Editor’s Note: I make it a point to revisit this 2011 post from Joe Esposito at least once a year. As we watch the continuing consolidation of the industry, and the commercial publishers gaining dominance in an ever-widening sphere, we must ask why this is the case. Despite calls for academia to take back the reins of control, things seem to be continuing to move further and further away from that goal.

At the beginning of Jared Diamond’s magisterial  “Guns, Germs, and Steel,” the author recounts a conversation he had with a native of New Guinea. Why, the New Guinean asks, do the people of the West have so much more “cargo”? “Cargo” is his term for material wealth. Diamond’s answer is that Europe had the three elements of his book’s title on its side. With such advantages, the accumulation of “cargo” was almost inevitable.

I have often reflected on this passage when the question of the relative success of for-profit and not-for-profit (NFP) publishing enterprises comes up. Although there are some conspicuous exceptions, most of the big dogs in scholarly communications are commercial enterprises.  What is it about the for-profit world of publishing that has enabled it to become dominant over its well-intended, hard-working fellows in the NFP camp?

On the face of it, you would have to say that the dominance (measured in market share and expressed in dollars) of the commercial firms is highly improbable. Publishing is not like most other industries; the NFP sector is large and often attached to other institutions (universities, government) that sit outside the roilings of the profit motive. NEJM, AAAS, ACS, OUP, and so on — try to find the equivalent of such NFPs in the auto or consumer electronics industries.  One would think that with such a strong group of NFP organizations, there would be stronger challengers to the for-profit leaders of Elsevier, Springer, Taylor & Francis, John Wiley, and their kin. The fact is, though, that for all the prestige of some of the NFPs, this is an industry dominated by commercial entities. The presence of NFP institutions and publishers serves as an offset to the influence of the for-profit firms, but there is no question who is the biggest kid on the block.

There are various explanations offered for this, the most common of which is that the NFPs cannot compete with the commercial firms because the commercial firms simply have more money. This is not true, and it is important to understand why.

Let’s take a small university press as an example. For such a press, the prospect of competing with the likes of Springer, Random House, and Pearson is daunting. Few university presses even try, which is why there is no NFP book list in STM to compare to Springer’s, no NFP upscale trade list (political affairs, biographies of statesmen) to compare with that of Random House, no college textbook publishing that stands a chance against Pearson.  Size matters. The huge scale — the money — of the for-profits would appear to be overwhelming.

But this is the wrong way to look at the situation. Springer did not start out as a billion-dollar company, nor did Random House begin atop Wall Street. (See Bennett Cerf’s entertaining memoir “At Random” for the story of the company’s founding.)  Commercial publishers, however big they may be today, started out as the historical equivalent of two kids in a garage in Silicon Valley. There was no money; there was only drive and an editorial idea.

It is much, much easier for a NFP to get money for a start-up than it is for a commercial entity.  I invite anyone who has ever received a grant from a philanthropy or governmental agency to try his or her hand at writing a business plan and making the rounds on Sand Hill Road to raise capital. The bar is much higher in the commercial world; start-up money is hard to come by; some good ideas are not funded because of the lack of a strong management team, some good management teams are not funded because of the lack of a good idea. Stating the goals of a new company are not enough unless the goals are paired with a persuasive argument about the ability to execute brilliantly. And it is not enough to have a good idea; you have to have an idea that promises a better return on investment than any other competing proposal. It is actually easier to get start-up money in the NFP sector than in the commercial world.

A lack of money is not what prevents a NFP from becoming the next Wolters Kluwer. Something happens, or doesn’t happen, after the seed capital is put in, and that’s why the big guys got so big. Whether an organization is for-profit or a NFP, when it moves into the world of scholarly communications, it moves into the marketplace, where growth and success have much to do with the practical economics known as business.

Another explanation for the strong position of the for-profit sector is that the NFP world is mission-driven (which it is) and thus makes sacrifices in economic terms in order to fulfill the reason the organization was founded in the first place. This is also incorrect; it confuses mission with strategy. An organization may have a mission to save the world (actually, only a commercial firm would have such a stupid mission statement), but the issue for pursuing that mission is a matter of strategy. Strategy answers the question of “how do I get there from here?” A strategy has to be anchored in the realities of the overall business environment; if the environment grants special privileges to organizations of greater scale, then even NFP mission-driven organizations have to find a way to achieve that scale.

A geneticist is not likely to lecture sociologists on their methodology, nor is a professor of comparative literature likely to offer a critique to the chemistry department, but publishing is one of those fields where everyone is an expert.

In my experience, too often NFPs use an appeal to their mission as an excuse for not having a more effective strategy. The real management challenge for a NFP is not the pursuit of its mission but to conduct that pursuit in such a way as to allow it to thrive in a competitive environment. To put this another way, there really is no point in whining about how big and unfair the big guys are if you resist the opportunity to compete with them.

Who really runs a NFP? In my experience in shuttling from NFPs to for-profit firms and back, one of the distinctions to be drawn between the two classes of organizations is that commercial companies are mostly run by the CEO and (in some cases) the executive team, whereas NFPs have their center of power in their governing boards. I am making a broad generalization here, but before everyone jumps up and shouts out examples that contradict this statement, think long and hard about the various organizations with which you are familiar and ask who crafts the strategy, who makes the big decisions.  I don’t know if there is a right way or a wrong way to put together a governing board for any organization, but some boards have a different notion of their prerogatives from others.

It is not unusual for the Board of a NFP publisher to consist entirely of people doing research in the field. This is especially true of many society publishers, where the Board is made up of members of the professional society. Occasionally someone from publishing fills one Board seat, but is outnumbered by a wide margin. The principle here is that research publishing is by and for researchers, and researchers know what is good for them. This confuses research (where only fellow researchers can make valid judgments) and publishing, which is a distinct art (publishing is not content; it is about content, a meta-service). Does a plant biologist with a toothache go to see another plant biologist?  Does a population researcher turn to another population researcher to fix the water pump on her car? It is difficult to have a reasonable discussion with people who feel this way, though perhaps thinking about what it actually means to run a publishing operation, for-profit or NFP, would help to open up the conversation.

The big mistake for most NFPs is what I call the “editorial fallacy”, the view that a publishing operation is entirely editorial in nature and that selecting the finest content will naturally lead to success. The second big mistake is the idea that superior intelligence can solve any problem. Or maybe that’s the biggest mistake. Thus, the distinguished life scientist pronounces on how publishing operations should be run without reflecting that perhaps there is more to the game than being smart. A geneticist is not likely to lecture sociologists on their methodology, nor is a professor of comparative literature likely to offer a critique to the chemistry department, but publishing is one of those fields where everyone is an expert. There are other fields like this as well — politics, certainly: everyone thinks he or she could do a better job than the bozos in office; or the management of a sports team, a task that may very well be as complex as working in some academic disciplines.  But publishing is different in that a professor of cognitive science would most likely stop short if asked to manage the New York Yankees, but as for publishing — well, what’s so hard about that?

It is not only the day-to-day tasks that make publishing different from the research that generates its content. No one really expects an anthropologist to know how to negotiate with a subscription agent (“I don’t want to pay 3%!”) or to install project-management software to track manuscripts through production. And when you get to digital solutions, the obvious gap between the researcher and the publisher is even greater. How to create an end-to-end XML workflow? Should we develop our own software platform in house or work with one of the growing number of vendors? But even here the questions respond well to careful data-gathering and analysis, all things that academic professionals are extremely good at.

The real problems arise when it comes to making money. Are we better off splitting this journal into two or keeping it as one? What will happen to our advertising revenue when we begin to phase out our print edition? Do we cut a deal with ProQuest or EBSCO?  What are the long-term implications of working with Google Scholar? Is Amazon our friend? Here few NFP governing boards are likely to have much experience, nor are they necessarily equipped to deal with the pace at which decisions must be made, not to mention the norm for the operating executive: having to make a decision in the absence of complete information.

It may be governance that helps to answer the question that has troubled me for many years: Why is it that the single biggest innovation in scholarly communications in the past 20 years, the creation of arXiv, should not have resulted in an organization operating at the scale of John Wiley or Springer? This question is my personal equivalent of the New Guinean’s query to Diamond about cargo. There is little doubt that arXiv is here to stay, but it remains a niche service. If Apple could turn a small technological advance (the use of the newly developed micro hard drive as the basis for the first iPod) into a technology and media empire that now bestrides the world, why is arXiv still passing the hat? One wonders what would have happened had arXiv had a broader vision of the strategic environment it operates in. Would arXiv be bigger than Elsevier by now?  Is PLOS heading in that direction, having had the example of arXiv to learn from?

This is not to suggest for one minute that the Boards of NFP publishing entities should consist entirely of publishers. Publishers are an insular lot and, like everybody else, can make boneheaded decisions based on extrapolations from their own area of expertise. It is simply mind-boggling to think that a half-dozen commercial firms did not beat PLOS to the punch with an author-pays open access service; they even had the model of BioMed Central to learn from. When publishers go to the tenure committee in the sky, they will have to answer for having let the author-pays model get away from them.

The important thing about building a Board is to have expertise from various areas represented: information technology, research, publishing, library services, finance, marketing, etc. It is also important that the Board understands that they are there to work in the publisher’s interest. A librarian on a Board does not represent a library’s interests; the librarian represents the publisher’s interests in the world of libraries. For a Board to be effective — to help a NFP publisher compete in the marketplace — the Board has to defend the publisher’s business interests.

What we should be asking the Boards of NFP publishers is that they be held accountable for the financial success of their publishing entities. “Success” can be defined in different ways; I would include an acceptable level of subsidy in my definition, provided that the size of that subsidy and the means to pay for it are established in advance. There should be a little bit of perspiration when someone enters the Board room, as the responsibilities are not trivial. We should ask a Board to populate itself with people who can help make important business decisions and who understand how to work with the Executive Director and the management team. Most of all, we should understand that NFPs do in fact compete with for-profits, like it or not, and the terms of that competition are the laws of the marketplace. A fuller embrace of the market orientation of the world in which NFPs and for-profits operate is the first step toward having the NFPs take on more cargo.