Wednesday, October 19, 2011

BIG’s Blog: Push Out Costs

You can’t avoid change, but you can avoid costs.

Obviously, Browne Innovation Group (BIG) and other strategic consulting firms can be agents of stability; as in “stabilizing and growing your donations” year-over-year in these times of disruptive change. There are successful models for transforming fund raising organizations.

As your fund raising organization transforms to accommodate change driven by generational shifts, technological communication changes and rising competition for donor dollars, the question is, "What can you learn from other industries that have already been disrupted?"

The New York Times article entitled, Amazon Signs Up Authors, Writing Publishers Out of Deal is just the latest news of a major disruption hitting the book publishing industry.

Amazon already sells more books (both printed and digital) than any other company in the world so they are already putting some book retailers out of business. They build and sell their own Kindle branded e-reader so they are effectively competing head-to-head with other digital devices such as the iPad. And now they are directly signing authors thus cutting out publishers and agents.

Aren’t you glad you’re not in the book publishing business?

We all know that this would not have come about without the Internet. As I have written so often . . . “The Internet changes everything.”

The Internet digital platform has disrupted the very definition of “a book” as well as changing the value-added relationship along the value chain from author to bookseller. Amazon now offers an end-to-end service connecting the author to the reader.

Amazon, in taking out these intermediary separate businesses that acted as a value chain of services in the traditional publishing business model has built a new business model that “pushes out costs.” This new business model allows the book to sell for less but also allows the author to make more money. And, of course, Amazon makes money all along the new value chain which they essentially control.

What can fund raising executives learn from this?

The same Internet-driven disruption that is changing the book publishing business will also affect the fund raising industry. As legacy modes of donor communication become less profitable, fund raising organizations will move more heavily into digital communications. The unexpected benefit of this will be pushing out costs.

Just like the authors that are the big beneficiaries of what is happening in the book publishing industry, so too nonprofits will see significant increases in net transfers from their fund raising groups as they push out costs.


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