A business acquaintance, Steve, recently purchased a small Christian publishing company from Jeff, another business acquaintance. Now both of these individual are pillars in the Christian “speculative” publishing world: Steve, a top agent in fiction, and Jeff, a man of many talents both inside and outside publishing companies. “Speculative fiction” includes such genres as fantasy, science fiction, etc. as opposed to general fiction written by likes of Hemingway. (Christian “speculative fiction” is a very small part of the publishing market with very loyal followers. Some of the novels have found their way into the entertainment industry like the Lord of the Rings.)
I have not spoken to Steve about his business strategy for purchasing this company, but this development can be a good example of how vertical integration works. Again, since I have not spoken to him, this article will be pure fiction as to strategic motivations.
Vertical integration is a style of growth executed by moving up or down the “supply chain” within a particular industry. A good example in the big corporate world is Apple’s iPhone. Originally, Apple created computers. These computers, among other things, could play music… other distributors’ music. The portable CD craze was winding down (and always breaking), and Napster just got crushed in July ’01 for its platform of providing free (illegal) music downloads onto computers.
When the Ipod was unveiled in October 2001-2003, vertical integration played an important role. Not only did Apple provide the device to play music, they moved up the chain to distribute the music that played on it through the ITunes store. Thus, eliminating any inter-company, inter-industry issues. They had achieved vertical integration. Today, almost every musician, small or large (including myself), distributes their music on iTunes. The iPhone was just an expansion into a complementary industry.
In regards to Christian publishing, the question is, how will Steve use this vertical integration to gather market share? Though, we can only speculate, I would start with a strategy session of consumer needs. The speculative Christian genre can be an advantage because large publishers may not want to divest resources from their money-makers (non-fiction books). A method that Steve could utilize is the Blue Ocean Strategy. This particular strategy focuses on creating a relatively non-competitive environment by challenging consumer demand assumptions. Is the speculative fiction publishers providing attributes that consumers do not want, and are there some attributes that the speculative fiction publishers ignoring?