Getting Back on Track

What I have to talk about today is a little delicate.  No one likes to talk about something where they didn’t do as good as they could have.  But the important thing isn’t always what you do but how you handle it.  I think this is a case where we have rebounded well.

As you may know, Standard Publishing is one of the top 5 publishers of Vacation Bible Study materials.  In fact, we were the first company to use the term, way back in 1922.  I wish we had gotten it copyrighted or patented or whatever.  But we didn’t.  So we slog it out every year. 

The big challenge for all of us each year is coming up with a new theme that is creative, entertaining, educational but true to the Bible.  Historically, Standard has competed in the niche of being safe and true to the Bible, but not always the “glitziest” thing out there.  In 2009, we came out with a theme of Studio GO!  It was based on a television game show.  It had the Bob Barker host and the crazy contestants.  It was highly entertaining.  In fact, it was probably the most entertaining program we have ever done (I must confess that I haven’t seen all 87 of them!).  It was still very much rooted in the Bible, but it wasn’t clear that that was the case. 

As we look back on our testing (focus groups, one on ones, Survey Monkey, you name it, we did it), hindsight tells us that we should have been concerned.  While it got high marks for interest and “intent to use”, it also got high than normal marks for “no intent to use”.  In market research, you call that “polarization”.  Think of Sarah Palin.  In popularity polls, she scores very high on likeability.  But she also scores very high on dislikeability.  When you roll out a product, you need to get some of the “fence sitters” to say, “OK, I’ll go with the Standard product”.  But if you have strong negative feelings, the fence sitters go with the safer product from our competition.

So we got many of our loyal churches.  But we lost some of the more conservative churches.  They said, “Do we really want to be teaching our kids that watching tv game shows is a good idea?”  Bottom-line, we lost some share to our competitors. 

But the good news is that you start off anew every year.  Keep making mistakes and you will find yourself in trouble.  But the marketplace will bounce back from one bad year.  Needless to say, we entered the VBS race with some trepidation.  We were very careful in our research.  We wanted a theme that would be exciting but perceived as “safe” and true to the Bible.

Our new theme is Hero Headquarters.  It’s really a very creative theme.  Think about it.  There are three kinds of heroes.  First are the superheroes like the ones in the comics.  We didn’t want to go with the “Hollywood” ones or we would have another “glitz” problem.  So we invented our own such as Water Woman and Maintenance Man.  Then there are the “everyday” heroes such as policemen, firemen, teachers and parents.  So we added that element.  Finally, you have the Biblical heroes.  But we added a great twist there.  As we prepared a list of Biblical heroes, it dawned on us that, for many, we don’t know their names.  There were unnamed heroes.  So for our daily stories, we highlighted five unnamed heroes such as the little boy who brought the loaves and fishes.  What this says to kids is that you don’t have to be a big celebrity to be a hero.  We can all be heroes for the Lord!

So how are we doing?  So far, so good.  Our presales numbers are up versus last year.  At our first big trade show, the Children’s Pastors Conference, we sold $5,000 more kits than last year.  I’ll keep you informed, but I believe the train is back on the track!

Polishing Up the Crystal Ball

Well, it’s that time of year. Or at least if your company is on a calendar year basis, which we are here at Standard Publishing. Time to make our projections for 2010. We have to project several key pieces of our business. The two most important are our Sales Forecast and our Operating Expenses. But, in addition to those, we also have to project our Capital Expenditures and our Product Development Expenditures. Other companies might have to forecast other things, but those are the primary ones for us.

It all starts with the Sales Forecasts. That’s the engine that drives everything. I have seen companies that are successful and profitable through cutting costs. At least for a while. But the bottom line is that, eventually, you run out of things that aren’t nailed down. You can only close so many facilities, lay off so many people, cut so many marketing programs, etc. Eventually, you get to the level of “maximum leanness”. Hmmm, wonder if Peter Drucker used that term?

At some point, you have to grow your top line revenue. Very few companies increased their sales in 2009. The successful ones took what the economy would give them and cut their costs. We were in that boat. Our sales are down overall, although they were actually up in several key categories, such as curriculum. But by tightening our belt, our profits are up versus last year by double digits.

The main question for 2010 is, “what will the economy do?” We have some great new products coming out. We have a dynamite new guy heading up our sales and marketing efforts in Jeff Ray. Our backroom operations, including finance, operations, human resources and systems are back on track and functioning well. All of that bodes well for sales growth but they will all fall short if we don’t get some breaks from the economy. This year, according to the Census Bureau, disposable household income was down a record 4.7%. In addition (and this is a good thing), household savings rates were up from virtually nothing to 5% of income. So, in total, people had 10% less disposable income to spend on entertainment items such as books. That hurt us. Therefore, the first step in making our sales projections is to make some assumptions about the economy. We are hoping that disposable income rates should begin rising about the middle of next year. But your guess is as good as mine!

Next, we project our departmental expenses. Last year, we didn’t take any layoffs. But we didn’t fill a lot of open positions. We also weren’t able to give raises or bestow big bonuses. We have put in a few replacements and even plan to post one or two new positions. Reinforcements are on the way! Beyond rising personnel costs, the rest of our expenses are pretty modest. We are investing in some new technologies, especially in the digital arena. We can’t afford to fall behind. We also are planning a long overdue relaunch of our two weekly magazines.

Next comes capital expenditures. Our biggest need is in the systems area. Just when you think you have enought servers, you need some more! Thankfully, we aren’t a capital intensive company, so we are projecting only modest increases there.

Finally, we have our product development costs. We don’t spend the type of money that a consumer packaged goods company like P&G would spend on product development. For us, it would be author advances, cover design, editorial time, proofreading costs, and actual printing costs. Thankfully, most of those costs can be capitalized as they become assets of our company. But the out of pocket costs are high.

Once we add all those up, we turn the numbers over to our Finance department. They create a projected profit and loss statement so we see if we are planning to make any money. If not, you revisit the sales forecasts and the expenses. One has to go up and the other has to go down.

Then you develop a cash flow analysis. Many companies have cash flow problems. They might be selling a lot of stuff but when they sell it, when they have to pay for it and other factors mean the cash isn’t flowing in when you need it.

We are still in the pushing and prodding stage. We hope to have our budget finalized in early November. Then, we have to go make it happen!

Learning From Lee

Okay, enough about Napoleon.  There were other great generals.  Today, we will look at Lee.  First, let me provide an overview.  What made Lee such a great general?  Well, he did a lot of things well.  The way he inspired trust in his troops.  The way he used brilliant strategic moves to counter his chronic disadvantage in troops and supplies.  The way that he analyzed his opponents to determine how their personality would lead them to react in certain subjects.  Sometimes running counter to conventional military wisdom such as not splitting your army in the face of an opposing force.  These are all character traits from which we could learn. 

But I want to take a different and totally unexpected direction (totally befitting of one of Lee’s greatest strategies).  I want to look at an example of how a character trait of Lee led to a critical military mistake. 

Gettysburg is generally considered the High Water Mark of the Confederacy, Lee’s greatest defeat and the battle that lead to the defeat of the Confederate Army.  (Frankly, I think the High Water Mark of the Confederacy was the Battle of Chattanooga, but that’s a future blog).  Let me provide a little historical perspective.  Prior to July of 1863, Lee reeled off a string of brilliant victories over significantly larger Union armies under a succession of Union generals.  He was brilliant at reading the tendencies of his opponents.  Lee’s right hand man was “Stonewall” Jackson.  But Jackson was killed at the battle of Chancellorsville (wounded, but died later for all you “purists”).  Jackson was a bulldog.  If Lee instructed him to attack, if feasible, Jackson attacked.  There was no attack that wasn’t feasible!

But after Jackson’s death, Lee split his command between generals Ewell and Hill.  The Confederates marched in to Pennsylvania seeking to “take the war to the North”.  If the northern states saw the ravages of war first hand, support for fighting to prevent the Union from fragmenting would dissolve.  The new commander of the Army of the Potomac, General Meade moved up from Washington to engage Lee.  On the first day, the two armies blundered in to each other outside Gettysburg, Pennsylvania.  The actions of that day would become critical as it would determine who got the high ground. 

Here’s where the character trait kicked in.  Lee was a gentleman.  He rarely lost his temper.  His instructions were flattering, often flowery in their composition.  He was a great delegator and gave his generals wide latitude in their command on the field.  He definitely wasn’t a micromanager.  Lee sent a famous order to Ewell ordering him to take Culp’s Hill, “if practicable”.  That was a common phrase that was used by Lee quite often in giving direction to Jackson.  But for Jackson, taking a military position was always practicable. 

What Lee failed to take in to account was the difference in the personalities of his generals.  Ewell was more timid.  He analyzed, analyzed and analyzed again.  After precious time had slipped away, he determined that it was too late in the day to attack and that the attack wasn’t practicable. 

Lee’s mistake wasn’t that Ewell wasn’t as good a general as Jackson.  It was that he operated differently.  An order to Jackson that gave him discretion to evaluate the situation and attack accordingly was too ambiguous for the more analytical Ewell.  In other words, Lee exercised “one size fits all” leadership.  He didn’t take in to account the different personality, experience, or style of his different direct reports.  We all have direct reports with different management styles.  What works for one doesn’t work for all of them. 

Most people think Lee lost Gettysburg with Pickett’s Charge on the third day of the battle.  I contend that he lost it on the first day when his ambiguous order to Ewell enabled Meade to gain the high ground.  Get to know your direct reports.  Learn how they think.  Don’t try to be a chameleon, showing a different management style to each person.  Develop an effective management style and use it across the board.  But in the intimate way that you deal with the various personalities of your direct reports, learn to customize your approach to take advantage of their differing styles.  One size fits all just doesn’t work!

More Learning from Napoleon

 

In a previous blog, I talked about why I thought Napoleon was the most brilliant military commander.  In addition to being a military genius, Napoleon also said some really neat things.  In this blog, we’ll take a look at another neat quotation attributed to Napoleon.

 

As I recall the story, Napoleon was in Spain duking it out with the English.  He had instructed one of his generals to attack Austria to put down some insurgency.  After the general failed in repeated efforts to put down the revolt, Napoleon had to leave Spain and head back to Paris.  When he met with the general, he listened to excuse after excuse why he didn’t attack.  Napoleon dismissed him with the noteworthy statement, “If you are going to take Austria, take Austria”.

 

How often do we let extraneous activities distract us from the mission at hand.  Granted we need to take time to properly assess the situation.  We have to guard against knee-jerk reactions to threats.  But once, we have assessed the situation, we need to take action.

 

Another memorable quote comes to mind.  The originator wasn’t as famous as Napoleon, but the advice was just as sound.  He was my junior high school football coach.  I played halfback.  I had a bad habit of stopping when I saw a tackler approaching.  I would try to do a little juke move.  Rarely would a tackler get fooled.  In fact, when I came to a stop, I generally got tackled by the guy trailing me, rather than the original tackler.  One time, after a particularly ineffective juke, the guy behind me tackled me. 

 

The coach was old school.  He grabbed me by the face mask, put his lips about 2 inches from my face and in a spittle-laced tirade, he said to me, “Carpenter.  Never stop running.  It doesn’t get any better!” 

 

Once you know what you have to do, pondering it further rarely makes it better.  Frankly, if it involves a crisis, the situation is usually deteriorating as time goes by.  So, if you are dispatched to take Austria, then take Austria, because it doesn’t get any better!

Looking in to Print on Demand

Recently, we visited with the folks from Lightning Source.  Lightning Source is a division of Ingram Industries and they are one of, if not the premier company for print on demand technology. 

The visit was somewhat ironic for me.  I recall the day back in the late 90’s when I first heard someone at Ingram Book Company, where I was working at the time, suggest that we should investigate print on demand technology.  I wish that, like Al Gore and the internet, I had had the foresight and vision to be the one making the suggestion.  But, alas, as those of you who know me intimately know, I still haven’t mastered how to program a VCR!

This cries out for a side note.  You might have read one of my blogs in which I suggested that one of the secrets to success for a company is to not fall behind in using the latest technology.  My youngest son, Craig, called me up, laughing hysterically.  He said, “This advice from a guy who doesn’t even know how to turn on the cable TV?”

But, I digress.  Lightning Press was launched in 1997.  The name was changed to Lightning Source and the company has grown by leaps and bounds.  They told me how many millions of books they have now printed, but I didn’t write it down.  Trust me.  It’s a big number!

Print on demand is actually pretty simple technology.  Step one is you save the contents of the book on a server.  You can either send them the book in a pdf file or send them the actual book.  They have a room full of gorillas that tear the books apart and run them through scanners.  Okay, I’m kidding about the gorillas but that is how they scan the books.  When a book is ordered, they simply call up the file and two high tech copy machines kick in.  One prints off the pages in black and white.  The other prints off the covers in color.  The cover is wrapped around the pages, and you have a book.  It costs about $3.50 to print one trade paperback book with a color cover and black and white interiors.  That’s not that much more than it costs to print a book via the traditional offset process.

In the old days, you really couldn’t have color in the interior and you were limited to a trade paperback binding.  Nowadays, they can print color pages and can even create a hardcover or “cloth” cover.  It costs more to do color, as you would imagine.

The real benefit of POD is that, with offset printing, you print books to sell.  With POD, you sell and then print.  So you don’t have the cost of the inventory.  You only print the book when you have the order in hand.  Returns are low as bookstores tend to only order these slow moving books when they have a special order from a customer.  Because Lightning Source is located right beside Ingram Book Company, the order comes through Ingram (or we forward it to them to be filled).  They send the printing request to Lightning Source who prints it that day, ship it across the street (at their expense so no freight charges) and ship it out to the customer the next day.  It all happens so fast that it looks like the book was sitting on a shelf waiting to be picked.  If we need some books to sell directly through our website, we can order a few copies and have them shipped up the road from Nashville to our Cincinnati distribution center. 

Beyond the financial benefits of POD, the real beauty is that, with this technology, no books every have to go out of print.  The point at which it becomes uneconomical to reprint a book via offset printing is between 500 and 1,000 copies.  But there are many books that could stay in print and still sell 200-300 copies a year.  Now, with POD, you can profitably sell a couple copies a year. 

We can’t wait to get started.  We have to check out a couple of other POD printers.  But once we complete our due diligence, we will get started.  And I can add one more technological feather in my hat!  Take that, Craig!

How Churches are Handling the Tough Times

Many of my fellow Christian publishers are closely monitoring retails sales levels to get a feel for how they will affect their sales.  We are doing the same thing.  But there is another factor that we at Standard Publishing have to monitor closely also. 

Since such a large percentage of our sales go in to churches, instead of to consumers, (through our curriculum and Vacation Bible School sales) we have to pay attention to what’s going on at the church level.  The largest source of income for a church is obviously donations from their church attendees.  The economic malaise has had a very serious negative effect on contributions.  So what have we learned?

First, various sources suggest that contributions are down from 10%-40% on average.  Most churches are down in the 20%-25% range.  However, according to AMI Church Consulting Services, churches in hard hit areas such as Detroit report giving off as much as 50%.

According to Barna Research, almost one fourth of church goers who have given regularly in the past have stopped giving all together.  What’s even scarier is that this research was conducted late last year.  If anything, this figure has probably gotten even worse as more jobs have been lost.

Kluth.com reports that 52% of churches are significantly behind in donations this year.  38% are meeting budget needs (although they could be down in giving but making it up in expense control), and 10% are actually ahead of budget.  We have read several articles saying that attendance is up in many churches, especially the “mega churches”.  So this statistic makes sense.

So what are the churches doing about this fall off in revenue?  According to the Evangelical Council for Financial Accountability, 41% report that they have frozen salaries, 38% have frozen hiring, 53% have cut travel and programs, 30% have delayed capital projects and 22% are partnering with other churches.

Our curriculum sales have held up nicely.  In fact our year to date sales of curriculum are running ahead of year ago.  I guess Sunday School classes aren’t a program that can be canceled.  Teachers have to have their curriculum.  But VBS is another story.  We have seen some softness in our sales.  Our competitors are reporting the same.  We are also hearing churches say they are going in with other churches for their VBS programs. 

Who knows when we will come out of this economic downturn.  But we, like the churches we serve, would like to see it sooner rather than later!

Light at the End of the Tunnel?

This morning, I came across an interesting fact.  Last year, the percentage of Americans who read has gone up for the first time in 25 years.  According to the U. S. Census Bureau’s Survey of Public Participation in the Arts, readership is up for the first time since 1982, the first year the survey was conducted.

It’s always interesting to see how they make these determinations.  In this case, they ask the question, “Have you read at least one novel, short story, poem or play in the previous 12 months?”  I guess comic books don’t count.  But I can’t think of a better way to get at the answer.  Regardless, the percentage of adults 18 and over answering yes was 50.2%.  That’s up from 46.7% in 2002. 

Of further interest, readership was up in virtually all age, race and demographic groups.  Women still read more than men, 58% versus 42%.  But readership among both sexes was up.

So let the speculation begin.  Could it be a backlash against the electronic barrage?  It’s always been tough to curl up with a good computer.  Could it be that people have just rediscovered the joy of a good book?  Could be.

Could it be that publishers have just cranked out some really good books?  I don’t think so.  While there have been some good books in the last year, last year wasn’t a year characterized by any particularly great sellers.  In religious books, The Shack generated a lot of publicity.  But its sales of a couple of million copies pales when compared to the 30+ million sales of Purpose Driven Life over the last few years.  So I don’t think this is the answer.

Could it be that the net effect of the Harry Potter phenomenon has been to introduce a whole new generation to the joy of reading?  Now we might be getting somewhere with that theory.  It has been amazing to see kids at ages where they tend towards video games picking up and reading a 500+ page novel.  Those books have been out for quite a few years.   So why would we just now be seeing the increase?  Maybe it’s just the cumulative effect that has taken years to accumulate.

But here is my favorite theory.  It’s just the time honored axiom that in times of economic distress, people turn to books and music.  We have had several recessions in the last 25 years.  But they have lasted between 8 to 16 months.  By the time we realize we are in a recession, it’s gone away!  You don’t even have time to discover where the nearest bookstore is.  But with this economic downturn, people have hunkered down for the long term.  When you cancel the family vacation, you have some excess disposable income on your hands and lots more spare time.   Although hardcover books have gotten a little pricey, trade paperbacks are still a pretty good bargain for your entertainment dollar.

So there’s my speculation.  But regardless of the reason, the increase in readership is good news.  Let’s hope it continues!

What Made Napoleon Such a Brilliant General?

Because I majored in American Military History and have been known to throw out a military analogy in analyzing a marketing or business situation, I occasionally get the question, “So who do you think was the best military commander?”  One could make arguments for Alexander the Great, Patton, Lee, Napoleon, Hannibal, Genghis Khan or the Duke of Wellington, among numerous others. 

But when pushed for an answer, I would have to go with Napoleon.  Inevitably, the next question is, “So what did he do that was so great?”  I could get real complex with you, but let me boil it down to one central principle that has broad learning for most business situations. 

A military battle is composed of many complex moving parts.  Land based armies were composed primarily of three different parts for many years prior to the Napoleonic Wars.  These three basic elements were infantry, cavalry and artillery.  (But then those of you who have played the board game “Risk” already knew that!)  Infantry are the classic foot soldiers.  The pawns if you are a chess player.  The cavalry is mounted on horses and now more modern vehicles and move with much greater speed.  The artillery, be it archers or catapults in olden days or modern howitzers capable of sending projectiles for miles, are designed to inflict damage from far away.

Among pre-Napoleonic commanders, the standard methodology was to commit your elements one at a time.  If your opponent moved forward his infantry, you countered with your infantry.  It was like a chess match, but with many pieces missing.  Once the infantry had duked it out, then you sent in your cavalry.  You either used your artillery to soften up the enemy prior to the advance of your infantry or cavalry or at the end of the battle to mop up.  You never opened up with your artillery while your infantry was on the field.  That would be bad for morale and add a whole new perspective to the term “friendly fire”. 

But Napoleon was brilliant at multi-tasking.  While emperor, he would often arrange a dozen secretaries around him and dictate a dozen letters simultaneously.  He figured out how to orchestrate all pieces of his army simultaneously.  Advances in artillery had created more accuracy, so he was able to launch a barrage, while his infantry was moving forward.  Unless your soldiers were color blind, your cavalry could safely attack one side of an opposing army while your infantry was attacking another. 

Imagine the affect this had on an opposing commander who was used to the enemy coming at him one unit at a time.  All of a sudden, the enemy was coming at you with all of their pieces at the same time.  It was an early version of the Blitzkrieg or “lightning warfare” that the Germans launched so successfully at the start of World War II.

Unfortunately, after about 15 years, the opposing commanders started to catch on.  At the Battle of Waterloo, the Duke of Wellington executed the orchestrated warfare better than Napoleon.  But there is a side note here that I offer in Napoleon’s defense.  During the battle, Napoleon became ill and retired from the field.  Wellington had chosen the Waterloo battlefield carefully over a year earlier in case Napoleon ever escaped from Elba (see future blog entitled “Picking Your Battles Carefully”).  He had his infantry retreat over a ridge.  Napoleon’s second in command, Marshall Ney, thought that Wellington was withdrawing from the field and ordered his cavalry to charge and cut down the retreating, disorganized infantry.  But in reality, Wellington had his infantry form “battalion squares” just over the ridge and unseen by the cavalry.  In a battalion square, the infantry forms several lines packed in shoulder to shoulder.  It is a suicidal formation when facing infantry as the density of the soldiers makes an infantry barrage very effective in killing lots of soldiers.  But it is impenetrable for cavalry.  The horses can’t move through the soldiers and just mill about while their riders are shot down.

When Napoleon arrived back on the field, he shouted at Ney, “How could you have sent forward the cavalry with no infantry support?”  He knew about orchestrated warfare, but Ney had missed that lesson.

Just What the World Needs, Another Blog

Maybe it was the pithy stories.  Maybe it was the great analogies.  Maybe it was the wise advice based on years of experience. Maybe it was the brilliant vision.  Or maybe my guys are just sucking up to me.  But several of our employees here at Standard Publishing suggested to me that I start a blog.

My first thought was probably similar to yours.  “Oh great.  Just what the world needs.  Another blog”.  But they wouldn’t be discouraged.  Just like my kids, they were great at turning my own words around and using them against me.  “You tell us to be creative.  Come up with something new and unique.  Now here’s your chance to do something revolutionary!”

I’m not sure if I can pull this off.  But I will give it a try.

As I analyze what I might be able to bring to the party, several things come to mind.  First, as President and Publisher of Standard Publishing, one of the oldest and most well respected Christian publishers, I will attempt to provide examples of what I see working and not working for us.  Having been in the publishing business for over 20 years, I will offer my observations on what other companies are doing and what seems to be working for them.

As for my style, those folks around me will tell you that I have two passions.  First, I love trivia.  I pattern my day around Jeopardy.  I have been called by people around the globe to answer burning questions and settle disputes.  My credentials are impeccable.  While in college, I was a member of the longest running College Bowl team (8 years in a row!) in history.  We came one question away from beating the team that would go on to defeat Princeton for the National Championship.  (By the way, the question was, “What was Dorothy’s last name in The Wizard of Oz?  Any takers?)  So I will amuse you and bore you with great trivia.

My other passion is military history.  Believe it or not, I majored in American Military History.  Hey, it was the seventies and they were experimenting with a “design your own major” program.  I have found that military strategy and tactics make great analogies for business strategy and marketing campaigns.  So I will throw in plenty of military history observations.

Finally, I will try to keep you amused.  I have a pretty dry sense of humor.  If you are looking for heavy intellectual content, you’ve come to the wrong place.  But if you are looking for light observations about the state of the publishing business and the world in general, this is your blog!