Up and away

How do they make it look so easy? Every day, the Silicon Valley website Product Hunt lists dozens of new launches; music services, desktop robotic factories, payment systems for Indian shopkeepers.

Invariably, they are spawned by start-ups: bright young things with world-changing ideas and sticker-covered laptops. Most fail, but a few (like Product Hunt itself) will earn multimillion dollar valuations in a matter of months. In 2015, publishers should feel under threat from start-ups. Publishers are in the business of selling distraction, so any new distraction (a chat app, a game, a video on your phone while riding the bus) is a threat.

When customers move faster than companies, business models can evaporate shockingly fast. When was the last time you saw a Blockbuster shop on a high street, or bought 35mm film?

The best way to counter this existential threat might be to learn from start-ups, and to build start-ups within traditional publishers. But established publishers are in a remarkable position to benefit from innovation. They have resources, connections, back- catalogues and customers that a start-up could only dream of.

Innovation for publishers shouldn’t be about new e-book formats, or new ways to re-sell old books under new covers. It should be about rethinking what it means to be a publisher, about building new businesses from their relationships with readers and with authors.

In other sectors, companies such as Lloyds Bank, Time Inc., MasterCard and John Lewis have built start-ups inside their businesses to answer these kind of questions. When British Gas wanted to start selling smart thermostats, it went head to head with Nest, a Silicon Valley start-up founded by ex-Apple engineers who were selling a beautiful, intelligent thermostat.

After a difficult in-house pre-launch, British Gas set up what was essentially a start-up called Connected Homes, with an office in Soho, well away from its Staines HQ. Eighty per cent of the staff were new, hired from outside the utilities industry. But 20% were British Gas insiders who understood the unique resources of the mothership—its network of 11,000 installers serving (deep breath) 6.8 million paying customers. That combination is crucial. Too close, and you risk recycling the same old ideas. Too remote, and you lose all the power of the big company. With 200,000 installations so far, British Gas took on Nest and won (at least in the UK).

The combination of start-up energy and big-company resources creates a kind of super start-up. But the hardest thing is getting started. Building an island of fast, lean culture inside a big company isn’t easy. It requires a senior backer who can act as
a catalyst, providing the support and the political cover for the super start-up team. That group must be able to make mistakes and deliver unexpected solutions without fearing for their jobs.

The start-up will need a brief, one that’s tight enough to give them focus but loose enough to let them follow the customers’ needs—wherever they lead. An internal start-up is not a unit for building a specific product. It is a new business, one that draws on the unique resources of the mothership.

It seems counterintuitive, but the real power of the start-up is discipline. With no money and little time to waste, successful start-ups are forced to focus on what is important, to understand the customer’s needs and hustle to grab their attention. They can’t afford to be self-indulgent or ponderous, sentimental or egotistic (they will have plenty of time for that later).

In 2015, publishers should think like super start-ups, and aim to revolutionise their industry from within.

Otherwise somebody else might well do it for them.

Tom Whitwell is a senior consultant at Fluxx. He will take part in the closing panel at the FutureBook Conference 2015, “Publishing Through a Looking Glass: A View from the Outside”, alongside Kings Road Publishing’s Perminder Mann, Enders analyst Douglas McCabe, and Penguin Random House Audio editorial director Caroline Raphael. For more information on conference click here.