The cafe: a case study
The publishing business
As a background to discussing the strategy for the writing of this book, it will be useful to take a cursory glance at the book publishing industry in general.
1) The product
A book is as much of a product as anything else. It requires time and cost commitments to create and is intended to produce a profit.
2) The entrepreneur
The entrepreneurial function is carried out by the publisher, who arranges the funding and sets up the infrastructure for the marketing, manufacture and distribution of the books. Most publishers became established long before the Internet came into being and their sales and production facilities are run in typical Industrial Age fashion with permanent managed teams to arrange advertising and marketing, organise production and take care of logistics and distribution.
However, book publishing, like any e-business, is in a highly volatile and competitive market place where there are many critical unknowns regarding the success of the products. Long experience has proved that the creative side of the business doesn't fit neatly into any business plan, therefore, very few publishers attempt to create books in-house.
Publishers have found it to be far more cost effective to spread the risks associated with content by putting the creative side into the hands of a variety of independent authors. They do not have to rely on any single book being successful, all they need is sufficient of them to succeed to cover the overall cost of publishing a number of them.
This is a typical Game Theory strategy used in conditions of uncertainty, where it is virtually impossible to predict the success of any particular move (or product). The content of books cannot be specified in detail, authors are simply commissioned to write within a defined area. They may be given a few guide lines but by and large the results are left largely to chance. Of, course, there will be several ways in which authors and contents are selected to improve the chances of success, but, the bottom line is that before a book goes on sale nobody can predict whether or not the content is liable to result in a best seller.
The same strategy is used in the fashion industry, the film industry and the music industry. A permanent infrastructure is set in place and the results determined by a probability that at least some of the products that are produced will succeed to pay for the losers and so result in an overall profit.
2) The Auteur
Creativity is in the hands of individual people - the auteurs - who use their ingenuity to produce a competitive product. Auteurs are selectively chosen by the entrepreneurial body who will usually base the selection upon an auteur's past record, or, a realistic and convincing proposal. For books, the auteur will be the author (or authors). In the film making business the auteurs will be directors, in the fashion industry they will be designers; in the pop music industry they will be bands or artistes.
3) Degree of uncertainty
Most entrepreneurial bodies will try to cut down on risk and uncertainty as much as possible. They will watch carefully for developing trends and follow these wherever possible. This works for early movers but risk increases when saturation starts to set in once a trend becomes fully established.
Most entrepreneurial bodies will employ a mixed strategy where they follow trends up to saturation point to provide bread and butter income, but, continuously speculate on more risky products to give them a chance of being an early mover in any new trend. The proportion of investment in trend following as opposed to speculation is characteristic of the particular style of the entrepreneurial body.
This can be likened to the strategy of the businessman described in chapter three, where there is not a single gamble on a fixed idea, but, a number of different possibilities are tried out simultaneously. Profit is made through concentrating on the successful and dropping those that fail. In book publishing, the books showing promise are reprinted. In the fashion industry, the more popular garments are repeated; in the music industry, more CD pressings are made of the hits. In the film industry more performances are put on for the successful films. In essence, these situations are identical to the strategy I used in my button badge making business, where a collection of uncertainties evolved to produce a reliably profitable outcome by carrying through successes to the next generation and dropping out the failures.
Successful e-business strategies are likely to proceed along similar lines, with entrepreneurial bodies spreading the risks of their funding across a range of uncertain possibilities. It will involve trying to spot and follow successful trends and at the same time experiment with novelty to have the advantage of being the first or an early mover in new trends.
The essential difference though - between the old established industries, that are following trends and looking for new opportunities and e-businesses looking for profitable solutions - is that the unknowns and uncertainties involve more than just the content of the product. In e-business there is not such a reliable infrastructure in place to provide a stable base from which to work from. Marketing, production, distribution and logistics are often as changeable and unpredictable as the products themselves.
This happens because the environment is chaotic due to the fast changing nature of the technological background. Most investments will be speculative with trends too quickly becoming saturated and more often than not leading to dead ends. This quite dramatically differentiates the nature of e-business from conventional business, because not only does the product content need an auteur's strategy, the whole business infrastructure needs one as well.
It is worthwhile then, to examine in more detail the way in which auteurs work. As their strategies are likely to have much in common, quite independent of the subject area, it will not make much difference what type of auteur we choose to take as an example. Thus, the strategy of a book author is likely to be fairly representative of all others.