Making the Digital Leap: Protecting the Value of Your Business in the Migration from Print to Electronic
April 7th, 2009
Today’s publishing industry is in a period of tremendous change. While the great majority of revenue is still generated by traditional print products, the pressure to develop more digital offerings and—and a greater share of revenue from them—grows more pronounced each week, it seems. While the challenges of transforming age-old business models are great, the consequences of ignoring digital imperatives are far, far greater (just think back to what happened to Encyclopaedia Britannica in the mid 90s should you need any proof).
Most publishers, of course, are well aware of how critical—and increasingly urgent—it is to make the digital leap. But few are clear on how to prepare for and manage this fundamental shift while meeting and exceeding existing financial expectations. The path to change is a treacherous one, to be sure, and few companies have proven roadmaps for successfully navigating through this uncharted new business landscape.
For the last two years, Cengage Learning, the $1.8 billion publisher of educational and reference materials based in Stamford, Conn. and formerly known as Thomson Learning, has been developing its digital assets while still protecting overall business value. In this article, Ken Brooks, the senior vice president of global production and manufacturing at Cengage Learning, discusses the journey to date and shares some of the insights gleaned from both successes and missteps. For publishers focused on similar issues, this case study provides some outlines on best practice for successfully managing this complex—but critical—business transformation.
The Digital Push
Few publishers need to be reminded of the numerous market forces pushing us all to develop more electronic materials and digital offerings.While the need may be clear, the steps forward are not—particularly for an industry as mired in tradition and as risk averse as ours.Among the principal questions we’ve all been asking over the last decade, the most worrisome one has been how to expand into digital solutions and services without cannibalizing our core offerings.It’s not an easy one to answer, by any means, and it will be different, of course, for different organizations.At Cengage Learning, we decided more than two years ago to start making this shift, and we knew the transformation was going to necessitate tremendous changes in our editorial, production and sales processes and workflows, as well as our overall work culture, due to our large size, broad scope and global scale.What we didn’t know at that time was that Apax Partners, a private equity firm, was going to become our new owners 18 months into our digital leap—an event that eventually helped us to successfully implement many of the cultural changes necessary for long-term acceptance and success.
A Mandate for Organizational Change within a Changing Organization
Cengage Learning, as many readers already know, consists of three divisions.The Academic and Professional Group is the largest of these divisions. APG is the former Thomson Higher Education consisting of such imprints as Wadsworth, Heinle and Brooks-Cole, and the Career and Professional Group consisting of Delmar Learning and Course Technology.Gale is our reference publishing division that publishes databases and reference materials for libraries.Finally, International is comprised of Asia-Pacific, EMEA and English Language Training groups.
As an organization, Cengage Learning has always been focused on developing and delivering highly customized learning solutions for institutions, professors, students and libraries around the world. In addition, along with a strong editorial focus, we’ve also traditionally led the industry in terms of delivery.One of the reasons for that delivery expertise is the strength of our production and manufacturing organization, GPMS.
GPMS—Driving Change from Within
GPMS handles the production and manufacturing of both print and digital product and has supporting vendor management and technology functions. In the case of Gale, we also handle the development of editorial.
Because of the breadth of each business division’s product suites, there is tremendous variation of production responsibilities across industry sectors.For example, because textbooks have a large amount of third-party content, GPMS handles the acquisition of rights and permissions for this third-party content as well the outbound licensing of our own content. In another example, GPMS has a large indexing group that handles not only the back- of-book indexing for our textbooks and reference books, but also indexes 14 million periodical articles per year for the Gale databases.Along with this we have an operation dedicated to taxonomies and controlled vocabularies, which I believe will be a source of competitive advantage in the future. We also handle copy editing, art, design and page composition for our print titles as well as transformation of content into eBook, courseware and other digital formats.Last, but not least, we handle the archiving and content management.
On the print side of the business we have both inventory management, determining how much and when to print, along with the actual print and paper buying.
As you would expect, an operation of such breadth, depth and sophistication requires heft and scale.We have 700 people spread around the globe and our operation commands over $300 million annually in plate spend (the money spent in developing a title prior to publication), PP&B spend (money spent for paper, printing and binding) and other operating expenses.
That background on our overall business and our GPMS operation is necessary for providing the proper context for the complexity underlying our digital leap as well as for the specific process, workflow and cultural changes we initiated to support this endeavor.In addition, it helps underscore the dramatic cultural changes we had to spearhead within GPMS to support the broader objectives.
Process and Workflow
In terms of the specific process and workflow changes we implemented to support our digital goals, they are far too numerous to detail within one article.But the objectives behind the great majority of them have to do with reducing internal cost per title, external cost per title or preparing for the future.And many have focused on creating a tighter alignment with editorial and vendor operations.
Two initiatives in particular, however, warrant a little more detail.The first is our production automation program, which really encompasses many of the other activities and is the source of our greatest opportunities—as well as our greatest challenges.The production automation program is essentially a complete re-vamp of how we generate titles, starting with authoring templates and ranging through standardized—well, actually we call them “mass customized”, designs.It also includes the use of XML throughout the process for at least 80 percent of our titles.This is a major change from our previous approach, which gave each title its own design and was done in a desktop layout program such as Quark or InDesign. Not only does our revamped approach substantially reduce cost– we’re expecting composition cost to eventually drop below one dollar per page — but it also is much faster and removes a major manual step in the publishing process, which is critical as we move to electronic products.
The second major initiative is our vendor consolidation and offshoring effort.This has proven highly effective in two areas with more benefits expected.We have saved millions of dollars in prepress costs by consolidating our vendor base on the use of low-cost suppliers, mostly in India, or in a combination of India and the United States. While this has not been easy, it has certainly reduced our costs.
The outsourcing effort is interesting in that as part of it we performed analyses of various manufacturing technologies and locations to determine if it would be more effective and cost efficient to place our printing elsewhere.We learned that for four-color print jobs under 15,000 units, we could print in China and transport them to the United States far more cost effectively than if we manufactured them in North America.As a Higher Education publisher, we have a large number of these four-color titles and most of our reprints fall into this quantity range. Naturally, there is a longer lead time associated with printing in China.We have addressed this through the use of demand and inventory planning processes, which are common in other industries. At the other end of the quantity spectrum—the low end and/or black-and-white printing, we’ve also tied print on-demand technology into our distribution system so that we don’t have to stock slower moving ancillary titles at all.
The outsourcing necessitated numerous and significant changes to our production processes.Our traditional approach was focused on high quality and schedule and budget maintenance.All pages were checked internally, the schedule was developed by our production managers and we had strong relationships with our compositors.Under our outsourcing approach, we wanted to maintain the focus on quality and scheduling, while also reducing costs.We still checked most of the pages, but we specified schedules and vendor expectations contractually.This is a stage where many problems started to surface around how explicitly we could specify our expectations, and how we managed vendor workload.
In the next phase of our effort, we continued to push outsourcing, but also focused on automating the process and providing transparency for all involved.We moved to a full process management model in which we achieved, and are still achieving, process efficiencies for the vendor and for ourselves.We still have a long way to go to achieve our overall objectives, but we have already realized significant economic benefits including substantial reductions in plate and PP&B costs (despite paper cost increases of 5 percent over the past three years) as well as headcount reductions in the production department.
Change begets more change
When you change the process and workflow of an organization, you must, of course, also change the organizational culture.Within GPMS, for example, once we implemented our production automation program, our outsourcing initiative and other programs, we had to overhaul our culture accordingly.The focus on product quality on a title-by-title basis no longer worked way it used to, for example, and we knew we would have to move our culture from a craft, title-by-title, basis to one focused on process efficiency, alignment and quality.
To ensure that employees would embrace the fundamental cultural shift noted above, we needed to create an environment that would help employees understand and accept the numerous day-to-day changes.What we grew to understand was that while management was busily creating new workflows, processes and tools that we excitedly interpreted as efficient and effective, employees were taking an entirely different view and seeing the changes as little more than “additive”, or, in other words, burdensome.And management’s interest in metrics—or measuring the results of our changes—were being viewed even more negatively as our attempt to “check up” on them.These findings were learned through engagement surveys that we conducted, that unfortunately came on the heels of the announcement that the organization was being divested by Thomson Corporation and everyone was concerned about the future of the company.Ultimately, it was a classic disconnect between what employees were doing and seeing and what management wanted them to do and see.
Publishing is a traditional industry that has long shied away from even small changes.While many other industries have already shifted from a craft focus to a process focus, few publishing houses had done it whenwe were trying to make this fundamental shift.Longstanding practices and beliefs cannot be changed overnight and cannot be changed by a simple management mandate—it’s a long process that requires commitment from and communication between all participating parties.
Publishing employees in particular, who tend to be older, educated and loyal, were highly invested in their roles as craftspeople, highly respectful of traditional practices and highly committed to day-to-day relationship management.Getting employees of that mentality to accept automation and standardization was no easy feat, especially when publishing employees tend to invest heart and soul into individual titles.We knew that if we couldn’t get GPMS employees to embrace the shift to a process culture they would never understand leadership’s broader goals they would not only fail to execute with the precision needed, but, more critically, fail to lead the innovation, co-creation and creativity we needed t remain a market leader.So we designed a framework for change based on forging shared understanding, imparting new information and building strong communication.What follows is a list and brief description of the Culture Change Imperatives we employed to build the acceptance and buy in we needed to make our broader change initiatives a success.
Forging Change Successfully
Cultural Change Imperative—Build a Shared Understanding
Every employee needs to understand what he or she is working toward, how the work is supposed to be conducted and what his or her role is in advancing on that goal.We began achieving this aim by discussing what the company was looking for—which was critically important given our changing circumstances and the shifts in business goals that attended those changes.Under The Thomson Corporation, the focus was almost entirely on revenue and operating income – which makes it quite difficult to get anyone to focus on plate or inventory investment, I might add.Under Apax, we’re now heavily focused on a mix of operating cash flow and free cash flow with a good chunk of revenue growth thrown in. So we brought our employees up to date on this shift and then explained how current goals are tied into operational metrics, along with the implications they have for day-to-day decisioning.
In terms of results of these discussions; they were significant.As we began to talk with employees about our customers, primarily students and professors, we realized that for many of us, these were our children or slightly older versions of our children and that a significant gap existed between how they worked in educational settings, the technology they used in a learning environment, and what we—as employees and managers—were personally familiar with.
Those discussions and realizations led to a shared understanding that we had to do something differently to bridge the technology gap between our product users and our product developers.And to put a fine point on our learnings, we conducted meetings not by PowerPoint presentations but by Wikis.This turned out to be wildly successful – it started out as just a vision presentation, but all of the sub-projects ended up with their pages, and then each group needed its own Web and it’s grown like kudzu ever since.Of course, there is the downside of not being able to find anything, so tagging and search has become equally important.But the upshot is:our efforts to build a shared understanding is leading us to better understand our customers’ needs and learning styles and, ultimately, will help us create the products and services they need to make the most of their educational opportunities.
Cultural Change Imperative—Get with the Program!
Now some readers may laugh, but related to the technology gap noted above, when we embarked on our digital leap, much of the GPMS was made up of 40- and 50-somethings who, while quite competent professionals, viewed texting as something that teenagers did, had no idea what blogs were, and had little experience with the very collaborative and technology based products and services we’re focused on developing to improve learning outcomes.
Using these tools for the first time and fitting them into a long-established world view is hard.I myself, still get into discussions about whether blogging is a good thing or a bad thing and whether Wikipedia will be the death of authoritative reference works and a major misleader of youth or a genuine boon to information-seekers and learners.Providing our employees with access to technology education, and encouraging discussion about new tech developments not only forced our teams to work together, but also provided them far more insight, expertise (and even interest) in developing the tech-driven, customer-responsive digital products we’ve committed to creating.
Cultural Change Imperative—Vision & Values
Vision and values govern what we see is possible in the world and how we work together.Ensuring everyone understands and supports the organizational or divisional vision and values is critical.It’s not a matter of creating an inspirational slogan, but rather effectively and accurately articulating what everyone is working toward.We invested a significant amount of time, thought and discussion on not only identifying the vision and values driving our new processes, workflows and culture but also ensured the words (and principles underlying those words) resonated with everyone in GPMS.
Cultural Change Imperative—Organizational Structure
When organizations change so too do their internal reporting structures and hierarchies.What’s important here is not only clearly outlining every employee’s role and responsibilities, but also ensuring that there is dedicated project management for key initiatives of major scope, teams focused on the key initiatives and strong executive leadership.
Executive leadership is an interesting topic.We’ve had a long legacy of strong senior sponsorship for divisional production responsibilities.That was a hard fought battle that continues to occasionally surface to this day, but I’m absolutely convinced that we would not have seen the financial benefits from the various initiatives had we turned that model on its head and centralized.The embedded divisional cultures would have just been too strong to accept the introduction of many of the concepts we are pursuing.So, cultural imperatives shouldn’t be aimed just at employees, but also designed to ensure leadership gets on board with the organizational changes that may be required to realize broad objectives.
Cultural Change Imperative—Metrics and Feedback
Metrics are a key part of what we’ve been doing not only because they help us gauge impact and measure successes, but also because they ensure we remain objective about our decisions and overcome more emotional objections to our plans.
At Cengage Learning GPMS, we’ve begun reporting performance and compliance, and I’ve been surprised at some of the metrics proposed by the team to address their concerns (variance in length estimates, and plate expenditures due to errors, among them).
In addition, we’ve also begun to tie performance incentives for a large part of the organization directly to the things we do in controlling costs and plate investment.These initiatives not only clarify what is expected of individuals and divisions, but also help to align individual performance with broader organizational goals—which is critical to meeting those business aims.
Cultural Change Imperative—Relationships
This imperative is designed to get at the formal and informal networks of relationships that exist in the company and how we work with our internal partners, our staff, and our vendors, strengthen these relationships and devise ways to make them more mutually beneficial.
Culture Change Imperative—Communication
It was difficult deciding whether I should list this first or last in the Culture Change Imperatives.I decided to emphasize this at the end so that the point is fresh in every reader’s mind upon finishing this article—because communication is perhaps the most critical aspect of effecting significant cultural shifts.And when it comes to getting everyone on board for moving innovation forward, everyone must be involved in the ongoing communication about all of the important issues.
What we’ve learned is that it’s important for management to take the first step in communicating. We’ve also learned that communication from the top never seems to go all the way down.Since it’s important to put a personal face on the change and be prepared to engage all levels of staff on any concerns they might have, we moved from an original focus on Town Hall meetings and broadcast e-mails to roundtables, blogs and wikis.Now, on a quarterly basis I meet with everyone in GPMS in groups of 20 or less in roundtable meetings that start with a discussion of the business initiatives that are currently being pursued, and then finish with an open discussion of any concerns the staff may have.I make sure to have a separate session for managers and directors at the beginning of my visit to a particular location, but then leave these managers out of the individual roundtables with the employees.
In Summary
We’ve made remarkable achievements and progress toward change in an environment that’s not known for a great deal of innovation or risk-taking. I attribute this to the openness with which we’ve pursued the changes and our willingness to discuss it and the reasons at all levels of the organization.
That’s not to say that we aren’t facing plenty of challenges in the weeks and months ahead.The pace of change is not slowing down and there’s an increasing pressure on economic performance—which shows no signs of stopping.
Challenges continue to emerge—seemingly in proportion with every accomplishment. As an example in the Spring we were getting criticized for not doing everything we could to bring books in on time.When we went back and looked at the statistics, however we found that 60% of the titles were coming in late, and those that were late were delayed an average of 39 days.Leaving production, the statistics had improved substantially: 29% were late, and by an average of 19 days. We had improved performance on 50% of the titles by an average of 50% of the time.
Nevertheless, we remain heartened and excited by our progress to date and believe that our new processes and workflow, along with our strong culture, will ensure that we continue to deliver on our overarching goals of creating and developing the learning materials and services that support achieve and excellence in learning.And if the majority of those tools prove to be digital in the future—well we’re ahead of the curve and leading the revolution!