The Business Rusch: Creative Destruction
The Business Rusch: Creative Destruction
Kristine Kathryn Rusch
Here it is: the Business Blog which, thanks to Marina Nelson, is called “The Business Rusch.” I like the title for a couple of reasons. First, I’ve had to live with the puns people make from my last name since I was a kid. I was in high school in the 1970s when the slang phrase, “What a rush!” was in vogue. You can imagine how often I heard that, and not always in an admiring tone.
In some ways, my last name is appropriate. All my life, I’ve been in a hurry. No one has ever called me patient, not even by mistake. Once I’ve learned something, I’m ready to move on—even if no one else in the room understands it. Once I know I’m on the right path, I hurry along, trying to get as far forward as I can before I collapse.
I’m the obnoxious kid who finished her homework early—not because I was a suck-up or even efficient, but because I thought about the assignment when I got it, finished it, and moved onto the next thing. I spent the first week of my 11th grade English class reading the textbook, and the rest of the year reading whatever I wanted. And that was—and is—typical for me.
The other reason the title “The Business Rusch” appeals to me is that modern business zooms by. It rushes from one thing to the next, headlong, heedless of the results. That’s how we got into the mortgage mess, which led us into the Great Recession, and I suspect that’s how we’ll get out.
Changes are happening in my business—publishing—that are so rapid that things which were true in May, when I finished my most recent paranormal romance novel, aren’t true now as I finish my latest science fiction novel.
As I mentioned last week, this blog will be discussing all kinds of business, not just publishing, not just freelancing, but whatever catches my eye. Before I became a fulltime fiction writer, I was a fulltime nonfiction writer, specializing in business.
My business specialty came because business publications, then and now, need a lot of copy from business literate writers and those of you who regularly read my freelancers guide know this sad truth: there are very few business literate writers. Even the reporters who get assigned to the Business Desk at major newspapers often do not understand how business works.
I understand it. I’ve owned a lot of small businesses and still run a few. I also love business, like I love history, like I love news. At its heart, business is about human interaction. Businesses succeed and fail because of the human beings in charge. You put the wrong people in the wrong place at the wrong time and even the most successful businesses will fail.
How does that go with rushing to get ahead? Sometimes my desire to hurry is counterintuitive to good business decisions, and sometimes hurrying is just what the doctor ordered. I couldn’t have written this type of column in my twenties because I didn’t know when to slow down and examine things. I didn’t understand the importance of it.
I learned that lesson repeatedly in the School of Hard Knocks.
So I’m going to share that knowledge, along with when I believe rushing forward is important and when research, caution, and yes, patience, are the watchwords of the day. This column will only occasionally have the structure of the Freelancer’s Guide. I want to keep my options open so that I can examine current events or whatever is on my mind any given week.
Speaking of the Freelancer’s Guide, I’m organizing all 140,000 words now, and releasing short segments as stand-alone books, for those of you who only want one or two topics, not the whole thing. You can find links to this week’s short book, Turning Setbacks into Opportunity, at the end of this column. For the next few weeks, I’ll also list this blog under the Freelancer’s Guide so that those of you who have the Freelancer’s Guide on your RSS feed will get the blog. If you’re interested in getting the blog, I suggest you add the Business Rusch to your RSS feed, since I’ll only do this two or three times.
I’m looking forward to the freedom of this column. The Freelancer’s Guide had a narrow focus: freelancing and freelance businesses. But right now, business—heck, the entire economy—is going through a huge shift. In talking about publishing this past weekend, writer Scott William Carter said he felt like he was going through a paradigm shift in the middle of another paradigm shift. He was talking about the digital revolution smacking into publishing and forcing an industry that has followed the same model for decades to confront rapid and somewhat startling change.
Thirty years ago, my ex husband saw the beginnings of the video revolution and said to me, “If we had extra money, I’d open a storefront and rent videotapes to people.” We discussed this as a business model for about three days, seeing all kinds of problems with it. At the time, video cassettes sold for a lot of money (my memory says $60-$80, but I’m not sure if that’s right). The industry hadn’t yet chosen a format, whether it be VHS or Betamax. Most people did not own video cassette recorders, because they cost hundreds of dollars.
So my ex and I decided there were too many variables: what if we backed the wrong format? How would we keep people from stealing the expensive video cassettes? Were there even enough people to keep us in business?
Obviously there were. By the time I met my current husband, Dean Wesley Smith, in 1986, video stores had cropped up all over the country. Four years later, Blockbuster had opened chain stores everywhere. I remember reading about Blockbuster busting the competition in the business section of the paper. It was quite dramatic here in Oregon because the owner of Hollywood Video, which was a competitor, staged a pitched and ugly battle with Blockbuster, and the papers covered it with great glee.
But had my ex and I started that video store business thirty years ago, we’d have spent the last ten years struggling. Change came again to the industry, and this time, places like Blockbuster didn’t know how to respond.
In July, the New York Stock Exchange delisted Blockbuster, and its stock trades at about 17 cents per share. Blockbuster has not survived yet another revolution, one Austrian economist Joseph Schumpeter calls “creative destruction.”
In creative destruction, innovative companies succeed while slower moving, often established companies do not. My husband likens the transitions to piloting a ship. If you’re piloting one of those floating cities we call cruise ships, turning it from its set course is extremely difficult. Cruise ships do not turn on a dime. They move slowly, and with deliberation, and no matter how quickly you want them to turn, you can’t speed up the process.
Smaller companies—yachts or better yet, cigarette boats—can turn quickly. They can skim the waves of change and move into uncharted waters with ease.
Not all small companies survive creative destruction, and creative destruction does not capsize all large companies. Some companies build response to change into their business plan. Sunday’s New York Times profiled Netflix, which planned for the demise of its original business model as it started the business. The owners of Netflix saw that DVDs through the mail was a short-term model, just like the video stores were a short term model. The founders of Netflix thought the web was the next big thing (hence Netflix, not Mailflix), and sketched the business model with that in mind.
Are they planning for the next big thing after streaming video? Only they know for sure.
Netflix’s advantage, even as it grew, was that it was a young company. It foresaw the change, and could act upon it. But two other industries, the music industry and the publishing industry, are much older, bigger, and have a lot more difficulty with change.
The music industry had its initial growth spurt over 100 years ago. In one of Dean’s piles of collectibles, we have piles of sheet music which acted as the singles of their day. The art is lovely, the music is still playable, and to collectors, the sheet music has value.
Even though there’s still a sheet music industry, it has shrunk to the point of being a niche market. It exists for schools and for people who play/perform music. Like everything else, sheet music has moved to the web and for a miniscule price, you can download sheet music for most titles from the past three hundred years.
But no one thinks of the sheet music industry as the “music industry.” When we think of the music industry, we think of the big studios, once called record companies. For decades—literally decades—these companies had a stranglehold over the music we listened to. The companies controlled the distribution. A small recording studio like Sun Studios could get its music played regionally, but it took the behemoth RCA to make Elvis Presley a nationwide sensation.
If an artist wanted to make millions, he had to give up millions to his distributor—the record label. Musicians could tour; they could play bars and concert halls, but they couldn’t gain a huge audience without the backing of a label.
That situation remained the same from the 1920s until the mid-1990s. Sure, the industry went through an upheaval as CDs replaced vinyl. But the big upheaval was still to come—the MP3 player.
As the industry changed, I kept hearing that the music industry was dying. At the same time, my indie musician friends had suddenly started to make a real living—and by that I mean a living off their music. Five-to-six figures per year, where they’d been making a thousand to two thousand before.
That gave me cognitive dissonance. How could the industry be dying and yet my musician friends were making more money than ever? I sort-of paid attention, but didn’t really think about it.
Until the same sea-change hit publishing. Now we’re hearing that the publishing industry is dying, yet midlist writers—the indie musicians of the publishing industry—can make a huge living for the first time in their careers.
Weirdly, both things.
The big publishing companies, like the big music studios, are cruise ships. Some of them can’t turn fast enough to take advantage of the changes coming through e-readers and constantly available literature. At the same time, midlist authors, whose early books went out of print, are the cigarette boats of the publishing industry. We can move so fast that no one will even see us coming.
Some cigarette boats will get lost in uncharted waters, but those of us with some business savvy see opportunity here. Like the indie musicians whose fans fund the next album, midlist writers can write books without a publisher’s backing and have a similar result.
Or so it seems.
Right now, we’re in the middle of the creative destruction. Some—like Michael A. Stackpole—believe the publishing industry (the big guys) will suffer their largest shake-out by Christmas of 2012. Me, I think we’re going to watch a long slow decline, and we’ll lose some publishers along the way.
The ones who can’t turn their ships fast enough will be the Hollywood Videos of the industry—the ones we’ll go, “Oh, yeah, I remember them.” Some of the publishers will become as marginal as Blockbuster. Some are doing everything they can to move quickly. They’ve seen the changes coming for more than a decade, and have some things in place already. Whether they have the right measures in place remains to be seen.
Does this mean publishing will go away? No. No more than music did. We consume more music as a culture than we did twenty-five years ago, and the artists who understand that are making a good living. I recently downloaded music from a group I’d never heard of, who plays only in Australia. (If you like comics, check out Tripod) I would never have contributed to their bottom line in 1985, if I had even heard of them. I would have had to have Australian friends who could find the CD and then ship it to me—if, indeed, they could even find the CD.
Now, I can hear about the group from a friend, hop over to my favorite digital music site, and download as many songs as I can find. (Which I did, by the way.)
This is just starting to happen with books—and the shake-out will be similar. The fleet of foot will make money in this change, but the larger industry will suffer greatly. Dean will be dealing with this a lot in his blog, The New World of Publishing. I’ll touch on it occasionally.
I’m more fascinated with the little guy twisting in the center of all these trends. The declining economy is good for book sales; people stay home and read. Books are cheap entertainment. But the publishing industry has overpriced books, so new books will suffer. They already are; publishers aren’t buying as many new books as they should. So if new books are costly, the book consumer will turn to other venues—used bookstores, libraries, and cheap downloads.
Dorchester already saw this. They have been a marginal company for years. Writers have had to push to get payments for some time now, always the sign of a company in trouble. Rather than go bankrupt, Dorchester has moved entirely to e-publishing, and has done it almost overnight. The nice thing about e-publishing? Small overhead costs.
Only time will tell if Dorchester’s move will save the company, but clearly no move at all would have led to the company’s destruction.
So you and me—the little guys—what do we do in times of creative destruction? We research. We guess. We stay nimble. We try things. We keep open minds.
Recently, as the Dorchester made its sudden change and startling announcement, bloggers cried foul. Writers had already invested money in promoting their books (!), and were now worried that all the money they invested was for naught. Never mind that writers investing in promotion never ever helps a book’s bottom line. The writers claimed they were screwed by Dorchester.
But here’s the thing: the writers signed a contract with Dorchester. If Dorchester violated that contract, then the writers can pull their books. But, I’m pretty sure that Dorchester didn’t violate any contract at all. I’m sure the company’s attorney checked that.
So what’s a writer to do? Look at the clauses that allow the writer to cancel the contract. Depending on the contract itself, writers can cancel for a variety of reasons—so long as they repay the advance. If writers are really upset by this, they can repay the loan that the advance is and “buy” their book back.
But too many writers are afraid to do that.
And fear is the biggest problem in this time of change. Because fear will keep you rooted to the same spot. You won’t be a cruise ship or a cigarette boat. You’ll be a buoy in the middle of the ocean, buffeted by waves, insignificant, forgotten, and ultimately, you’ll sink.
So what do I recommend? What I always recommend. Research. Figure out your place in the marketplace. Figure out what you want from your career. Then figure out how to turn your boat—if, indeed, it needs turning.
Right now, most business owners should reassess their position in this economy. I don’t think any business—great or small, manufacturing or artistic, distribution or service—should assume things are going to remain the same. The changes to the economy itself are too great. Add the technological revolution that’s happening in many industries (not just the arts), and you have the makings of a great economic upheaval.
Time to look at the future. Time to figure out your place in it. Time to figure out how to get there.
I’m scrambling. Part of this blog will simply be me, thinking aloud as I figure out where I’m going. I hope it will help you figure out at least part of your future as well.
I decided I’m putting a donate button here. If I inspire you, get you to forward the link to friends, or make you think, drop a few bucks in the tip jar. Thanks!
“The Business Rusch: Creative Destruction” copyright 2010 by Kristine Kathryn Rusch.
Here’s the newest Freelancers Guide Short Book: