How Digitization Can Destroy Your Business

I have written before about how digitization and virtualization can help reduce costs and enable your business to access talent you couldn’t reach otherwise. But digitization–like the Force in Star Wars–also has a dark side. If used by others in your market and not you, it can have some devastating effects on your business.

Let’s consider the example of book publishing.

For decades and decades, if you wanted to get a book published, you needed to work with a traditional publisher. Publishers offered authors value by providing them with production, talent, promotion, distribution, and capital.

But the power of digitization and democratization has blown apart this model and made it easier than ever for would-be authors to circumvent the traditional publishers to create and distribute their books in new ways. I speak from my recent experience of publishing my latest book, Professional Drinking about confident business entertaining, something I might not have been able to do on my own just a decade ago.

It used to be that publishers created huge production runs of printed books because of the available printing technology. That meant that printing books required a big investment. But one of the impacts of digitization is that many books today are available as e-books or audio books, which drastically changes the production capabilities and costs needed to create the book. It’s now incredibly cheap to produce books compared to the old model. Plus, most of the paperbacks you might order online are now printed on-demand, meaning that they only hit the printer after you’ve hit the “buy” button, reducing inventory and capital costs. I have even seen the case where a bookstore has invested in a big printer of its own where they let customers order any book they want and they’ll print it for them right then and there–quite literally giving it to them “hot off the press.”

Another element of the traditional book production process was the team needed to bring a book to life–such as copyeditors, layout designers, and cover illustrators. But you don’t need to work with a publisher to access that talent these days. There are countless people with these talents that you can now hire on a freelance basis, all of whom are just as good as the people you would work with at a publisher.  I was able to assemble a team of national-class talent that worked together virtually on the book.

It used to be that traditional publishers would help publicize their author’s books. Then, more recently, they shifted their thinking to prefer working with authors who already had a good social media and publicity platform already–because they can sell more books. The thinking became that it less risky for them to publish books where the authors could help sell more of the books themselves. That dynamic now works in favor of someone like me creating and publicizing my own book as well. I can also hire great freelance marketing talent to help me promote and sell the book as well–no publisher help required.

Another element of control that traditional publishers used to have was accessing the distribution channel where books were sold. They were the ones who shipped the books to bookstores and airports. But today, Amazon dominates the industry as some 60% of all books are sold through the site. Plus, any author can work with companies like Ingram Spark, and others who can help you print and distribute your physical book anywhere books are sold.

The fifth element of publishing that’s been disrupted by digitization is the capital needed to create books. It used to be that publishers invested thousands and thousands of dollars in creating, marketing, printing, warehousing, and distributing books. Plus, they also paid authors what’s called an “advance” on the future sales of the book. Now, because of digitization, any author can create, market, and distribute their book for a fraction of what it used to cost. The added element here is that when you self-publish a book, you also retain ownership of all your content–and a much bigger proportion your sales.

The result is that more and more people are choosing to self-publish their books instead of working through the traditional publishers. This used to be a mode used only for vanity books, but it has become a main-stream approach for many popular books. That all adds up to a disturbing trend for traditional publishers who, just like magazines, face an extremely uncertain future all because digitization and democratization is completely disrupting their business model.