise the competency of others and outsource those tasks? Are you equally focused across your full list? Are you now focusing on being "never out of print?"

These are just a fraction of the new players on the radar of publishing who deal with content and need to be evaluated, understood and positioned. Many will fail, but what is certain, is that a number will succeed and will radically change aspects of publishing as we known them today. Are you comfortable that you understand their competencies and value add?

Remember, only a few years ago Amazon was dismissed by many. An interesting thought to ponder…is that all major trade publishers now have a clear vested interest in Amazon’s continued growth and success and that failure of the some of the dotcom’s could have a fatal impact on some.

Ask yourselves what the role of the wholesaler is today? Look at how many are currently positioning themselves for tomorrow. They clearly are embracing digital distribution, they are clearly providing total web fulfillment services to many bookstores, they are providing drop shipment and could even be regarded by some as distributors. What is their core competency and value add and where do they now position themselves in tomorrow's supply chain?

Second is a focus on Integration - not replication

When it comes to online fulfillment Publishers have a clear choice - replicate their commercial systems online or seamlessly integrated their e-business activity with their existing systems and existing information.

Unfortunately, many have learned the hard way. The skill and knowledge set required to achieve this business integration, is different to that owned by even the best web designers let alone the “garage boys”, that are all too often here today and gone tomorrow.

An example of replication. The commercial systems feed the digital warehouse in real time, with information on customers, products, trading terms etc. The consumer enters via an intermediary and selects the ebook and required format. They submit an order on behalf of the consumer to the digital warehouse, who proceed to download the ebook to the consumer and confirm the transmission to the etailor and the sale to the publisher. Finally, the publisher's commercial systems raise an invoice to the etailer. Seems fairly straightforward, until you start to think about the synchronization between the Digital warehouse and the publisher's commercial systems and the fact the digital warehouse will have to virtually replicate the publisher's commercial systems etc.

Unfortunately this process is not fictional but is one fraught with risk.

When we look at the integration options, we start to remove duplication and synchronization of data and replication of functionality. The solution is simple and importantly recognizes the core competencies of those involved and importantly is consistent with physical fulfillment.

There are many people who we now have to interface with. We need to think about how we interface them. Integration not replication is the only answer. Many who adopt a replication route will fail not because their digital warehouse was wrong but because they introduced risk and cost when it could have been avoided. Think about how you will need to synchronize functionality and data and not just with one but many partners. Critically, you are not just replicating your functionality and data, you could find, you are also giving away your customers and your interface with them.

Third focus on a Standard Interface

Many believe that the ability to process a credit card transition is all that is required today and that B2B and B2C are completely separate.

Increasingly, the demands of servicing even the B2C customers will become complex. They themselves will be more demanding and their needs will be driven not by what publishers can provide but by their total e-experience.

The need to manage all customer’s through a standard interface is compelling. It offers standardization, commercial flexibility, development economics and effective customer service.

Fourth focus on Core Relationships across the Value Chain

In one of our research reports, "The Impact on The Publishing Value Chain of Online Networks", we created, from the work of Professor Michael Porter, a modified Publishing Value Chain. It is critical that we focus on product and customer information and the associated trading terms across this lifecycle.

As illustrated by the initiatives such as ONIX/EPICS and the earlier BIC Basic, product information does not just materialise when the product hits the warehouse and neither does it stop there. Over 70 % of customer Service calls are about basic information. The demand for product information is exploding, after all if you can't find it you can't value it and you can't buy it.

Today all the major chains, e-tailers, wholesalers all have book in hand processes. Collectively this is a huge cost to all. It's primarily focus is to collect rich information which is often not available any other way. The problem is that this is too late in the lifecycle.

Inconsistent and inaccurate information is costing this industry millions and also losing sales.

The question is not so much as to who will provide the information to the marketplace, but how publishers will produce and provide the information in a timely manner.

To survive in this new environment, all publishers now need a rich product database with full export capability as much as they need a customer database and fulfillment system.

Fifth focus on the different user / community perspectives

Yesterday we would have built different systems for different users groups and even different networks.

Our problem is that we all have:

• Close relatives and friends with whom we share close information. (our Intranet)
• More distant relatives and friends we see less frequently and share less information with (our Extranet)
• Finally, relatives and people we only see at births, marriages and deaths and share little information with (our Internet).

However we have all three types within the same user groups and their individual closeness will vary over time.

In addition, we also have to recognise that the difference between what one group customers wants and another group may vary as little as 5%. There is often more commonality than we think.

We now need to recognise that there are many community builders out there. However we need to be wary. Some want to totally own their community, others only wish to be service providers. In all cases, we have to recognise what is best for the user and the community and ensure that intermediaries don't lock you out from even knowing who your customers are.

Again Terry McGraw recognizes the key focus required. Sharing information and trust, and in doing so understanding behaviour become important if not critical factors. Some today will give these away in the belief they are growing business, they are wrong, they are giving away their future.

Sixth - focus on servicing everybody - not the just the few

Although it is relatively easy for large publishers to trade electronically with large booksellers, this is often restricted to base transactions and rarely filters down to the 80% that constitute 20% of value and volume but a high cost of service.

Here we see traditional communications such as fax, phone and even post. EDI or e-commerce is often too complex and costly to prevail, is not real time and doesn’t deal with customer service queries effectively.

Also we need to remember that 40% of the UK Book trade is export, they can’t be ignored, they need 24 x 7 hour access to their information and ability to trade both efficiently and effectively.

Last - focus on Web access

Yesterday users wanted an integrated desktop, one from which they could access all their information in a consistent manner. Today is no different except it is no longer restricted to the confines of the local environment, it is global and more important people now only want to see and have access to their world. They want "My Web", identification, personalization and consistency from anywhere and anytime. ebusiness is about providing solutions to all both inside and outside of the organization.

Theses seven principles are not fixed they are fluid, they will evolve but they are today's issues. The technology exists, the opportunities exist what is now required is a broad e-business vision, a corporate strategy and the business commitment to make it happen.

Today we must stop thinking that ebusiness is different. It is business.

We now need to cross the road, recognise the opportunities, actions and risks and avoid being caught in the glare of the e-light.

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Paper By Martyn Daniels

Published as Chapter 3

Information in Action: Putting Knowledge to Work in the Publishing Industry

1999, ©VISTA Computer Services

ISBN 0952556685

3. Learning to Manage in the World of the Unexpected

"In an economy where the only certainty is uncertainty, the one sure source of lasting competitive advantage is knowledge" Ikujiro Nonaka ¹

When we set out on a journey, we have many decisions to make:

• Which route should we take?

• What conditions will we face?

• How long will it take?

• Do we know of any delays, road works, and hazards?

• Have we sufficient gas to make the journey?

We know how to drive and how to minimize the risk of accidents. We understand the automobile's dashboard and the many messages it conveys. But even with all this preparation, information and experience, we know we have to expect the unexpected.

When on our journey we are faced with a new road sign, an oncoming car flashing its headlights at us, or a warning light on our dashboard, we recognize the potential risk associated with the message and take appropriate action. We collate all the information available to us at the time, relate this to our experience and knowledge, and decide what we should do.

Our business journeys towards our strategic and tactical goals are no different, just more complex. We are all in different vehicles with different capabilities, moving at different speeds, often going in different directions. We all want to avoid tailbacks, getting lost, accident, break down – and running out of gas! However, we often find ourselves confronted with the unexpected; then we have to draw on our personal and organizational skills and knowledge to manoeuvre around the obstacle and continue our journey.

Unfortunately, the information signals we receive – from both inside and outside the organization – are obscure and ambiguous. Often the information is out of date, which means that our responses, instead of being proactive, can only be reactive. In many instances, the person who is best equipped with the experience and knowledge to deal with a particular issue is not the one who receives the relevant information.

Before we start to look for a response to these issues, we must reflect on the contribution that technology has already made in capturing and exploiting information, experience and knowledge and, as a result, providing competitive advantage to the companies that have used it effectively.

3.1 Yesterday's Journeys

Automating the process and accumulating the transactional data

"So far computer users still use the new technology only to do faster what they have always done before, crunch conventional numbers" ²

We have all in the past experienced some degree of success in reducing the cost of doing business. We have automated data entry, reduced accounting and clerical resources and significantly reduced the cost of processing transactions. We have also enabled our organizations to grow, handling greater volumes of data more effectively. It is difficult if not impossible to imagine the same levels of growth being achieved using the old paper- and people-intensive business systems.

However, in automating our business processes, we implemented little change; the processes remained essentially the same as they were before they were automated. In many instances, innovative “best practice” solutions to particular problems were neither widely identified nor widely adopted. As a result, these frequently remained proprietary to an organization or an industry sector. Taking the view that the individual organization always knew best, "packaged" system solutions were customized to support proprietary practices and processes and as a result became unsupportable by the vendor.

These "batch based" business system solutions were all too often inward looking and focused not on the supply or value chains but on internal organizational processes. Competitive advantage was seen as flowing from reduction in the business's cost base, even if this reduction was made at the expense of others in the chain. Investment in technology was high – and any competitive advantage gained proved unsustainable.

Businesses created "data islands" that did little to provide the organization with the information it required for making its tactical – let alone its strategic – decisions. These "islands" of data were often hard to locate within the organization. It was cumbersome to extract useable information from them and it required specialists to provide or amend the simplest of reports. In many cases, the data was incorrect, inconsistent or out of date.

Organizations made many of their decisions entirely "blind of the facts". Despite the investment in technology, they remained totally reliant on the internal, unsystematized expertise and knowledge on which they had always depended.

"In the absence of learning, companies and individuals, simply repeat old practices. Change remains cosmetic and improvements are either fortuitous or short lived" ³

Providing power to the desktop but not the organization

The PC and local network revolution brought a realignment of focus from the organization and the back office to the user. This change, together with previously unimaginable local computing power and software capability, broadened the computing franchise beyond the IT specialists.

We now found ourselves wielding new tools that could download the data, manipulate it and report on it more effectively and efficiently than ever before. However, we often found a significant gap between those who could and those who just thought they could. Newly empowered users often spent hours designing (and over-engineering) spreadsheets and other analysis tools.

The data was certainly turned into information – of a sort. However, in this “new frontier” environment, it was still doubtful that the right information reached the right people at the right time.

The more that data was collated and analyzed, the more information we wanted. Our thirst could not be quenched. All too often we failed to stop and think – we just had to analyze everything. Every finance department had its own spreadsheet "magician". The autonomous became even more autonomous. We had deployed "island technology" that spawned "island information" and the information created even more information in this seemingly lawless maze.

The myriad "information islands" that now dominate the publishing front office often inhibit easy access to comprehensive information covering the complete life-cycle of a title. However, we need to recognize that the information alone is effectively valueless unless we can also find ways of capturing and exploiting the organizational knowledge that gives it context.

In this era, competitive advantage was still seen as residing in the ability to analyze a business's performance in detail, to seek out inefficiency and to apply corrective action. However, it turned out that monitoring the organization was hard: all too often, conflicts occurred when two departments presented two (or more!) different perspectives using precisely the same information.

Investment in technology remained high, technical effort across the organization rose sharply and any competitive advantage again proved unsustainable. Organizations became increasingly "sceptical about the facts" and were still totally reliant on –and exposed to – that internal decision making expertise and knowledge they had always used.

Information is not static and lives all around us

"Most organizations have habits and structures that keep them at arm's length from the rest of the world" ⁴

In the second paper in this series, "Profiting From Tomorrow's Customers", ⁵ we highlighted many of the issues surrounding the publishing supply chain and the growing shift from a product-oriented business to a customer-driven one. We highlighted the often-adversarial relationships that existed then and that (perhaps to a lesser extent) still exist today.

Sharing of data, let alone information, with trading partners is only now starting to take place across the industry. Publishing still lags a long way behind other industries in the area of EDI (electronic data interchange). Such sharing of information as does exist in the book industry would be regarded as unacceptably meagre in many other trading communities today.

However, movement is perceptible. The industry has started to confront the massive gaps in information that have existed between trading partners across the publishing supply chain.

• In the subscription sector, it is recognized that the vast majority of claims – and the resultant costs – are a direct result of there being little or no sharing of publication schedules.

• In the book sector, over 65% of calls to publisher's customer service departments are inquiries on price, availability and the status of an order.

Organizations are beginning to realize that significant efficiency can be gained by the adoption of "open information trading" with their supply chain partners.

EDI will address a considerable proportion of the transactional information exchanges but will not address real time requests for information. Innovative services, such as PubEasy.com, ⁶ Ingram I, ⁶ Oasis ⁶ and others, are starting to redefine information access, presentation and exchange. Other industry services such as BookTrack ⁶ and BookScan 5 are now collating and analyzing cross-industry information.

In the third and fourth papers in this series, ⁷ we highlighted many of the issues relating to the publishing value chain and the information and technology needs of the core "value adding" front office activities within publishing. Integrating information from the myriad of "information islands" that dominate the front office is often a daunting task. What is more, bridging the cultural divide between publishing back and front office is not as important as bridging the information divide between these two areas of the business.

Significant competitive advantage can flow from sharing data and information both within the organization and in trading partnerships. However, realizing the benefits from this activity requires vision, commitment and co-operation between "information traders". Data standards are also essential, not just between the different trading partners but also within the organization!

However, merely throwing information "over the wall" without the insight and knowledge that gives it meaning does not create the "win-win" environment that is essential for future success.

"There is no future for hermetically sealed closed systems in the networked economy." ⁸

Yesterday's journeys brought us greater efficiency and started to unlock the information available from inside and outside the organization. In doing so, they served to highlight the exposure of the organization to inadequate management of its information and knowledge resources.

3.2 The dynamic landscape we now live in

3.2.1 Convergence, convergence, convergence

Not only does everyone now have internal systems and information sources, we have many external ones as well. We are all continually bombarded with email and have increasingly high mountains of it to climb every day. We still have the telephone; thanks to mobile telephony, we can no longer escape from its call. If we do escape briefly, we have a string of voice mails, all crying out for our attention. We still have the constant arrival of faxes and even traditional "snail mail” seems never to decline in volume.

We are, as individuals, becoming increasingly "open all hours", to do business with anyone, from anywhere and at anytime. We are continuously "plugged in" to the information and communication network.

"I meet refuges coming out of Kosovo with the few possessions they could carry. I was amazed to see them carrying their cellular phones with them" ⁹

Will it get worse? “Certainly” is the only possible answer. Potentially at least, we are now recipients of more information in one day than Jane Austen or Mark Twain would have received in a decade. Telecommunication and information services will continue to merge and develop. Anytime, anywhere access to information (and others’ access to us) will become inescapable. At the same time, the quality and utility of that access will improve. We will find the "office in our hands" a reality.

Most of us can remember life without laptops, mobile phones, personal organizers; our new employees will never have known life without them. The new workforce will expect, indeed demand, much greater and more sophisticated use of technology.

King Canute failed to hold back the tide. The question today is not how we can contain this new tidal wave of intrusion, but how we can manage and exploit it to our advantage. We will need automatic filters on what we receive and when we receive it – and we will need to personalize these to reflect our individual needs. In a world of convergence, we will need to find new ways of establishing lines of demarcation between our social and working lives.

Publishing and the media are at the very heart of this technology convergence. The formats and channels in which content is delivered (with its supportive contextual information) are rapidly evolving.

The speed at which this convergence is happening is frightening, even to a professional technologist. We are constantly being bombarded with new and innovative technology and prototype applications. If we thought that the choice in the beginning between Betamax and VHS was a close call, then we are in for some tough decisions. Broadcasting and telecommunications technologies are converging, along with the infrastructure and tools that we use to access them; at the same time, their carrying capacity is increasing exponentially.

What this all means for the future is uncertain. Who will dominate this marketplace and what their offer will be remains unclear. What is certain is that out of today's myriad of options will emerge a winner, just as in the past we had IBM (mainframes), DEC (midrange), Intel (PC chips), Microsoft (PC Windows), Oracle (relational databases) and SAP (ERP software). What may be worth noting is that no dominant technology position has ever proved to be defendable against the next wave – at least, not yet.

3.2.2 Drowning in the sea of data

"Mistakes get repeated, but smart decisions do not. Most important, the old ways of thinking are never discussed, so they are still in place to spawn new mishaps" ¹⁰

As with telecommunications, we are increasingly being bombarded with “information”. Some of it is still only “data”; some has been collated and analyzed and can now claim to be “information”. Nevertheless it is clear that we all spend far too much time and effort reading the wrong news.

We have office systems which create their own information flows, some structured and some not. How many emails and attached reports are circulated to us just “for your information”? We now have the all too simple capability to fire off at random "just in case" information. Are we expecting some sort of response, a reaction – or are we merely covering our backs? Irrespective of our expectations, the recipient has to make some decision about it. To make that decision, at least part of what we send has to be read by all those to whom we send it.

We also have external feeds, both in the form of transactional and operational information and access to external market information. These feeds are sometimes "pushed" at us in the form of an online newsletter or alerts; alternatively we have to go and pull the information in the form of online "self service".

We are increasingly information and communication slaves, all conscious that non-participation in the information chain (both creating and digesting) is a not an option; exclusion from the chain could have a terminal effect if not on our business then at least on our careers.

Ask yourself these questions:

• How much of my day is now spent dealing with "noise"?

• What percentage of all the information I receive actually makes a difference?

• What information don't I get that would really make a difference?

" Who depends on me for information? And on whom do I depend? Everyone should be constantly thinking through what information he or she needs to do the job and to make a contribution" ¹¹

Management by exception must be the goal – with automated profiling and filtering of information an essential means of reaching that goal.

However, we often forget that communication is a two way process. What information do we send to others today that instead of enriching their contribution potentially dilutes it? There is little point in giving trading partners advanced supply chain information, such as demand forecasts, if they are unable to use it effectively, or choose to ignore it, or, worse, actively use the information as a weapon against us.

We need to learn the art of navigating a safe passage through this sea of data and to ensure that in doing so we do not inadvertently sink those on whom we also depend.

3.2.3 The e-business environment

"With electronic business not only commercial transactions but whole businesses will go online" ¹²

The migration from e-commerce to e-business is so significant and difficult to achieve that many companies will miss the boat and perish as a result. The move from the physical world to the virtual world is not just about digital product; it is about doing business, irrespective of whether the product itself is physical, virtual or multi-format.

Early adopters may be seen to be operating at a commercial disadvantage, apparently spending money for little or no tangible return. They are however learning the new rules, establishing their brands and gaining knowledge about customers and the market that will be essential to their survival.

3.2.4 The net redefines the customer

"Electronic commerce gets over hyped today. There's nothing dramatic about the fact that an order that used to come on paper now comes on the Internet. What's profound is when buyers and sellers who never would have been matched before are being matched" ¹³

We speak today about ERP (Enterprise Resource Planning) and “Enterprise Systems” but these are already being overtaken by CRM (Customer Relationship Management) and “Customer Systems”. Vendors are realizing that information about their customers sales are not enough and that they need to understand their buying patterns and preferences. Categorizing customers by this analysis can be far more productive than by sales and territory alone.

The traditional vendor driven publishing model is fast becoming extinct. Power has already shifted firmly to the intermediary but is moving at an increasing speed to the consumer. Those who ignore this – and the rising role of the Infomediaries – may well find themselves not driving the development of their products and the market but firmly being driven by others down the supply chain.¹⁴

"Customers don't have to buy the books - the mere fact that they looked for information about such books can be recorded and marketed to others" ¹⁵

The customer is king in the world of "MyNet"

"There's no such thing as a personal computer in the future. There are only available appliances. You'll use your smart card or smart ring or some sort of proximity device, the device knows who you are, what you're authorized to access - and you type in your password to get whatever service you paid for" ¹⁶

Utility of access works two ways and comes with a heavy price. Consumers can be accessed and targeted just as easily as they can access and target vendors and information. Consumers are besieged, telemarketers phoning at home at all hours, direct marketers stuffing the mailbox with junk mail, relationship marketers demanding more information. "Spam" junk email now constitutes 10% of all worldwide email.

Yesterday the consumer was happy to give their personal information and often had the option to refuse its reuse or sale to third parties. Today we only have to view our PC files to see the profusion of "cookies" that are being deposited in them. Customers understand that their information and feedback has real value and is no longer an afterthought. It has the potential to become "the tail that wags the dog".

• A 1996 DIRECT survey found 83% of those surveyed said there should be a law requiring an opt-in procedure for names to be included on direct mail lists

• A 1998 survey of more than 10,000 World Wide web users by Graphic, Visualization & Usability (GVU) found that 72% of Internet users believed there should be new laws to protect privacy on the Internet and that 82% of users objected to the sale of personal information.

• A 1998 Business Week poll found that 53% of respondents said government should pass laws now for how personal information can be captured and used online, a figure 3 times higher than the number of consumers who supported the idea that the government should let trade groups develop voluntary privacy standards.¹⁷

Another aspect of this new environment is the development of Intelligent Agent technology. We are all familiar with the search services available on the Internet. Without the search engines, we would not be capable of finding the haystack, let alone the needle. These agents collect information and allow us to search against it. However they perform simple "word match" searches (however sophisticated these may be) and are "dumb" as to the relevance of what they find to any particular individual.

A new breed of tools are taking this one stage further and are starting to search more intelligently against specific requirements and on a narrower range of directly relevant sites. Comparison shoppers, for example, are powerful aids to the user who is searching for the "best buy" – and can kill traffic to sites that are not in their search path. If customers see value in their service, then there is much to be lost in blocking their entry. However, who is then the real service provider to the customer?

Infomediaries¹⁸ are now using agent technologies both to profile users and to enable users to profile themselves. This profiling then enables the user to be automatically alerted to any new information or services that match their profile. This technology has the potential to make a really significant impact on everything we do, both in our commercial and in our social lives.

Imagine for example a bookstore that currently generates insufficient trade to warrant a call from a sales representative. The bookstore’s buyer inevitably goes to a wholesaler today. With more sophisticated tools, publishers could profile these accounts, not just by their sales history (which only says what they bought), but against their own description of what they want, when they want it, and those many other factors that together create an “intelligent profile” of their business.

This would then present the opportunity, for example, to "push" appropriate marketing and promotional materials to them at the appropriate time. Potentially a "win–win" solution – and one that could address a significant proportion of today’s supply chain issues.

3.3 Learning to swim in the sea of data

"A Corporation's success today lies more in its intellectual and systems capabilities than in its physical assets" ¹⁹

How do we prepare for the unexpected and arm ourselves react more quickly – or to pre-empt the surprise? We need to focus on what we need to know in order to perform our individual tasks and to remove unnecessary data that is currently cluttering our vision.

The schematic in Figure 1generically depicts the different information roles within any organization. The framework is defined by the type of actions required from a member of staff, from routine everyday tasks to exceptional ones and from those that are often heavily systematized to those that require substantial intellectual "knowledge" input.

Figure 1

Clerical Support activities require routine and systematized information flows that feed regular inputs, that can be processed and output to the next activity in the chain. The information is transactional and needs to be minimized to facilitate efficiency. This area of activity is where the paper chain (and resultant paper mountains) need urgently to migrate online and where integration and portable technologies such as hand held terminals, radio frequency, and mobile telephony can bring significant efficiency. The overall objective is to "feed the conveyor-belt" and ensure that operations are kept moving.

Users need workflow tools that provide "to do lists", automated routing, process management and full integration of their information and communication systems and services. They also require full online enquiry and entry capabilities and minimal paper reporting.

The service objective is: "check it in and check it out".

Process Management activities differ from the clerical ones in that these are focused not on the performance of tasks but on the performance of process. Process managers require access to the same transactional information used in the clerical process but their usage of the data and their application requirements are very different. They often require access to associated information from a number of sources to enable them to manage risk and change in the day to day activities associated with the process.

Users here still require workflow tools but in this case to alert them to process exceptions, performance bottlenecks and future resource requirements. They also need basic analysis and standard online reporting against targets, thresholds and trends.

In today's flat organizational structures, a program manager may be involved in the management of a process or processes not just within a single functional area but right across the whole business. This involves the management of cross-functional teams and appropriate allocation of resources. The resource information associated with these dynamics is similar to that found in the traditional project management toolkit; this adds a further dimension to the information requirement.

The service objective is: "keep today on schedule".

"Strong businesses and economies draw on deep reservoirs of know-how and expertise" ²⁰

Business Analysis activities tend to be associated not so much with process, but with monitoring and analyzing overall business activities and performance. This analysis may be prompted by a variance to that expected or by a search to discover the parameters that effect an operation or process. All involve deep "data mining" of the information.

"Data mining" describes the functionality required to drill down through a huge volume of data, tapping off into specific rich “seams” as necessary. This involves not viewing information in a single dimension but in multiple dimensions.

Analysis is often performed "offline", often using a Data Warehouse, in which both operational information and information from many other sources has been aggregated. This approach protects live operational data from the performance demands of the analysis techniques while at the same time providing analysts with both the performance they require and the wider business picture. The tools used vary considerably from the PC spreadsheet to very sophisticated modelling and forecasting tools. It is important that the results of any analysis can be presented in a graphical and accessible format using industry standard tools.

The service objective is to enable the analyst to: "turn over the stones and look for the issues".

Enterprise Decision Support is focused at managing the key performance indicators (KPIs) within the business. The activity is focused not on “fixing what isn't broke”, but identifying what is broke and fixing it, or even more importantly on identifying what could be breaking and taking actions to prevent the fracture. There is also an often-unrecognized need to understand where and why performance is exceeded. The role is proactive as well as reactive and users need to be able to pose sophisticated "what if" questions against information at a high level. .

This area of activity is at the senior executive level and again needs to accommodate external as well as internal information sources. However, unlike the "search and discovery" role of the analyst, executives need an active feed that alerts them to where they need to look more closely at information. This type of approach can be referred to as "traffic lighting". They do not need to know when the lights are green but only when they are on amber or red. When on amber they also need to understand if they are about to turn green – or red.

The service object is to: "identify which key performance indicators need attention".

"The management of knowledge involves essentially the creation of behaviours that allow people to transform information into business results" ²¹

All too often we seek a single solution or toolkit that covers all these disparate needs for information; we end up by servicing only lowest common denominator needs. Alternatively, we develop lots of different information islands and become incapable of a complete and consistent understanding of the business.

3.4 A technology architecture for the millennium publishing business

Few new technologies suddenly appear and get instantly deployed. They need to mature. They develop from what is initially announced, start to be adapted to meet a specific need, then when viable they start to be widely adopted. Finally, they go full circle and spawn new technology.

This should not be seen to imply that we believe that all announcements end up being adopted or even that all adaptations progress. There are many good ideas and good technologies that never made it.

However, if we look at publishing, we can see a number of examples of this virtuous circle of development. Today the e-book is a classic example that may be somewhere around the initial adaptation stage. Radio frequency tagging is another example where the technology has been adapted to address the issue of bookstore shrinkage, but where its adoption is now waiting for the price of the technology to drop sufficiently. Wide spread adoption may eventually depend on the potential use of RF in managing returns.

In last year's white paper in this series,6 we first introduced a schematic architecture for systems to support publishing. Having reviewed and qualified this basic architecture, it has now been further refined and developed to become a driving vision of how we see the future being serviced. This vision should not be seen as “finished”, it is continuing to develop. What we envisaged some six months ago is being enhanced as we continue to adapt and adopt it.

The unique architecture is focused on delivering front and back office solutions for publishers that are full integrated with e-business applications. These business solutions are able to access the corporate databases that underpin the business and provide a common user presentation for the information.

The business processes that are required to support publishing activities and projects are controlled by use of work flow and data flow technology and a powerful reporting tool. The architecture also includes a powerful decision support and analysis tool to provide intuitive access and presentation of all the business information within the organization.

The schematic in Figure 2 depicts this architecture

Figure 2  

The Databases are built on the core publishing foundations of Content, Context and Commerce.

• Content consists of the books, chapters, journals, issues, pictures, and fragments of information in all its many formats.

• Context is the product and bibliographic information that describes the content and enables you and your customers to find it and establish its value.

• Commerce is the final dimension, the business information that relates to pricing, sales, inventory, customers and royalties systems.

The process management and control layer focuses on the need to manage and control the business across its operational activities and also various product and project life cycles.

• Work Flow technology enables the various activities within a process to be integrated and for them to be controlled from start to finish.

• Data Flow technology enables the flow of content and its associated context, to be managed and controlled from receipt of manuscript to delivery of finished product.

Business Transaction Processing provides a framework that is focused at supporting any publisher’s specific requirements across the total life cycle of a product, from conception to final royalty payment. Different activities within a publisher will require different aspects of the functionality and will need individual combinations of the back and front office applications as well as e-business solutions.

This layer incorporates not only the front office applications that are shown but also back office applications (customer service, ordering and fulfillment, distribution and warehousing, finance and administration, royalties and inventory management). Also in this layer are the e-business applications that open all of the company’s applications to communication with the outside world. This recognizes that the successful operation of a publishing company implies the management a “virtual organization” with many out-sourced operations.

Information Management focuses on using database and knowledge technologies to enable all information to be accessed and analyzed both at summary and detail levels.

The User Presentation layer recognizes the need for consistency and integration of data and its presentation through a standard user interface. Today, the user interface is a Windows Client for internal use and a Web Browser externally. We need to satisfy both and recognize that they will shortly converge, with the browser becoming the dominant presentation technology for the next millennium.

In order to understand the significant changes that an information and knowledge driven environment will have, it is necessary to develop these latter layers further.

3.4.1 Information Management

We regard the application and database layers as being the primary information feeds into the business. Figure 4 shows the three primary feeds.

Figure 3 

The traditional approach is to view the corporate analysis and reporting layer simply in the context of the corporate data warehouse. The warehouse is a storage aggregation of all the corporate information within a structured relational database environment. However, this perspective often limits the vision and development to focus only on operational needs and creates a narrow perspective on the overall organizational needs.

As we have already discussed, we can no longer afford to ignore perspectives provided by external information; there is also a need to deliver a wide range of types of information in a consistent user interface, not just commercial information but also contextual information, and even completely unstructured information.

The architecture also acknowledges the critical relationship between information and one of the key knowledge-adding inputs – process. The requirement to manage, control, monitor the business processes and product development is achieved through the sub layers and tools provided by Workflow and Dataflow.

Given the different information roles and needs we discussed earlier, we can now extend this critical aspect of the architecture even further as depicted in Figure 4.

Figure 4

3.4.2 Preparing for "MyNet"

It is not possible to ensure that your customers in the future will not elect to bar you from their world. The technology is rapidly becoming available for them to profile what they want, when they want it and how they want it. Full self-service is becoming a reality; e-business is not something you should be thinking about, it is something you must be doing now. Those who enter the fray late will have to spend heavily on the skills and knowledge to enable them simply to stay in the game; if they fail to make the migration to customer relationship management they will surely perish in the world of the infomediary and permissions marketing.

Figure 5 depicts how the new permission layers will need to be accommodated.

Figure 5

We can now further develop the vision to recognize this new and evolving environment. This vision is shown in Figure 10, which we believe sets the agenda for tomorrow's solutions, incorporating the extended information needs and knowledge input.

Figure 6

3.5 Beware – technology at work

Remember all those dreams we only partially realized: the paperless office, teleworking, the virtual organization? All too often we were presented with the prototype but tactical priorities dictated our direction and we adopted a "wait and see" approach.

Today the pace of technology change is quickening and it is no longer an option to join the marathon at mile 21.

“Business must compete by exploiting capabilities which its competitors cannot easily match or imitate. These distinctive capabilities are not raw materials, land or access to cheap labour. They must be knowledge, skills and creativity…That is why we will only compete successfully in future if we create an economy that is genuinely knowledge driven.” ²³

Learning to learn continually is our hardest task. This is not restricted to the organization itself, or to relationships with trading partners and customers, or to new channels to market, or to evolving product formats, or to business processes, or to organizational structure. It encompasses all of these and more. It is about learning to adapt, adopt and advance technology. It about learning to share information within a new "open" commercial environment. It is about reducing the organization's current exposure to risk from the failure effectively to manage knowledge and information assets. It is about tapping into and exploiting all the information and knowledge available to provide a secure future for the organization and the individual within it.

"We can know more than we can tell" ²⁴

Notes and references:

1. Ikujiro Nonaka, "The Knowledge Creating Company", Harvard Business Review Nov - Dec 1991

2. Peter F Drucker, "The Coming of the New Organization", Harvard Business Review, Jan - Feb 1988

3. David A Garvin, "Building a learning organization", Harvard Business Review, July - Aug 1993

4. S Davis, C Meyer, "Blur: the speed of change in the connected economy" ,Addison Wesley 1998

5. M Bide and M Shatzkin (Eds) "Profiting From Tomorrow's Customers" the second report in the Publishing in the 21st Century research series, London and New York: VISTA Computer Services (1996)

6. PubEasy.com, E-business Internet trading service developed by VISTA Computer Services Ingram I , a self service Internet service developed by the Ingram Book Company OASIS BookTrack, a retail sales analysis and reporting service developed for the UK market by J Whitaker Information Services BookScan, a retail sales analysis and reporting service developed for the US market by BookScan Inc.

7. M Bide and M Shatzkin (Eds) "From N to X - The publishing value chain" the third report in the Publishing in the 21st Century research series, London and New York: VISTA Computer Services (1997)

M Bide and M Shatzkin (Eds)"Supporting Creativity: Bringing Technology to Front Office Operations" the forth report in the Publishing in the 21st Century research series, London and New York: VISTA Computer Services (1998)

8. K Kelly, "New Rules for the New Economy: Twelve dependable principles for thriving in a turbulent world" Wired, Sept 1997

9. Richard Gere, CNN May, 1999

10. Art Kliener and George Roth, "How to make experience your companies best teacher" Harvard Business Review Sept -Oct 1997

11. Peter F Drucker, "The Coming of the New Organization", Harvard Business Review, Jan - Feb 1988

12. Gigabyte - an annual review of the Information Technology Sector, Granville Equity Research, 1999

13. Bill Gates , Microsoft 1999

14. See further chapter 11 in this report

15. John Hagel III, Marc Singer, "Net Worth", Harvard Business School Press, 1999

16. Scott McNealy, Sun Microsystems, 1999

17. John Hagel III and Singer M "Net Worth" Harvard Business School Press (1999)

18. See further chapter 11 in this report

19. "Our Competitive Future" UK Government Department of Trade and Industry White Paper, 1998

20. A Braganza and Dr K Breu, "Management Focus" Cranfield School of Management, winter 1998

21. Ibid

22. M Bide and M Shatzkin (Eds)"Supporting Creativity: Bringing Technology to Front Office Operations" the forth report in the Publishing in the 21st Century research series, London and New York: VISTA Computer Services (1998)

23. J B Quinn, P Anderson, S Finkelstein "Managing Professional Intellect" Harvard Business Review March - April 1996

24. Michael Polanyi quoted in "Gigabyte" (see above n12)

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Drive with Care: People with Technology at Work

Presentation: M Daniels, VISTA "Information in Action" conference London and New York, 1999

We all, took a journey to get here today and in taking that journey we faced many decisions. In fact I took a journey which I expected to be half an hour, it took an hour. But we all faced decisions about which route should we take, how long, what conditions, what delays - road works, hazards unknown to us. Do we have sufficient petrol to make the journey? We all know how to manage the down the risk of accident and we understand the car dashboard and the many signals it conveys. But with all this preparation, knowledge and information, we know one thing is certain - we have to expect the unexpected.

A business journey is no different, merely more complex. We often find ourselves in different vehicles, with different capabilities, going at different speeds, often in different directions. But what we all want to do is avoid jams, accidents and breakdowns and of course - running out of petrol. However, with all this experience and all this knowledge, we are confronted everyday with the unexpected and we have to draw upon a large volume of skill and knowledge within the organisation that enables us to manoeuvre and move forward. The signals, the information that we receive within our businesses is often obscure. It comes from not only within the organisation but now increasingly from out with the organisation and instead of being proactive a lot of the information that we receive and how we deal with it is reactive and overly reactive. Often, the person who is the best equipped with the skills to deal with that the issue in itself, is not the person that receives the information.

What I want to do today is look at some of the journeys that we took yesterday, look at some of the challenges that confront us today, look at information and its utility within the business and finally look at a potential business architectural and technology model.

If we look at yesterday’s journeys, automating the transactions, we all experienced a huge amount of success in reducing the cost of doing business, we automated data entry, we reduced clerical administration and accounting and we reduced the cost of processing transactions. In fact it is difficult to see how we could have achieved the growth that we have all experienced under the old paper and people processes. However, Peter Drucker got it right, very little has changed, the processes within our businesses have remained basically the same. Often proprietary to an organisation and proprietary to an industry sector. Solutions are often inward looking and not focussed on the supply chain or the value chains but internal processes. Competitive advantage has been seen as driving down cost, reducing the cost of doing business, even if it has been at the expense of others within the chain. Clearly we have not learnt a lot. What are the results of this automation? Well we have ended up with data islands, we have ended up with information that is hard to find, hard to extract, where we often rely on a specialist to produce the simplest of reports, and by the way you have got to wait. And often when we get the information it is out of date.

Many decisions are made blind of the facts today and we remain very reliant on that organisation knowledge and skills inherent within the organisation. We clearly have an information and knowledge business exposure; we probably don’t recognise it. If we look at yesterday’s journeys also we have to look at the PC and local area network revolution. This was great we empowered the user. Well we did that so well that we found users that spent hours designing and over-engineering spreadsheets, power point presentations, word documents etc, etc, etc. And the gap was great, it was a significant gap between those who could and those who thought they could, and we can all relate to that. But the thing that was underlying is that is still questionable whether the right information reached the right people at the right time. All too often we failed to stop and think we just had to analyse everything. Ask yourself how many finance departments and marketing departments now have their own little Merlin’s who are the spreadsheet whiz kids within your organisations, I think you all can relate to that. What we found as a result of all this was that we had island technology, that spawned island information, and that information created more information and rather than making it easier to find information it was even more difficult to get it in what was now a seamlessly lawless maze of information. If we look at the mirriad of information islands that exist within the publisher’s front office it’s hardly surprising that it is virtually impossible to look at the information across the lifecycle of a title in any coherent manner. We still had, in fact we had increased our business exposure with regards to knowledge and information.

So that is two journeys down, the third journey was about sharing information with trading partners it is hardly surprising we discovered the obvious, information is not just internal. Sharing of data and information is critical but publishing still lags a hell of a long way behind other industries. And what information sharing takes place within publishing would be unaccepted to many industries today. However, movement has at least started. Throwing data internally or externally over the wall whether it is to trading partners or to colleagues without the insight and knowledge that makes it into information does not create the win win environment that we all seek to achieve it just merely replaces the postman.

So if we move over to today’s challenges, I think you can relate to this - how many of you feel like you are drowning in a sea of data? I do. We are bombarded with information, some of it is still only data, some of it has been collated into information, but we spend far too much time dealing with the wrong news. How many e-mails are circulated just for information? We now have the capability of firing off ‘just in case information’ are we expecting a response, a reaction or are we just merely covering our backs? Irrespective what you have to start thinking about is it all has to be read, it all has to be assimilated. We now, in the last 30 years have produced more information and published more information than in the previous 5,000 years. We can now externally get information pushed at us from newsletters and alerts and we can pull information in the form of self-service. One thing that is very frightening though, is that we all recognise that non-participation is a non-option, exclusion from the information chain has a terminal effect. Maybe on our businesses and definitely on our personal careers. How much of the information that you receive today makes a difference? How much of your time and day is spent dealing with noise? What information don’t you receive that would make a difference? Most importantly what are you doing about it? We have to take responsibility to learn to navigate safe passage. However, we must remember that we must not sink those on whom we also may depend.

The next challenge is equally as daunting, in fact it is probably even more daunting, it is that of convergence and intrusion. We are now open all hours. We used to be able to switch off the phone, but now due to mobile communications – we can’t, in fact we can never escape the phone and when we do we find a string of voicemails all crying out for our attention. We still have the constant delivery of faxes, e-mails and snail mail. We are constantly plugged in; anybody who thinks that they are not constantly plugged in is kidding themselves. We will do business with everybody, from anywhere at any time. Will it get worse? – Yes, telecommunications and information services are converging at an alarming rate. It is not just about access to it is also about the utility of access becoming inescapable. We can all remember life without laptops, personal phones, personal organisers etc. Unfortunately our new staff never knew life without them.

I’d like you to forget about SGML and XML and think about WML (wireless mark up language), or VXML (voice extendable mark up language) forget about GSM, what about GPRS – full e-mail and web browsing by a mobile communications, what about UMNTS which is due out in 2003, full broad brand wireless by mobile networks. We have to start thinking about convergence in a big way. King Canute failed to stop the tide. The question today is not whether we stop or contain, but how we manage and control this new wave of intrusion. We all need an automatic filter what we receive, when we receive it, and an absolute requirement to personalise this to reflect our individual needs. In the world of convergence it is essential that we establish new lines of demarcation between our social life and our work life.

Another challenge that we face today is that of e-business. The change from e-commerce to e-business is not understood by many. But it is so significant that many companies will miss the boat and will perish. It is not about physical world to the virtual world, it is not about digital product, it is not about any of these, it is about doing business irrespective of whether the product is physical, virtual or a combination of the two. The interesting thing is that early adopters may be seen to be working at a commercial disadvantage, they may be seen to be spending a lot of money with little return. They are getting huge return, they are learning the new rules, they are establishing brand, but most importantly they are getting knowledge and information about customers and the market which will be essential to competing in the new century and their survival. So what about the consumers? Well consumers today are besieged, we all in this audience have telemarketers ringing us at all hour, direct marketers stuffing post into our post boxes, relationship marketers wanting to know our every movements. 10% of worldwide e-mail is junk spam mail. Yesterday the vendor never really knew, ask yourselves - the publishers never really knew whether the customer was giving them 10%, 20% or 100% of their business.

We talked about relationship marketing, getting to know the customers every habits and taking a share of the wallet. But the reality is we didn’t, today consumers can be accessed and targeted in the on-line world but what we must remember is that they just as easily can target and access vendors and information. Yesterday the customer was happy to give personal information; he often had the option to refuse its use or sale to third parties. Today I ask you to look at your PC files and look at the profusion of cookies that are planted within them. What is quite clear is that now customers are starting to understand their information and feedback has real value and could become the tail that wags the dog. The customer is going to be king in the world of MyNet. We now find ourselves moving speed into a new permissions marketing environment which is very significant in terms of information. It is more significant for those that are going to become the new infomediaries who manage and control access to the information and channel to market.

The traditional vendor driven publishing model is now under pressure; in fact, it is going to die. Those who ignore this in the rising role of infomediaries may find that they are not driving the development of their products in the market but are firmly being driven by others down the supply chain who own the information, knowledge and access to the market. In this new personalised world publishers need to ensure that infomediaries don’t filter them out from their readers. So how do we prepare for the unexpected? Our first priority is quite clear, we must learn to swim in the sea of data. The schematic that is coming up depicts the basic information roles within the organisation and it varies by the actions required, from the routine to the exceptional, and from the systemised to those that are heavily dependant on human knowledge input. What we often do when we have designed systems in the past is try and satisfy all requirements by a single solution and end up servicing the lowest common denominator or alternatively we create different islands of information that are incapable of consistently seeing both the macro and micro perspectives. If we look at these quadrangles we clearly see the need to support clerical activities, the routine activities, the heavily systemised activities. Here it is about transactional information, here it is about automating as much as possible to gain maximum efficiency, and it is about checking it in and checking it out. Process management is often viewed the same way but it isn’t it is completely different here it is not about focusing on the performance of the task, it is about the performance of the process. Although it is still the same information the usage and needs differ greatly and also it requires additional information about resource allocation and the management of risk and change. It is all about keeping today on schedule.

The business analyst activities are different again. Here we are talking about monitoring and analysing overall business activities and performance actually looking at variance to exception, discovering the parameters that effect an operation or a process, data mining its about drilling down a wide volume of data, tapping into specific scenes and often not in a single dimensional view but in a multiple dimensional view. Here often analysis is performed on a data warehouse where the operational information from both internal to the organisation and external to the organisation could be aggregated. This approach obviously protects the operational environment from the performance demands of these techniques and also provides the analyst with both the wider business picture and the performance they require. The tools used vary considerably, from the spreadsheet to sophisticated modelling and forecasting tools. The service objective is to enable the analyst to "turn over the stones and look for the issues".

Management Decision Support is focused at the business key performance indicators, the issues that really matter. We are talking about management by exception, this is where we are talking about identifying what needs attention. Not fixing what isn’t broke but identifying what is broke and fixing it and what may be breaking and taking preventative action. It also needs to be proactive as well as reactive. Unlike the analyst the executive needs are proactive feed alerts, he hasn’t got time to go drilling down. He needs what we call traffic lighting, he doesn’t need to know when the signals are green, he needs to know when they are on red he also when they are on amber, and when on amber he also needs to know in which direction that the information is going. Here it is all about management by exception, identifying and understanding the issues that need attention.

Finally, I want to review a publishing business technology architecture that meets the challenges in information and knowledge. What is quite clear when you actually look at information and knowledge management is that a piece meal approach to a business is no good enough. In last years’ white paper we identified a unique publishing architecture that separated the constituent elements of both technology and its utility and what we discovered last year was not finite it has evolved and what we think of it now will be different in 6 months time as we continue to adapt and adopt it. If we look at the original concept, first of all it was built on databases, the database foundation in publishing is straight forward – content, books, chapters, journals, issues, pictures fragments etc. Context, the product information that describes the content and enables you and your customers to find and value it, and commerce the business information – pricing, inventory, customer sales etc. On top of that we have a number of business solutions, in the past we looked at these as applications all embracing, we now have to change our view of these, they are just merely processing engines.

If we actually look at these a bit closer we have back office engines that form a comprehensive operations environment handling products from warehouse to reader – and the support, customer service, ordering fulfilment. We are all familiar with these engines, but they are now engines not applications. There is a need for engines that deal with e-business and EDI – significantly different but recognising the critical role of standards and also the emergence of self-service over the Internet. And we have front office engines that focus on supporting editorial, production, and marketing and rights functions. Now all of these engines could be supplied separately by different vendors, in different formats etc, etc. but what is important and what is critical is that we have a seamless integration of that processing from author to warehouse. We then have a process layer and control layer which looks across the whole product and project life cycles and operations where we have consistency of analysis and reporting, we have data flow managing the flow of product, and work flow managing the flow of the process and controlling the process and then on top we have the converging presentation layer with windows and browsers.

Having looked at this we now need to look again, more closely and look at what is the impact of information and knowledge driven environment could have on this model. First of all, it quite clear that we now need to break down the different information needs and utility and provide consistency across the business. The obvious approach is to provide this through a data warehouse, but we must remember that we no longer ignore external information, and this is not just dealing with commercial information but also contextual information and even unstructured information. What we have done is to extend that further and reflect this within the different usages that we had already identified. Moving the work flow and data flow down closer to the engines that deal with the processing, because in fact they are process engines themselves.

However, we need to actually look at and prepare for the world of MI-NET, how are we going to deal with MI-NET, how are we going to deal with ensuring that the customer does not elect to bar us form their world?, or where they have elected to use us that we optimise that election? We need to profile, profile wealth within the organisation and external to the organisation of what is required, when it is required and how it is required. The schematic depicts how new access permission layers will need to be accommodated both internal and external to the organisation. But we need to beware, those that enter this permissions environment late will spend heavily on the skills and knowledge to enable them just to compete. If they fail to make the migration in customer relationship management they will perish in the world of the info-mediary and permissions marketing.

The new vision clearly sets out the agenda incorporating the extended information needs and knowledge input, what we have to do is be prepared that we now see clearly on the road ahead people with technology at work. What we must remember however, is can you remember all those dreams? The paperless office, tele-worketing, the virtual organisation, all too often in the past we have been presented with a prototype – and tactical priorities have dictated our direction, we have adopted a wait and see strategy. Today the pace of technology is changing and quickening at such a speed that it is no longer an option to join this marathon at mile twenty-one. You will not have the capabilities, competencies and skills within your organisations to even get to mile twenty-six.

Learning to continually learn is one of the hardest tasks, it is not restricted to the organisation, the relationships with trading partners and customers, new channels to market, the evolving products, formats, the business processes, the organisational structure, it is all these and more. It is about learning to adapt, adopt and advance technology, it is about learning to share information within a new open commercial environment, it is about tapping into and exploiting all of the information and knowledge available both internal and external to your organisations. But what is clear – it is about reducing your organisations knowledge and information exposure.

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Focusing in a Fuzzy World: Trading in the Networked World

The Institute of Information Scientists 40th Anniversary Conference, Sheffield. July 8-11, 1998 Speech by Martyn Daniels

I am pleased to be here addressing your 40th anniversary conference. I am also pleased and proud that it is Sheffield. My second home where I grew up, was, or was not educated and where I started my career.

When I started my career some 30 years ago this year, the employment exchange presented me with an interesting decision. Whether to go to work in a Computer Department of a major electrical retailer, Henry Wigfalls, or go to work at English Steel. The career councillor advised me that English Steel was a job for life, offered a real career and that computers were still a bit iffy. I didn’t like the thought of going down Attercliffe every day so I choose computers and never looked back.

If we look at Sheffield over those 30 years we see the steel capital become a steel village, a shift from heavy manufacturing to service industry. Sheffield is now the sports capital of the UK and you only need to drive down the east end to see the difference. Where Hatfields once stood proud now read Meadowhall.

But technology has also not stood still. Far from it we all know what has happened and the impact it has had. However, we are now faced with a revolution, not evolution and one driven by a technology – The Internet. The world of the information networked environment. We all know that the Internet is dynamic and is growing at a phenomenal rate. It is pervasive and what we thought of it six months ago is probably different to what we think today and what we will think of it in six months time. It is challenging all our previous thinking and our commercial environment. But does it pass the "so what test"? Will it change what we do, what we sell, how we do it , who we do it with and our supply and value chains?

The answer to all the above is a resounding, yes.

Why is it introducing such change and what new properties does it introduce that enable it to have such an impact?

• It does not respect geography -- after all where is the USA in a virtual world, companies can be oceans apart and still climb into the same boat. How many know or care where the head office of Amazon.com is?
• It challenges territorial pricing, that was designed for the physical world and its many domains.
• It challenges the traditional thinking on our bottom line -- image you owned the goose that laid golden eggs. The balance sheet just says one goose and assigns no value to future earnings. Doesn’t Amazon.com make this challenge today?
• It demands a global economy and could promote harmonisation, far quicker and wider than imagined in the corridors of Washington and Brussels. It is in fact truly stateless.
• It does not respect time – nine to five is dead , 24 x 365 now rules.
• It does not respect size as a competitive advantage and enables the small to be big by connecting to the capabilities of others and at the same time remain agile and adaptable because of their size.
• It does not respect ownership or commerce – it was born an open and free environment. Does owning physical inventory now constitute an asset or a risk?
• It does not respect the processes and standards that prevailed in the physical world – it is online and demands real-time, interactive and constantly learning solutions.

Today when we visit our High Streets, we all recognise the familiar names. We know what to expect when we visit a store. We understand the price proposition and most importantly, that we have to pay to get anything. We understand the difference between fashion, electrical and entertainment stores. We find ourselves in a comfortable zone.

The Internet removes all those comfort factors, challenges every assumption and more importantly it is the greatest opportunity to our commercial and information environments since the printing press. It can create and promote new Brands that may not exist today in our physical world but brands which are instantly global and that can gain significant exposure with little traditional brand promotion and marketing spend.

How many today are familiar "Amazon" and is this recognition restricted to just those who have used the service or even to consumers within one country? We all know the answer, but the question now is not what the brand stands for today but how it can be used tomorrow. Traditional booksellers are often physically restricted not just in their offer but also by their ability to leverage their brand, Amazon doesn’t have these problems.

We have all witnessed what the likes of Virgin can do with a brand and I would contest that Amazon now has an equal opportunity. But before we start to grapple with this New World, we must recognise those issues which yesterday inhibited and constrained our supply chain. It is important that the New World addresses these and doesn’t compound them further.

How do we service the "tail" -- the 80% of customers and suppliers who only generate 20% of value and volume but have a high cost of service? How do we stop drowning in a sea of paper, faxes, telephone calls, and clerical administration, all of which tend to inhibit instead of enable trade? If we fail to address this in the networked world we could face a ridiculous situation where the reader finds the content online, may even buy it online and thereafter is communicated with and serviced inefficiently by paper and telephone and ends up drowning in a sea of frustration.

Those who only focus on one aspect of the process without looking at the total process miss the opportunity. If you look at the US book market it is obsessed with the order transaction and often ignores the downstream transactions that make the overall process and service inefficient.

How long have trading partners operated with one hand tied behind their backs -- publishers not knowing what is selling and bookstores not knowing what is available and what the price is? Libraries not knowing if a journal has been published and firing of automatic claims one minute after the deadline. Agents, who are equally in the dark on publishing schedules, either passing these claims onto the publisher, or conveniently loosing them. Each step or stage within a broken information chain adds a buffer for uncertainty. Between the individual steps this may be 10% extra, but across all steps this could be quite significant. Uncertainty and the lack of effective communication and trading partnerships, is the mother of all inefficient supply chains. The Internet can effectively address the broken information chain and make information available to all. However, if this opportunity is not realised then issues and associated costs will certainly grow.

Studies in the UK, show that some 60 to 70% of all customer service calls to general trade publishers are about price, availability and order status. A study performed by a US academic press found that of their 11,000 800 presales calls 95% were about price and availability. An analysis of their post sales calls showed some 45% were about back order information and a further 45% were about shipment status. They could even cost each call and it doesn’t take long to total this to over $900K of annual cost. A sobering thought. What is your cost of service today? Authoritative and timely bibliographic information Wherever we look in publishing, we see a many to many supply chain, with a significant volume of new and existing product. The various sectors may have different numbers but the story is the same.

We think of it as books and serials, but increasingly we must view it as "stuff". How do we find stuff? What is core bibliographic data or information and who will provide it? We may know the publisher, if he hasn’t be acquired this month, and look at their catalogue. However, this has to be first found and when found we often find that each varies, even within the same publisher, on how they present, navigate and in the consistency of the data presented. The bibliographic agents and aggregators are often out of date and have data processing cycles geared to their CD-ROM production. In all cases we are asked to view subscription product separately from book product. Is this acceptable going forward? Yesterday we all agreed that there were probably 8 to 12 data elements that made up the core bibliographic data, but is this still accurate today? Where does extended data and core bibliographic data start and finish? Context aggregation is an increasingly important requirement, but one which we all have paid lip service to in the past. It is interesting to see that some Bookstores in the US are starting to prefer to search and value Amazon.com and Barnes&Noble.com bibliographic data online than that on Books in Print CD-ROM. This is inevitable, given the richness of information and ease of access.

Today, all primary or secondary publishers must have 6 "Cs" embedded within their market proposition.

Content, Context, Commerce, Community, Connectivity and Consistency

In the world of publishing we have to first ask what do we trade over the Internet, digital product or physical product? Books, chapters, journals, issues, pictures, fragments, information, does it matter? If we are now moving into a world of selling "stuff" in whatever media format, what is the impact? What becomes the key to making the sale? Is it the content, all those books, journals, magazines and information that you associate with publishing today? After all it is the content that the consumer buys. We can now publish on paper, CDROM, online, etc but the question of being able to find the "stuff" remains, if not grows in its complexity.

The Internet enables you to sell content as "stuff", to anybody anywhere, anytime. Amazon.com yesterday just sold physical books from their US base, they now sell books and music globally. Their UK operation is now operational www.amaozon.co.uk. STM and professional publishers such as Reed Elsevier, today sell both physical and digital content. We are entering the world of "stuff".

Yesterday, trading partners bought "off the shelf", from what could best be described as physical catalogues. The sales representative often physically introduced these catalogues to the buyer. They, the catalogues and not the reps, weren’t fully searchable, were limited in the information available and if you didn’t find a product you couldn’t buy it. We are reminded of the traditional retailer’s statement, "if it is not on the shelf, you can’t sell it". Today, trading partners still buy from the catalogue, but increasingly this is becoming a virtual one and one where everyone is demanding more and more information and reference about the potential product they may wish to buy. If it is a book, they want to see the jacket, read some reviews, read about the author, read the first chapter, understand its market position. Information that enables you to qualify the purchase and thereby minimise the risk of a bad investment. Therefore is it the context, the information about information that enriches content, enables you to discover it and also value it, that is the key going forward. Today’s challenge is to understand what context is essential and what is nice to have?

The Internet enables far richer and current information to be readily accessible to anybody anywhere, anytime and can also facilitate links from one database to another transparently. Context can now be distributed. Contextual information is no longer an afterthought in the networked world its is fast becoming the tail wagging the dog! The publishing world is currently obsessed with online. Publishers must be online, initially they focused on content. and now it is context.

I wonder how long before they get round to commerce and the realisation that all three, go hand in hand. After all, we have to find it, qualify it and purchase it, before we can read it. Context, through commerce, to content. The Internet enables commerce for all, from anywhere, at anytime. The challenges of the online marketplace are very interesting when one looks at selling "stuff" online. The discovery and qualification process can be significantly different, accessing the product is certainly different and we would expect the business models to also be different. So why do we continue to be tied yesterday’s commercial models? We must recognise that "stuff" will demand new "stuff" commercial models.

The next "c" is that of Community. That network of relationships and added value that together make it happen. Today’s challenge is to remember this network, this landscape and map it into the network. Together there is strength, individually, we all may perish as we are increasingly all marginalised. It is easier to respect and accommodate the value added that others bring to the equation, than to start from the naive perspective that one can do it alone. How many today are competing where they should be collaborating and by doing so wasting effort, money and potential opportunities. The Internet enables trading partners to be virtually linked together to anybody anywhere, anytime and we should not forget that together there is often a unique strength and protection from competitive threat.

The penultimate "c" is Connectivity. If you are not connected, then forget it, you’re dead. Removing the old restrictions imposed by the postman, the telephone, the fax, the old Monday to Friday, nine to five and batch processes are essential to moving into the future. Often some think that technologies such as EDI solve this issue, they don’t. EDI was in fact an extension of the postman, a batch process that even referred to the transfer mechanism in terms of "mailboxes" and "postboxes". EDI will always have its place for simple, high volume transactions between established trading partners, but it will not deal with queries, low volume transfers and more complex information transfers effectively or economically.

We must not however dismiss the EDI message standards that are still important and go some way to provide another "c" that of consistency. More important though in the online world, is the consistency of presentation, navigation and information. If everyone did it different, forget it. If there was logic is the collaboration of message format standards there is equal logic in recognising the needs go even further in the New World.

We are no longer in the world of E/commerce but also the world of E/service. Content, Context, Commerce, Community, Connectivity and Consistency.

The 6 Cs are like a marathon. You don’t enter at mile 24. You’ve got to be there from the beginning. So understanding and saying ‘We’ll just wait’ is not a viable option. You end up in a position where you don’t have the competencies, you don’t have the capabilities and you don’t get into the opportunity set.

The acid test is to ask yourselves how your business aligns with these foundations for tomorrow’s world. If you only have parts of the set you may well find yourselves outside tomorrow’s opportunities. Two or three out of six isn’t good enough! It is not enough to just develop new standards that describe the content and automatically link to the appropriate reference. It is not enough to develop commerce models for selling physical or online product, either as a whole or increasingly by fragment. It is not enough to deploy content online and develop new and exciting ways of presenting it.

All these steps are necessary but often we forget the lessons we learnt from yesterday on how we often failed in the physical world. Lessons that could now be addressed more effectively in the network world. So how do we move forward and what is our vision? How many understand the concept of "self service?" "Self service" is about the ability for you to go and serve yourself to your information, on a trading partner's system. Home banking is one example of this. FedEx and UPS are others where anyone can log onto the Internet and by entering their parcel tracking number, instantly track it down world-wide.

Bankers shut up shop and go home every night, but their money stays out all night. Why not allow a bookstore or library customer of a publisher or distributor to service themselves to publisher information, not Monday to Friday 9 to 5, but 7 days a week, 24 hours per day, irrespective of time zones.

Effective "Self Service" is a unique Internet function. E/commerce and E/service is not just about orders and invoices but about all communications between trading partners.

Transactions and queries, fulfilment and customer service. The Internet can break down the walls that exist between trading partners and enable us together to redesign the business process, not to reflect yesterday's landscape, that relied on the postman or the phone, but on the new virtual landscape.

A fundamental cornerstone going forward, must be that a bookstore or library should not be asked to perform the same function differently on every web site they go to. It doesn't make sense to expect them to do this. The key is to make it simple, affordable and enjoyable to do business. If every publisher and distributor creates their own solution to performing the same standard functions, they will all fail by competing where they should be in fact collaborating.

Which brings us to the BookEasyTM family and the implementation platform of our vision. It offers standards, functionality, and significant self-service provision over the Internet. BookEasyTM is a partnership between VISTA Computer Services (which can access and understand publisher systems and information), Whitaker, the UK ISBN Agency and R.R. Bowker, the US ISBN agency and a significant number of publishers, distributors and other industry players.

In the UK, BookEasy also partners with the Booksellers Association, who own the UK book industry payment clearance house. These are key partnerships that make up the trading landscape and we expect to expand to include many others. BookEasyTM through Whitakers offers central bibliographic search and discovery, central routing and security management, as well as central ordering facilities. At the distributed publisher sites, it today provides direct access to publisher operational systems, that offer current pricing, availability, and ordering options, as well as the ability to check order status.

It is an E/commerce and E/service unique industry community service and is being developed as such. With all players in the industry sitting down and working together, to make the cake bigger for all and not just enlarging their own slice of the existing cake. Together we are providing Content, Context, Commerce, Community, Connectivity and Consistency.

Every site looks, feels, navigates and performs exactly the same, a unique achievement built on real collaboration. BookEasyTM is not theory, it is real. It was developed in Internet time-scales (weeks not months or years).

It puts the book trade back to the vanguard of electronic trading, where it once was when it developed and implemented the ISBN. It shows what can be achieved when we co-operate and not compete.

It starts to be the vehicle which can address a great deal of today's supply chain issues and build tomorrow's supply chain It strengthens today's partnerships and enables them to compete in the virtual world. It enables us to cast off yesterday's paper chain "baggage" and take advantage of today's networked opportunities. We call it a family because we recognise that we are only at the first base.

We are already working of a number of other interesting "Easy" services that will enable publishers to trade upstream, downstream, service all aspects of their business and perform in the world of "stuff". Today one of the opportunities we are seriously currently exploring, involves a number of major STM publishers, major subscription agents and a ISSN bibliographic agency. We are working together to fully review and jointly specify SubsEasy or as I refer to it "StuffEasy".

But it doesn’t stop there. There are many different interfaces with Publishers and therefore many opportunities to do things "Easier". Today our processes are governed by history, the constraints of the paper chain and the uncertainty in which we all operate. Within the publishing industry there is probably one further "C" we must all learn to practice, that of collaboration. One we all agree in public to do, but when we get back to our organisations, we often forget to practise.

Finally, if one thinks back to the Steel industry and the changes it has experienced over these years, I would suggest that the publishing industry today, is in a similar position to that of the steel industry 30 years ago. Change is coming far greater than any of us can predict and far faster than ever before, who will survive and what the marketplace will look like in even 5 years is a challenge. We have to learn and adopt new ways that enable us together to do things simpler, smarter and of course "Easier."

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Trading on the Internet

Trading on the internet should be no different to trading anywhere. Before we start to trade we must first understand the landscape, the market its; size, needs, issues, etc. We then need to understand our position within, or related to that market. We then need a proposition or offer to the market. Finally we need to set expectations , objectives on our costs, returns and associated time-scales However we all know that the Internet is dynamic , is growing at a phenomenal rate, it is pervasive and what we thought of it six months ago is probably different to what we think today and what we will think of it in six months time.

If we briefly look at this challenging market we see that the Internet challenges all our previous thinking and environment. It does not respect geography after all where is the US in a virtual world. It will demand the growth of the global economy. It does not respect size as a competitive advantage and enables the physically small to be virtually large. It creates a level playing-field for all.

What do we trade over the Internet, Digital product or Physical product ? This is a virtual world which respects both. You should not be trying to sell digital product if your buyer still wants physical. We have to learn to sell “stuff”. You don’t have to stock the physical product to sell it over the Internet. An interesting merchandising issue, the virtual warehouse.

What is more important in this virtual world, the full online digital content or the context? Context being the bibliographic reference, reviews, abstracts, blurbs, covers, etc that enrich content, enable you to discover it and also value it. How do we balance the current phobia of publishers to spend money developing marketing vanity sites with the need to perform commerce and make money? Today, we clearly see publishers wallpapering the web with marketing “stuff” but with little thought to the commerce need to selling it. Do they wish to strengthen there existing channels to market and relationships that bring in their revenues today, or do they believe that they can build their direct market and will this weaken their existing channels? Obviously the issues vary between the different sectors, but can they as individual publishers be found on the web , let alone satisfy individual consumers needs. Who will emerge as the intermediaries in this market? Who will offer “one stop shopping” ? It is clear that that there are new content hungry entrants waiting in the wings ; Microsoft, AOL, Dialogue, etc. as well as global brands ; B&N, Amazon, Ingram, etc. The Publisher’s focus must remain on making money.

In the UK ,an extensive review of the Supply Chain was jointly commissioned by the BA and PA and performed by KPMG. It did not tell us anything we didn’t already know. But it has galvanised our thinking, if only for this month! How do we service the “tail”. The 80% of customers and suppliers who only generate 20% of value and volume but have a high cost of service? How do we stop drowning in a sea of paper, faxes, telephone calls, and clerical administration , all of which tend to inhibit instead of enable trade. How do we establish common authoritative and timely information?

How long have trading partners hand operated with one hand tied behind their backs - publishers not knowing what is selling and bookstores not knowing what is available and what the price is? Studies in the UK, show that some 60 to 70% of all customer service calls to publishers are about price, availability and order status. How do we start to think about minimising stock holding and not maximising it across the chain? How do we increase stock turn and investment return? How do we build trading partnerships in an adversarial landscape where a “deal culture” prevails and results not on growing the cake for all, but on growing slices of it at the expense of others?. Uncertainty , the lack of effective communication and trading partnerships is the mother of all inefficient supply chains.

How can the internet help move us forward?

How many understand the concept of “self service” ? “Self service” is about the ability for you to go and serve yourself, to your information, on a trading partners system. Home banking is one example of this. FedEx and UPS is another, where anyone can log onto the Internet and by entering their parcel tracking number, instantly track it down world-wide. Why not allow the Bookstore customer to service themselves to publisher information, not Monday to Friday 9 to 5, but 7 X 24, irrespective of time zones. Some would have you believe that EDI as we know it today will be the answer. They are wrong. EDI will work where there is volume and simple transactions. It will not work with the “tail”, where it is too expensive, cumbersome and complex, and cost and utility will always prevail. It will not work for queries, or forecast information. The internet is cheap, effective and can reach the people and needs EDI can’t. On the internet you can build virtual trading networks, where you can go from one partner to the next at the click of a mouse button in real time. The internet can not only build on the EDI transaction standards that we have today, but also introduce new presentation standards.

A Bookstore should not be asked to do the same function differently on every web site they go to. It doesn’t make sense to expect them to accept this, but we have done.

The internet can break down the Chinese walls that exist between trading partners and enable us together to redesign the business process, not to reflect yesterday’s landscape, that relied on the postman or the phone, but on the new virtual landscape. What is clear to our vision is that the user will only want to learn once, if everybody did it differently forget it, and they also want a community network they haven’t time to surf. So standards are important but different. Community is important but different. The key is understanding these needs and inventing the surprise, the new way, the environment that enables publishers to sell “stuff” and make money.

I don want to talk about BookEasyTM, other than to that it offers , the standards, the functionality, the network significant service functionally over the Internet. BookEasyTM is a partnership between : Vista , who can access and understand publisher systems and information, Whitaker, the UK ISBN agency who also own Teleordering, RR Bowker the US, Canadian ISBN agency and in the UK, the Booksellers Association, won own the UK industry payment clearance house. The partnerships that make up the trading landscape and that we expect to expand to include many others. It is a true virtual industry and community service and is being developed as such. With both publisher’s and bookstores sitting down and working together to make their businesses more efficient.

BookEasyTM is not theory, it is real. It was developed in Internet time-scales (weeks not months or years). It puts the book trade back to the vanguard of electronic trading, where it once was when it developed and implemented the ISBN. It shows where we should co-operate and not compete It starts to be the vehicle which can address a great deal of today’s supply chain issues and build tomorrow’s supply chain It strengthens today’s partnerships and enables them to compete in the virtual world. It enables us to cast off yesterday’s paper chain baggage and do things smarter.

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“Substituting Information for Inventory”

Martyn Daniels Director of Strategic Development Vista Computer Services

Paper for BA Conference 21st April, 1997

Some eight years ago I first read Sam Walton’s book “Made in America”. For those who maybe do not recognise that name, Sam Walton was the founder of Wal-Mart stores - the world’s largest and most successful retailer. In it he talks of the effort companies go to understand their customers, but that they do not share this knowledge with their trading partners. Also a conversation he had with a major trading partner.

“We both decided that the entire relationship between vendor and retailer was the issue. Both focused on the end user - the customer - but both did it independently of the other. No sharing of information, no planning together, no systems co-ordination. We were simply two giant entities going our separate ways, oblivious to the excess costs created by this obsolete system. We were communicating, in effect, by slipping notes under the door”.

The traditional book channel can be characterised by the adversarial relationships, lack of trust and mutual respect, all of which seriously obviate the adoption of Supply Chain Management. All too often players will tolerate inefficiencies, as long as they are borne by another in the chain. This view fails to recognise that any costs and inefficiency incurred within the chain, is lost to all in the chain. All commercial sectors have a degree of adversarial friction but those who adopt a Supply Chain approach have to address this head-on. If communication is a key to working together, how do we move away from “slipping notes under the door?”

How do we establish a true open trading partnership across the chain? How do we start to share responsibility for the efficiency of the chain? How do we share the benefits achieved? How do we share trading information and not as some seem to believe, sell trading information to partners? How we start to focus is on stock throughput, stock location, service and margin across the chain and to the consumer?

One of the main benefits of Supply Chain Management is that it starts to distinguish those activities that can benefit from collaboration, from those which produce the greatest benefit when left to competitive forces.

The “substitution of information for inventory” enables collaboration through joint management by trading partners. What is this information and how will it or can it be used?

Three types of information can be exchanged between trading partners:

Transactional information, such as the order, the invoice, the despatch note. This is critical to triggering events such as despatch, receipt and payment.

Master file information, such as price, product and availability. This is critical to the provision of service across the chain and to the consumer and can reduce, if not remove, a significant volume of queries and disputes.

Finally, planning and reporting information. This is critical to the provision of timely and accurate response.

The planning and reporting information is the hardest to use. There is a wide variety of information available, some of which is very sensitive. However, the exchange of this data by itself is of little value. When used pro-actively and integrated within the business decision process, this information can make a significant impact by lowering costs and improving performance via greater speed and certainty of decision making.

Booktrack is good news, as it starts to introduce much needed sales reporting information. However, will this remain just within the Sales and Marketing department or be shared across the publishing business? If this information is not shared and understood it could easily be misinterpreted.

I have taken three actual Booktrack sales profiles from the top ten titles.

The first I will call, “The Big Dipper”, sales take an unexpected big nose dive and then recover. The second I will call, “The Alps”, sales are volatile and are up and down from week to week. Finally, “The Surprise”, sales climb rapidly, peak and then all but vanish.

They all should automatically beg for more information, not just on why but also on the resultant impact and service to the consumer.

This is just sales data, it omits publishing production, distribution, fulfilment, service and returns information. It does not show stock movements, print and reprint decisions, dues, etc. It is merely one perspective and by itself is not authoritative. It indicates consumer lost sales to a title but does not cover consumer substitutions or basket sales analysis.

In the US some publishers want to hook into the EPOS systems but what will publishers do on receipt of EPOS sales and potentially retail stock data.

Will they treat it with scepticism, ignore it and continue to do business the same way. Will they relax, adjust stocks accordingly and respond to service criticism from the bookshops by pointing to the data, or worst still used as a stick to beat them. Will they assume joint responsibility and work with the bookshops and other trading partners to extract the benefits and in doing so help service the consumer.

Information by itself is just that, information. Information with the right commitment, vision and systems is a powerful business tool.

Using information to optimise stockholding and plan production. Sounds easy and everyone already does it today, but it is not and they do not. It involves sitting down with each major trading partner and understanding and sharing your business. It is important for each company to map out its own supply and associated information chain, its value adding stages, its key decision-taking points and how any change can be achieved. Understanding the total process and by doing this understand what information could help remove uncertainty, reduce inventory, improve business efficiency and add to each company’s bottom line. The supply chain does not start at the warehouse and decisions taken in production on an individual title, can influence the efficiency of the total supply chain.

Market consolidation has assisted the development of Supply Chain Management in other commercial sectors. How do we achieve it, in what we could describe as a “many to many” supply chain, where you all have such a high number of trading partners?

For the last two years at the International Distributor’s forum at Frankfurt I have talked about a book trade supply chain extension of Pareto’s 80/20 principle. The premise is that the top 20% of trading partners actually constitute around 80% of revenue and 80% of volume. Conversely, 80% of trading partners not only generate only 20% of business they probably also incur a very high and disproportionate amount of fulfilment and service cost. This view is the same across the chain.

If we look at the profile of the top 20% we see; high volume across a narrow range, consolidated shipment, high risk of returns, sensitive pricing, more complex transaction requirements and at a unit sale level, low margin, which is dependant on high volume.

If we now look at the profile of the 80% we see a marked difference; low volumes across a wide range, low volume shipments, high variability in demand, low risk of returns, simple transactions, and at unit sale level, high margin, which is dependant on minimising administrative cost.

These two diverse groups should not be viewed or managed in the same way. They have two different service requirements and commercial profiles.

Time today does not permit me to address the 80%. However, I will predict that the broken information chain here will not be addressed by the EDI services and networks as we know them. It can and increasingly will be addressed, by the Internet. The Internet is not just a new force for electronic product and electronic delivery it clearly is a major force for doing electronic commerce more economically. It enables the smaller trading partners to “serve themselves”, and also “the physically and geographically” small, to be “virtually and globally” big. It is a leveller.

Returning to the 20%. I would propose that the broken information chain here will need to focus on the wider opportunity for Supply Chain Management. Given the service profile and market impact, this has to be across the chain and needs to understand the decision and information flows as well as the product and operational flows.

The unexpected, can and often does, pump inventory into the chain. Supply Chain Management needs to remove the uncertainty that exists when trading partners keep each other at arm's length. Uncertainty on forecast, on pricing and availability, on returns, on sales and on stock holding. It needs to remove the stock buffers that guard against uncertainty. It needs to input and integrate back into the publishing production decision process, thereby optimising print, reprint and stockholding decisions.

It is very important to recognise, that even within the same trading market, not all supply chains are the same. WHS has a central ordering and warehouse facility, others do not. WHS has just changed their supply with respect to customer orders, which again is different to others. There is not one generic solution for all, but probably three or four supply chain templates that cover the 20%. Some templates will offer greater opportunity than others and some will overlap. Only by examining the individual relationships, processes and information flows will it be possible to exploit the opportunities.

Today, you need to decide how you wish to do business, you may need to decide whom you want to do business with and you must never forget the consumer. You will certainly need an information strategy, not one just for your organisation but one that encompasses the supply chain. In some cases it will impact where and how you stock product and in others the planning and process. In all cases the exchange, integration and full use of information will be key to the future.

The weakest link in any chain actually dictates the strength of the chain. Many today believe that they are “OK” and the problem is elsewhere. In doing so they happily go on, oblivious to the excess baggage and cost they are carrying for others.

I believe the committment to addressing the Supply Chain from the BA and PA is great news. It is long overdue.

To maximise its success it must challenge and question all the assumptions that exist in today’s supply chain and start from the premise that these are wrong. The review should be comprehensive and ensure that there are no “no go areas.” Most importantly, it has to start with and focus on the customer, the consumer.

This is not one homogenous industry but several that joined by a common media. There is a need to review the different sector’s supply chains, as these accommodate potential important different perspectives and customer expectations, values and perceptions. In addition the review must include the 80/20 principles of supply and needs to recognise that even within the same sector not all supply chains the same and that they comprise of more than just publishers and bookshops.

The supply chain actually flows from author to consumer, but to in order to achieve maximum benefit the initial focus should be on the manufacturer to consumer supply chain and the consumer book market.

The following processes need to be established:

• The physical / logistics flow - stock movements, handling, location, storage, service responses and throughput.
• The transactional information flow - order through to payment.
• The financial flow - who pays who, when, how and why.
• The value added stages - who adds value when and how.
• Master file information - the sources, location, accuracy and level of detail.
• An activity cost analysis - all the costs associated with the supply and service to the consumer.

The results will identify among other things:

• Broken links in the chain.
• Things that do not get done.
• Misunderstanding about other’s processes.
• Duplication of effort.
• None value added activities.
• The under optimisation of information.

In particularly, it could give us the new models, which will take us forward not in small and insignificant steps, but in bold and mutually rewarding ones.

It should, optimise the efficiency of everybody in the chain and in doing so reduce everyone’s cost base and this will result in an increased profitability for all. That’s certainly an attractive proposition, which must appeal to everyone.

Wal-Mart continues to grow and dominate the US retail market and recently the Walton family were ranked in the top three richest in the USA. So it was interesting to see this article earlier this month in “The Bookseller”.

Wal-Mart to expand online books US chain Wal-Mart is considering an aggressive expansion of its online selling operation to include 50,000 book titles, according to “Bookselling This Week”. BTW reports Phil Martz, Director of Wal-Mart Online, as saying that the offer would complement similar offerings in music and video.

Sadly, Sam Walton is no longer with us today. However, Wal-Mart clearly have some more words of wisdom that they could potentially share with us on “Profiting from Tomorrow’s Customers”.

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Substituting Information for Inventory

Martyn Daniels Director of Strategic Development Vista Computer Services

18th International Distribution Specialists Meeting Frankfurt, October 1st, 1996

Background:

It is easy for us all to reserve our seats at this forum in three years time, in order that we can celebrate together the dawn of the new millennium. However, as we approach the 21st century we are now faced with a radically changing and challenging market, where reserving your seat may not be enough.

Change is happening all around us. It is occurring at an alarming rate. It is effecting the way you do business, who you do business with and what you sell. It is effecting the Publishing Industry, at least as much as any other commercial sector and in some cases is different to any change that has gone before.

Some sectors of publishing are moving faster and are effected today more than others. But what is clear, is that, “you can run, but you can not hide”, no-one is immune, no-one can afford to be complacent.

More content is being produced each year. In fact, as the ability to publish becomes easier and cheaper with the increase of new publishing formats, we could well realise the saying , “there is a book inside all of us, waiting to be published”.

As content continues to proliferate, the identification of product and quality becomes harder. The effect that this has on the publishing value chain is further compounded by the shift from print-on-paper, to the network environment. This can be best thought of as the change from content to context and this will have a significant impact on all of us.

Distribution:

So what about Distribution? More direct sales, smaller and more frequent orders, more digital and less physical product, greater differentiation between fast and slow sellers, an increase in digital distribution etc. etc. etc.

What is also clear, in this increasingly customer orientated environment, is that distribution services can no longer be geared to satisfying the “average” customer.

I would like to draw attention to the special service statements made by leading organisations in this years “Academic Hotlines” in the Bookseller in August. Not only is there significant variation in minimal order values and quantities but delivery commitments for these urgent orders vary from next day to four days. Also some even stated that they were unable to receive “urgent” EDI and Teleordering orders. Obviously, some operations today are unable to adapt from meeting their average customer’s requirements to meeting the demands made by individual customers during their busiest trading period.

I will be as bold as to predict that; the number of titles published will continue to rise, the shift from physical to digital product will dramatically increase, full on-line fulfilment will become very important and direct sales will rise dramatically in some sectors. The impact of servicing and supplying the range of demand, will require not just one, but a number of supply strategies.

I also predict that there will be fewer distributors to occupy these seats in three years time. The announcement made by Reed and Excel last week, further demonstrates that the economics of distribution are about to radically change. Publishers will find it increasingly difficult to resist the economics of outsourcing. This will be further fuelled by the continued consolidation in distribution and wholesale and the resultant economies of scale. However , success in this environment will also depend on a solid information and technology infrastructure. Reserving your seat will not be good enough.

The 80/20 Concept:

Last year at this forum I presented a paper on the “Virtual Warehouse” which introduced what I call the 80/20 concept. This is based on the premise that your top 20% of customers actually constitute around 80% of your revenue and 80% of your volume. Conversely, 80% of your customers not only generate only 20% of your business they probably also incur a disproportionate amount of fulfilment and service cost.

If we look at the profile of the 20% we see ; high volume across a narrow range, consolidated shipment, high risk returns, sensitive pricing, more complex transaction requirements and at a unit sale level, low margin, which is dependant on high volume.

If we now look at the profile of the 80% we see a marked difference; low volumes across a wide range, low volume shipments, high variability in demand, low risk returns, simple transactions, and at unit sale level, high margin, which is dependant on minimising administrative cost.

You should not manage these two diverse groups the same. They have two different service requirements and commercial profiles.

Time today does not permit me to address the 80%. However, I will predict that it will not be addressed by the EDI services and networks as we know them today. Standards will continue to be pivotal but these will also need to change to meet the needs of the networked environment. There are some interesting models starting to appear in the market and the marriage of cost efficient fulfilment and customer intimacy, across today’s 80% and the emerging direct market, is a very interesting subject in itself.

The Top 20% - Supply Chain Management

Returning to the 20%. I would propose that these require a different strategy, one based on Supply Chain Management. This has to be across the chain and understand the decision and information flows as well as the product and operational flows. It needs to remove the uncertainty that exists when trading partners keep each other at arms length. Uncertainty; on forecast, on pricing and availability, on returns, on sales, on stock holding and availability. It needs to remove the stock buffers that are built up to guard against uncertainty. It needs to input and integrate back into the publishing production decision process, thereby optimising print, reprint and stockholding decisions.

Simply to be able to function on average more quickly, but without dependability, will not make you better in this area, nor will dependability without speed. For good customer service to be affordable it requires both speed and certainty of response.

Supply Chain Management is not about “slipping” orders and invoices under the door to unsuspecting trading partners.

It recognises that there is only one customer that counts. There is only one customer who puts money in, the Consumer. All too often we hear of people passing costs on to their customers and believing that in doing so they have scored a major success. This is naïve, as it forgets that all costs, all inefficiency, everything that happens in the chain, effects the chain. Supply Chain Management is not about servicing the next intermediary in the chain but about servicing the whole chain and focusing together on the end consumer.

Unlike one leading high street book retailer, it is not about selling information to your trading partners. It is about sharing information with your trading partners.

Using information to optimise stockholding and plan production. Sounds easy and everyone already does it today, but it isn’t and they don’t. It involves sitting down with each of your major trading partners and understanding and sharing your business. It is important for each company to map out its own supply chain, its value adding stages, its key decision-taking points and how change can best be managed and integrated with Supply Chain planning. Understanding the total process and by doing this understand what information could help remove uncertainty, inventory, improve business efficiency and each company’s bottom line.

There are three types of information which can be exchanged between trading partners; transactional information, such as the order, the invoice, the despatch note; master file information, such as price, product and availability ,and finally planning and reporting information. The later is the hardest, not only because of the wide variety of information available and its sensitivity but because the exchange of this data by itself is of little value. However, when it is pro-actively used and integrated within the business decision process it can make a significant impact by lowering costs and improving performance via greater speed and certainty of decision making.

I was always brought up to acknowledge that when stock stands still it costs money , every time it is handled it also costs money and that these costs can only can be offset by service.

Each Supply Chain is Different:

I applaud the pilot adopted by Dillons and Tiptree this year on Dillons 300 Christmas titles. It was like a breath of fresh air. The logic that you don’t have to hold the inventory to realise the benefits could have a significant impact when it is proven. I believe it will be a success and is one further example of the effect of Supply Chain logistics. Dillons only require the information exchange and a mature trading relationship, they don’t require a “Swindon”. They don’t require to stuff their stores full of stock for three months, in order to counter the variability of service, mid-season reprints etc. They can afford to “drip feed” stock into their stores on a “quick response” basis and thereby will get significantly improved stock turn, return on investment and radically reduce end of season returns. I am not in a position to comment on the issues of liability and risk but I do applaud the initiative.

It would be very interesting to monitor WHS business performance against those same lines. Unfortunately, books are only one of the products shipped via Swindon. If they were to follow the same route , they would find themselves with a classic “catch 22”, whereby the cost of supply of their other products, such as stationary, would change significantly and their overall space, resource and vehicle utilisation would need to be downgraded. This brings home my point that each supply chain trading partnership is potentially different and that each need to be reviewed and understood in order to find the most appropriate solution fit.

You will probably discover that there is not one but three or four supply chain templates that cover your 20%. Some will offer greater opportunity than others, some will overlap. Only by examining the individual relationships, processes and information flows will you be able to exploit supply chain opportunities.

The decision process can be enriched further by industry information. The best example of this today is Whitacker’s Booktrack data. However, will this data sit in the Sales and Marketing department or across the publishing business? The real trick is taking all this industry data , your individual trading partner data and your own business data and consolidating it so that you can interpret trends and directions and enrich the decision making process throughout your business. Again not an easy task, one that requires a solid technology and information infrastructure and is a subject in its own right.

“Substituting Information for Inventory”:

To return to “substituting information for inventory”. I believe that to take your seat there in three years you have to start adopting a Supply Chain approach to your top 20%. You will need to decide how you wish to do business, you may need to decide who you want to do business with and you certainly should not forget the product. You will certainly need a comprehensive information strategy, not one just for your organisation but one which encompasses the supply chain and is enterprise-wide. In some cases it will effect where and how you stock product, in others the planning and process but in all cases the exchange, integration and effective use of information will be key.

Reserving your seat for the 21st Century is clearly not enough; corporate vision, business planning, an information infrastructure and action are now required if you wish to survive to be a player and enjoy the rewards in the new millennium.

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Supply Chain Management

Martyn Daniels, Independent Consultant. Presentation as part of an EU delegation of EDI experts, addressing a conference of leading Israeli businessmen and technologists on ecommerce. The presentation was based on experience and achievements whilst at B&Q PLC. October 1995

The development of the central distribution service enabled B&Q to review the way in which product demand patterns fluctuated, and understand the effect this had on the service levels from manufacturers and consequently on the stores and customers.

B&Q's products are slow selling and have an erratic sales pattern. In order to attempt continuity of supply, stock buffers are built up throughout the supply chain. However, this is a very inefficient method of stock management to say nothing of it being very costly.

The flow of orders move flow through each link in the supply chain. These orders are characterised by a variability in the demand between each link and have a different requirement for frequency or replenishment. A small variation in demand at the consumer end becomes magnified as it progresses back trough the chain. These demand changes also lag behind one another in time at each point in the chain.

As a result of the order materials and finished product flow back through each link in the chain. Each link is characterised by the replenishment lead time ( how long does it take to move materials and products from one link to the next?). Stock is held in the system to buffer against demand variability, length of the chain, lack of manufacturing flexibility and the service level requirement at each point in the system.

Critically excessive stocks are held to buffer out uncertainty, uncertainty caused by broken information flow.

t is important that both partners understand the characteristics of the individual chain: The manufacturing processes The bottlenecks The characteristics of the supplier processes The consequent cycle times and stock levels The planning approaches adopted The forecasting systems used.

To try to smooth this merchandise flow B&Q worked with a number of its larger suppliers on sharing "forecast" demand data. The objectives were to:

minimise the time stock stands still and to substitute information for inventory.

The exchange of forecast data is the "lynch pin" of supply chain integration, removing the need for suppliers to double guess the actions of a retailer. However, the exchange of forecast data is not as easy as it sounds. Firstly what should the forecast be of? Consumer demand or epos data, as it is commonly known,  Store order demand? What is the relationship between a store replenishment order and sales through the till, or replenishment of stock in the central distribution facility?

The whole essence of central order management is to reflect future demand. Each retailer's supply chain is different and requires individual analysis.

The second reason why the exchange of forecast data is not easy is the internal business relationships. It will change the traditional role of the buyer and his relationships with his supplier. At B&Q, the tactical day to day links with the supplier are now with the logistics area with the strategic commercial relationship remaining clearly with the buyer.

The big question is how the supplier will react when in receipt of demand forecast data? Will he:

• Relax and cut stocks and respond to criticism from the retailer by pointing to the forecast?
• Ignore the data and do nothing differently?
• Or assume joint responsibility for product availability and work with the retailer to extract benefits from the supply chain?

B&Q now send forecast product sales data to an increasing number of suppliers, so that they can feed in this information into their production schedules. This forecast can be for 3 months ahead, and is gradually firmed until it is committed at order. The object is to reduce the amount of surprises in the merchandise orders, whilst enabling the manufacturer to smooth their production scheduling and stocktaking.

This initiative has now been working for over a year and has brought encouraging results. The benefits from exchange and joint use of forecast data are significant. They can:

• Reduce supplier lead times resulting in lower stockholding Improve service levels to store and therefore to customers
• Reduce cost down the whole chain

The next area is that of pre-order to delivery process. The order confirmation is designed to remove opportunities for error in the exportation and receipt of goods. If 10,000 units of goods have been ordered but the supplier can only deliver 8,000, then the sooner it is known then the easier it will be for B&Q to plan. Furthermore, if B&Q confirm the quantity received at delivery, this again allows more accurate invoicing and consequently more efficient administration for booth ourselves and the supplier.

Again it removes the "surprises" and allows the true service levels to be managed.

The next area is that of the invoice remittance payment cycle. B&Q introduced electronic invoicing in '92 and currently have 75% of invoices being sent electronically. The benefits have been immediate in speeding up invoicing whilst reducing data input staff. Remittance advices are now being sent electronically to suppliers. This is further removing a significant volume of paper, postage and the need for a supplier to rekey the information into their system. It should significantly assist the supplier in reconciling multiple invoices with a single payment. This is particularly relevant where he receives orders and raises invoices with individual stores.

But this is only seen as the first step in reducing non value adding activities. The benefit opportunities in this area are: Management by exception. By removing the need to check things that reconcile Reduced cost. Paper, postage and rekeying time Reduced manual intervention The process is from ledger to ledger electronically.

The last area I wish to cover is that of price and product data - The big challenge.

Currently, these are updated internally from agreed specifications between B&Q and the supplier. This is merely a duplication of effort. Why shouldn't the supplier have access to a retailer's product file to update details on such areas as: description bar code minimum quantities prices. Now this is quite a change of culture, since it allows capture and verification of details at source, without the consequential paper process delay. It also reduces one of the variables in invoicing; the price of the product. A great amount of discussion currently takes place as to when a price is effective; order date or despatch date.

Under a joint scheme the price of the product is agreed because the retailer and the supplier are referencing what is in effect the same file. The quantity is not in dispute, since the delivery advice quantities have been transmitted on receipt of goods. With all this in place, you can eliminate invoicing altogether and move to self billing. Payment can therefore be effected at the time of the agreed terms from date of receipt of goods if necessary, rather than invoice. Now that would be a novelty.

The other day I was thumbing trough a copy of Sam Walton's book " Made in America". For those of you who maybe don't recognise that name, Sam Walton was the founder of Wal-Mart stores. In there he talks of the effort that corporations go to, to understand their customers, but that they don't share it with their trading partners. I quote: "We both decided that the entire relationship between vendor and retailer was at issue. Both focused on the end user - the customer - but both did it independently of the other. No sharing of information, no planning together, no systems co-ordination. We were simply two giant entities going our separate ways, oblivious to the excess costs created by this obsolete system. We were communicating, in effect, by slipping notes under the door".

If you really want to get away from "stuffing pieces of paper under each others doors" reflect how electronic trading could be used to advantage in your business. It is an enabler to assist your business strategy, not a strategy in itself and allows information to flow from the appropriate retailer and supplier systems.

The technology exists, the standards exists, all that is needed is the vision and commitment

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