Know any corporate behemoths just begging to be toppled by an entrepreneurial upstart like you?
posted 12.04.05
ON TAMING DINOSAURS
Once upon a time, there was a ferocious dinosaur known as Publishsaurus rex who roamed the Earth, devouring everything in its path. Bookstores and authors were especially attractive prey for this carnivorous monster.
While scientists believe that most dinosaurs disappeared as a result of some catastrophic natural disaster about 250 million years ago, the Publishsaurus rex managed not only to survive, but prosper. In fact, it's still around today, though it has been tamed.
Taming Publishsaurus
It took the cleverness of an entrepreneur by the name of Leonard Riggio to accomplish such a feat. The story of what Riggio did to bring the book-publishing industry to its collective knees would rival "Jurassic Park" on the big screen.
First, a little history. I don't know how book publishers ever got themselves trapped into such a bad deal, but since the beginning of time, most books have been "sold" to bookstores on a consignment basis. From a business standpoint, this arrangement is so absurd that whenever people who aren't familiar with the book-publishing industry hear about it for the first time, they're amazed.
Nevertheless, publishers were always able to live with the obscene consignment arrangement, because they were so powerful and could push bookstores around. In earlier days, when large bookstores chains hadn't yet been invented, many bookstores were fearful of returning too many books to a powerhouse publisher for fear of being cut off from future shipments.
But, as Waldenbooks and B. Dalton developed into large chains in the seventies, the bookworm slowly began to turn. Even so, the publishing dinosaur was so busy with other more important matters that it didn't even notice what was happening to its own business.
By important matters, I'm referring to publishing executives attending sales conferences four times a year in such fun-and-sun locations as Puerto Rico, Miami, Los Angeles, and Las Vegas...the Frankfurt Book Fair once a year in Germany...the annual London Book Fair in the U.K....having lunch and dinner with literary agents at New York's finest gourmet restaurants, where they could (as one agent gently described it in a national magazine) "plot how to screw authors"...and, of course, at the highest levels of management, partaking in extramarital affairs that provided highly entertaining gossip for the publishing industry.
Then, one day, a funny thing happened to publishing executives on the way to lunch at 21 Club in Manhattan: A fellow by the name of Leonard Riggio bought a little company called Barnes & Noble. You had to figure that Riggio was a country bumpkin, because who else would want to plunk down his hard-earned money to get into a dull business like retail bookselling?
Apparently, I wasn't the only one not able to pick up on what was occurring in the book-publishing business, because even the biggest publishers didn't see it coming. In fact, no one paid much attention to Riggio and his little chain of bookstores until well into the 1980s.
Little by little
He moved quietly and cleverly until, little by little, Barnes & Noble maneuvered itself into a position where it was able to tighten its control over the gates that stand between book publishers and retail customers. And, along the way, Barnes & Noble bought up smaller bookstores and chains, the most notable of which were B. Dalton and Doubleday.
Riggio's next major move was to begin building superstores—and today, Barnes & Noble has nearly 700 of these monster retail outlets spread through every major metropolitan area in the U.S. As part of his master plan to become the industry gatekeeper, Riggio also added two new twists.
First, he put small cafes in his retail behemoths so customers could have a croissant and cup of coffee without ever having to leave Barnes & Noble. Second, he had overstuffed lounge chairs strategically placed throughout each store, so customers could relax and read to their heart's content.
By the time well-fed, lethargic publishing executives woke up to what was going on, it was too late. They already had a huge Barnes & Noble chain around their collective necks, and Riggio was giving them harsh commands to heel and toe.
As a result, nowadays if a publisher wants to assure that its books will be given reasonable nationwide distribution, it had better be prepared to pay homage to Barnes & Noble. And if it desires decent placement for any particular book in Barnes & Noble's superstores, that homage must come in the form of hard cash.
For example, if a publisher wants a book to appear on the third table from the front of the store at Barnes & Noble, it has to pay extra for that privilege. If it wants the book to appear on the front table, that's even more expensive. Simply to have a book placed on the "end rack" of any bookshelf in a Barnes & Noble store, a publisher must to be prepared to pay The Gatekeeper a few extra shekels.
Then, of course, there are the special racks that are filled with just a single title. This is such an expensive proposition that, in order to be able to afford it, a publisher almost has to be prepared to cut back on (gasp!) executive dining with literary agents for a month or two. And, finally, a publisher can purchase a rack at the very front entrance of B&N's superstores for about what it would cost a family of five to tour the world for a month.
Legal bribery
Basically, all Riggio did was copy the legal bribery system that has been used by supermarkets for decades. When you go to a supermarket, wherever you see a display of, say, Pepsi or Coke, be assured that those companies paid serious money for that placement in that particular store.
So, is Riggio an earthly rendition of Lucifer for ruining the cushy lives to which publishing executives had become accustomed? I think not. After all, for centuries publishers have played the role of gatekeeper vis-a-vis aspiring authors, with a ruthlessness that makes Riggio look like a Boy Scout.
The arrogance of publishers is legendary. In fact, most of them won't even open a package from an author if they believe it contains an unsolicited manuscript. That's right—they actually send back thousands of manuscripts, unopened.
I guess a good definition of arrogance would be claiming to know, without even opening a package, that the manuscript inside isn't worth reading. I only wish I could be so omniscient.
Now, it's the long-time bullies of the publishing industry—major publishers—who are getting bruised and battered and drowned by returned books coming from every direction. They haven't even come close to figuring out a way to deal with Mr. Riggio's way of doing business. And, to make matters worse, Borders and Books-A-Million are doing their best to imitate Barnes & Noble.
Knockout punch
You'd think things couldn't get any worse for the Publishsaurus rex, but they have. About three years ago, Barnes & Noble started its own publishing division to compete with its own book-publishing customers! If this were a prizefight, the referee would have stopped it long ago.
The lesson all of us little guys on the sidelines can learn from Leonard Riggio is that no one has such a stranglehold on any industry that it is invulnerable. If your plan is clever enough, and you're prepared to do whatever it takes to execute it, anything is possible.
The secret is to keep a low profile and move quietly, but keep moving forward. And if the companies currently ruling the roost are arrogant—which is almost always the case—it gives you a huge advantage to move stealthily into position to upstage them. Even a college dropout by the name of Gates (as in gatekeeper) proved it could be done.
* * *
Speaking of taming dinosaurs, are you old enough to remember Las Vegas? I'm not talking about today's Las Vegas—tract homes thrown up like mud huts with tile roofs...traffic jams that rival those in New York, Chicago, and L.A....and giant gaming corporations that are in total control of anything and everything that goes on there.
No. When I refer to Las Vegas, I'm talking about the original Las Vegas—the one where men wore coats and ties and women wore fine dresses in the casinos and hotel restaurants. In those days, if you wanted to sit in the front row to see a puffy Elvis perform in his Col. Sanders outfit, you slipped the maitre d' 50 bucks and were immediately ushered in and taken to a stageside table. If you liked a touch of class with your corruption, Vegas was the place to be.
Frank Sinatra, Dean Martin, and Sammy Davis Jr. would make surprise appearances at each other's shows, blowing smoke rings, sipping booze, and spontaneously yukking it up on stage. Talk about the good old days—Vegas in the sixties, seventies, and early eighties was the embodiment of that phrase.
Enter Steve Wynn
Then, along came a young upstart, Steve Wynn, who broke up the party. Many credit Howard Hughes with the corporatization of Vegas, but the reality is that Hughes was so drugged out in the late sixties that he probably thought he was still in Nicaragua while lying in his bed on the top floor of the Desert Inn Hotel.
Wynn, however, knew exactly what was going on in Sin City, and he had a vision of a very different kind of Las Vegas—a rigidly corporate desert oasis structured for the masses. The son of a compulsive gambler, he somehow negotiated his way into owning a piece of the Golden Nugget in seedy downtown Las Vegas.
After converting the property into a luxury hotel, Wynn mounted a full-scale attack on The Strip itself. He opened the Mirage in 1989, and followed that in 1993 with the ultra-tacky Treasure Island right next door. Then, in 1998, he went to the head of the class—as in first-class—and built every socialist's nightmare, the Bellagio, a structure so sumptuous that even Saddam would have been happy to count it among his palaces.
The paintings in the Bellagio's art gallery cost more than it cost to build an entire Vegas hotel in the good old days. But long before he built the Bellagio, Wynn had already succeeded in forcing the gaming industry in Vegas to conform to his corporate-structure model.
Stripping The Strip
Once he landed on The Strip, it took him just a few short years to eliminate the old maitre d' bribery (er, tipping) system and replace it with tightly controlled theaters where people were given only one choice: Buy a ticket for a specific seat...or stay outside. Worse, he turned Vegas into a come-one, come-all town—"Bring your paycheck, and preferably as much of your dwindling savings as possible, and your whole family is welcome."
The coats and ties are now just a distant memory. In their place are sloppy fitting Abercrombie & Fitch T-shirts made in Pakistan, even sloppier khaki shorts made in the Philippines, and an army of fast-food-bloated bodies parading around in them.
This army consists of everyday Americans who part with most, if not all, of their money inside the casinos, then wander aimlessly up and down The Strip in search of fun that doesn't exist. "Gee, Maude, it all looked so exciting in those TV commercials we saw back in Des Moines." Funny how having your last dollar extracted from your wallet seems to take the fun out of everything.
In 2000, Wynn sold his Mirage Resorts group of hotel casinos to MGM and became a billionaire. In case you aren't familiar with who the big players are in Vegas, MGM's largest shareholder is Kirk Kerkorian, who seems intent on making Howard Hughes' hotel-buying spree in the late sixties look like a game of Monopoly. It's no wonder Kerkorian is in such a hurry. At the tender age of 88, he is well aware that he probably doesn't have more than 10 years left to take control of every hotel-casino in the city.
What Wynn accomplished in a town where Bugsy Siegel and The Mob once called the shots is about as easy as taming a dinosaur. He got his foot inside the door (Entrepreneurial Step No. 1) through his minority stake in the Golden Nugget. Then—slowly, at first—he started to manipulate the entire industry to his way of thinking.
I don't know whether Wynn began with a grandiose plan to change the way Vegas operates or if events just sort of unfolded for him as things went along. But, either way, like Leonard Riggio, he proved that every industry is vulnerable to resourceful entrepreneurs. Wynn's success in bending the desert Establishment to his way of thinking was a remarkable entrepreneurial achievement.
Go for it
So, what industry are you in? Are the companies at the top arrogant and lethargic? Probably.
If so, think about going against the grain and doing things differently—or, even better, exactly the opposite of the way the big guys have been doing them for years. But don't spend too much time thinking. Instead, take action. Move quickly, quietly, and relentlessly, and you may be surprised to find out just how vulnerable the major players in your industry are.
Gates did it to IBM and the rest of the computer industry. Now Google is trying to tame Microsoft and Microsoft's worst enemies. And, guess what? At this very moment, there are young dinosaur tamers like Google's Larry Page and Sergey Brin working out of their home offices and plotting how to tame Google.
Pretty exciting century we're living in, isn't it? Why not make a commitment to be in on the excitement?
Copyright © 2005 by Robert J. Ringer. Reprinted by permission of the author. Robert Ringer is a professional speaker and the author of three #1 bestsellers, including two books listed by The New York Times among the 15 bestselling motivational books of all time. You can sign up for a free subscription to his e-letter, A Voice of Sanity in an Insane World, by visiting robertringer.com.
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