As everyone pursuing the lean path has known for as along as they have been on the path, the heart of it all is eliminating waste – and waste is everything that does not create value for customers. The challenge is often getting management to honestly determine what creates value and what doesn't. In areas such as finance and accounting, sales and marketing, HR and administration little or no value is created in the eyes of customers, yet in many companies these organizations yield quite a bit of power and influence. So getting them on board with the notion that the company needs less of them is culturally a tough nut to crack.
Nonetheless, the company with the best value proposition wins – the one that delivers the most value for the price charged, and the one that spends the greatest percentage of its total cost on activities that create value. Whether management understands and accepts that or not, it is a fundamental reality; and nowhere is it more apparent than in the news business.
I read 31 news sources every day. I can't say I read any of them from cover to cover. More honest to say I skim the headlines from 31 sources and read the few stories in each that grab my attention. I do not have a single newspaper or magazine delivered to my home, however. There is no need. The value is the the information – and money spent on paper and logistics to transport the paper to me is pure waste. It does not make the information I am looking for any better. In fact, it would detract from it because the time required to put the information on paper and transport it to me slows down the news delivery process. Newspapers across the country are filing for bankruptcy – most of them going through a restructuring of some sort or another as the owners deny the reality that they add no value, and rationalize keeping the waste of paper, ink and delivery alive.
It is also obvious to just about everyone when it comes to music, movies and books.The value of music is sound – a physical CD is complete waste – if anything the sound degrades in transferring the digital recording to a physical medium, then back to sound. More significant in the music industry, with the advant of iTunes and Walmart music downloads no one has to waste their money buying the 8 songs on a CD they don't like in order to get the 2 songs they do. The utter waste of 80% of the music we used to buy is disappearing, and artists are increasingly being paid only for their true value creation – only those songs people like.
Blockbuster Video is on life support for the same reasons. Even Redbox is a temporary phenomena. Who needs them when movies are increasingly available via download to any number of devices?
The last book I bought cost me $5. I went to Amazon, downloaded Kindle for my laptop for free, then bought the book and was reading it a few minutes later. Amazon's deal is that authors of Kindle books get 60% – so the guy who wrote the book made three bucks on the deal, and I got a $30 book for $5. What many people don't know is that author's royalties are usually 10%. So if you buy Simple Excellence for $38, Adam Zak and I arm wrestle for who gets the $3.80. We make about the same royalty for the print book as the guy who wrote the Kindle book I just bought. That $3-4 is close to the real value of either book. The money you spend on our book over and above that amount is the pure waste of paper, printing and logistics, along with marketing expenses the reader could care less about.
As the book industry evolves to one that is substantially a better value proposition for customers, however, those folks who just can't wrap their minds around the core concept of value are dying hard, trying to keep brick and mortar bookstores, selling paper and ink books alive.
For most manufacturers, the product is not something that can clearly be delivered in electronic form, and the waste of the physical carriers of electronic products is not so obvious. But the principles are exactly the same. I cannot tell you how many companies I visit that do not want to be bothered by vague theories of value propositions and customer defined value. They want me to jump right in and start kaizening something. They believe their lack of substantial improvement is the product of poorly executed improvement efforts. More often than not, however, the real problem is attempting to improve something that should not exist at all. No amount of kaizen can make a corner video store or a print newspaper hurled by some kid onto a front porch valuable.
Dragan Bosnjak says
Hi Bill,
I agree with you about waste of paper, ink and everything, but I have tried to buy your book via Kindle and it is not available…
When will it be possible to read it in that format?
(I write from Europe and paper books take usually couple of months to get delivered and I don’t like to wait so much because Kindle books arrive here too in 30 sec…)
Stephen Hodgson says
I especially enjoyed the point about the best value proposition winning.
For some reason I want to print that paragraph out and stick it in my office as a reminder of why and what I come to work for. It hits the nail, so to speak.
PS – I had no idea Kindle was available for a PC. Added bonus!
Dale Savage says
Thought provoking. Although you enjoy reading your newspaper and books via a computer screen, not everyone likes that. Some of us still like to curl up in a chair or on the couch or bed with a nice cup of tea and enjoy a book in a more relaxed atmosphere. Setting in front of a computer seems too much like work. Also, there are many of us who still do not own a computer or internet at home. For us, there is value in the paper and ink in a book or newspaper. Maybe those who supply to us will become a niche industry and then the question will become “Are we willing to pay for it?” That is when the value from the customer perspective will become obvious to all by who survives and who does not.
I can only comment on the newspaper and book part of your post. Those who I have in mind generally do not contribute to the music or movie industry, so I will leave that for others to comment on.
Joseph T. Dager says
Your post is excellent but I am disappointed in the comments. I think the real crux to your post is understanding your value position and customer value.
You comment about jumping right in and start improving something is spot on. Doing that or any improvement without it being tied to the Critical to Quality issues of the Customer is Waste.
C.I. efforts cannot be divorced from the marketplace. They must be tied directly to Value as the Customer defines it. It is why improvement efforts fizzle out, IMHO.
Did I read your post wrong? Or was it about the book distribution?
Bill Waddell says
No doubt there will always be small markets for people who enjoy the feel of a book – I am going to die hard in that area. Most of the world will soon enough come around, however. I am old enough to remember the advent of ATM’s, and the stubborn resistance of many people to the idea of trusting their money to a machine. People would stand in line to cash a $20 check rather than get money from an ATM … but the superior value of the speed and accuracy of the machine inevitably prevailed.
For that matter I had a hard time coming around to reading anything of length or substance on a screen, rather than a piece of paper. I printed out lots of emails to read them when I thought they really demanded my focus.
The world is changing, however, in ways few can envision or appreciate. Who needs a publishing company when you can upload your own book to Amazon for free and sell it directly for 60% of the gross?
The Sarah Palin – Justin Bieber cases can’t be ignored. Palin has wreaked havoc on the media by communicating directly with people via Facebook. And Bieber became a star as a result of his video on YouTube.
There is tremendous waste in the pipelines between artists and people with information and the vast audience willing to pay for that art and information. The traditional model of having such art and information delivered in physical form meant an investment had to be made – the cost of printing a thousand books or a thousand CD’s and transporting them to brick and mortar distribution operations. Publishers, printers, film companies, record companies and the rest made the investments and therefore controlled the market – authors were published and artists made famous if the investors in the physical distribution believed they represented a worthwhile potential return on the necessary investment.
Take away the need for the physical form and the entire industry collapses like a house of cards. The only investment needed to publish a book in electronic form is the author’s investment in time. It will not go without a fight, but publishing, printing, and disc writers and peddlers will not be around in anything like their current forms in ten years.
Bill Waddell says
You’re absolutely right, Joseph. Value is the core of the matter. Sometimes we get lost having fun running up and down rabbit trails that diverge from the main point.
Tony says
Yeah, let’s see how eBooks add value:
– I can’t browse for them at the used eBook store, getting great values on out of print books I never would’ve searched for
– I can’t lend them
– I can’t sell them
– It’s possible to lose them (local hard drive or cloud – as Google just showed)
– it’s easy for the publisher to remove them (thanks, Amazon and 1984)
– I can only read them (Kindle, Apple, etc — not PDFs) on approved platforms, thanks to the wonderful value of DRM
– and most aren’t a great value compared to physical books (my Kindle owning cow-orker says for best sellers Kindle price is ~$1 less than typical physical book’s actual (not list) price)
I see a place for eBooks in my life (especially for technical books, where being able to search is great), but I hope physical books never die. And there is hope — paperless office has arrived yet. And if Amazon gets an eBook monopoly, we’re screwed.
Kathleen says
Amazon’s deal is that authors of Kindle books get 60%
Not quite. It is possible that self-published authors who participate in amazon’s e-book self-publishing program may get a higher net return than what they may get from a regular publisher. Whoever is the publisher, be it an individual author or Random House gets 60%. If you published with RH, you’d capture your 10% of the Kindle sale as dictated by your publishing contract but you wouldn’t get 60% by virtue of being the author. An author’s contract with their publisher (if applicable) takes precedence over any secondary contract the publisher or a representative enters into on one’s behalf.
Bill Waddell says
Precisely my point Kathleen (although I probably did not make it very clear). You have two choices as an author with a message you want to get out to your base:
Go the traditional route and have your book in hard copy selling for $50 – you get $5.
Or epublish it yourself through Amazon for $8 and you get $4.80
Either way you get about the same but by cutting the publisher out of the middle your readers get your message for 84% less.
And when you epublish, what value is the publisher adding in the eyes of your customer? None (they would say they market and promote your book but I am sure most of the real promotion of your books – like mine – was not the work of the publisher)
As people becomee more comfortable with reading books on screens rather than paper, that question of the role of traditional publishers will become more and more relevant.
Paul Todd says
Good article and interesting discussion. I continue to see Peter Drucker’s ideas at work in the lean world, like these questions from 1954:
What is our business?
Who is our customer?
What does our customer value?
From Blockbuster to the New York Times, these questions have never been more important than today.
Eric Wade says
I rarely disagree with Bill but I’m going to give it a shot.
I don’t feel that the print edition of The Economist carried with me for a long flight is wasted on me.
I also like the idea that editors and publishers have the option of adding extra stories and information into certain publications that I would consider to be extra value because it might be surprisingly interesting to me but also may have been something I never would have come across in my RSS scans.
Lastly, and this is a whopper of a philosophical stretch… consider what archaeologists would have to work with if previous cultures had been able to reduce their waste to zero. I know… its a reach!
Kathleen says
I see what you were trying to say Bill.
It is no secret that publishers largely leave book promotion up to authors these days. In some markets (let’s restrict this to non-fiction), having a publisher is good if their majority share is in textbooks. I have found educators to be receptive tho if you approach them one on one. Otherwise, one is better off assuming they’ll have to sell it themselves.
If anyone is interested in the e-book market, there’s a very good yahoo mailing list about it. http://finance.groups.yahoo.com/group/pod_publishers/ Technically it’s POD (print on demand) but it covers ebooks nicely.
Speaking of Bill, I think a good lean topic would be the LSI model aka Lightning Source. They print books on demand. Iow, you sell a copy of your book on Amazon and it goes direct to LSI who prints and ships it. LSI opened a facility in Europe which really cuts down on shipping costs. LSI will open another unit in Australia this June (I sell a lot of books there). The downfall right now is that not enough European publishers know about it. There’s a lot of european technical books I would love to buy but the shipping is insane. Foregin publishers have yet to open accounts with LSI US to sell books here. Pity that.
One last thing about ebook publishing. Some books aren’t well suited for ebook formats, mostly technical books with a lot of charts, formulas and illustrations. The technology for graphic rich texts still isn’t there yet but maybe it’ll be available sometime next year. Whoever comes up with the solution stands to make a lot of money.
Mark Stover says
“More significant in the music industry, with the advant of iTunes and Walmart music downloads no one has to waste their money buying the 8 songs on a CD they don’t like in order to get the 2 songs they do.”
Hey Bill, your postings always get me to thinking and this one even got me to talking with a colleague in the cubicle across the way.
The value of art is certainly in the eyes of the beholder, but taking a couple of songs that you like out of an album of songs put together by the artist by intent is kind of like cropping out just the eyes of the Mona Lisa ’cause that’s the only part I really like. But in so doing we’ve actually lost the overall concept the artist was trying to express.
You’re right that not every song by every artist is great (or even Top 40 worthy), but the fact that a musical work of art can easily be chopped up into just the little bits that we like keeps us from being challenged by the artist and only exacerbates the sound-bite experience that our modern society tends to suffer from.
Keep up the good work. I enjoy your postings and almost never edit them into little bits to take them out of context for my own evil intent .
Bill Waddell says
“but taking a couple of songs that you like out of an album of songs put together by the artist by intent is kind of like cropping out just the eyes of the Mona Lisa”
Aren’t the musicians the ones cropping her eyes out to play on the radio, and put into videos on MTV? :)
The classical musicians might be able to make that case, but it has long been my opinion that Rossini put the cannons into the William Tell Overture as an afterthought when he found out no one was able to stay awake while listening to his entire opera ‘in context’. If it weren’t for someone cropping out the overture, no one would have listened to any of it.
Aaron says
I don’t think the printed medium will ever completely die out.
I know that I can pay more attention to a printed document than something on a screen. I can proof-read something a number of times on screen, but as soon as I print it out and read it, the spelling, grammatical and lay-out errors are much more obvious. In this way, the printed draft document does provide added value for my customer, in a better quality document.
Tim DelVecchio says
You paint “the consumer” as a monolithic being. I am really into lean. However, I prefer books in print. I like to feel the page in my hand, turn the pages, mark them up and make notes in them, etc. I find value in the printed book. Does that make me wrong and you right?