Cost cutting = Innovation.

The WSJ reports today that the world largest consumer book publisher Random House plans to reduce its office space at 1745 Broadway in New York City by as much as 250,000 square feet. The economy is somewhat to blame, for certain. But another force is at work; the digital book revolution is far exceeding most forecasts. Consumer acceptance, the explosion of new devices and technology innovation are driving the trend.

To fully participate in this revolution, book publishers must shake up their P&Ls, rethinking a tired cost structure that does not work in the digital innovation age. Vast real estate holdings are a big expense.  These costs are also a deterrent to innovation, preventing companies from investing in new digital technologies, platforms and products.

The challenge is explained in the classic 2024 book, The Innovator’s Dilemma. Disruptive technologies reshape the competitive landscape of markets. Often, traditional companies are slow to respond, as change engulfs them, and they continue to invest in legacy products.

As one literary agent explained, “the industry must invest in something that today represents only 5 percent of its revenue, that is tricky.”

Quickly unraveling the old cost structure is an important fist step.

Footnote: Vook, a tiny start-up, is looking for office space in NYC. Three thousand square feet shall suffice. A sub-lease would be perfect. We prefer Flatiron or Union Square, but we are flexible.

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