BookSmarts Podcast (ep. 49): David Hetherington on “Building Resilient Business Practices”
David Hetherington is the Vice President of Global Business Development at Books International, a leading provider of US and International book manufacturing, print and digital distribution services for the book publishing industry. With over 40 years of experience in the book publishing industry, David has served as a Board Member for the Book Industry Study Group, Book Manufacturers Institute, and PubWest, along with the Pace University Graduate School of Publishing.
As a publishing veteran, David joins the BookSmarts Podcast to discuss how to establish practices that ensure your business is more resilient in times of crisis. We discuss how publishers should address common risks, how to prepare for those risks in advance, lessons learned from the pandemic as well as other known book publisher challenges, and the importance of building relationships in the industry to better prepare for potential crises.
David will be speaking at the Association of Catholic Publishers event in April and will also have an upcoming BISG webinar about managing through the next crisis. To contact David, email d.hetherington@booksintl.com.
Transcript
Joshua Tallent
On this episode of the BookSmarts Podcast, I get the real pleasure of having a conversation with David Hetherington. David is the Vice President of Global Business Development for Books International. He’s also a veteran of the publishing industry. He’s been around for four plus decades and pretty much every job you could have in the book publishing area. So David, it’s a pleasure to chat with you. Thanks for joining me on the podcast today.
David Hetherington
Thank you, Joshua. I’m delighted to be here, and I hope that you and your fan club will find this to be a productive discussion.
Joshua Tallent
A fan club; that’ll be great. Maybe I’ll get one of those one these days. Yeah, I appreciate you joining. I you know you and I have been in the same circles for many years. We’ve kind of seen each other in different ways and different positions over the years, and I’ve always appreciated your deep understanding of how publishing works and your understanding of the industry. You served on the BISG board when I first joined the board a couple of years back, so it was great to have you and your your insights and your thoughts in that space as well. So today we we didn’t have the opportunity to have you at the Publishing Innovation Forum back in September because you were unwell and couldn’t come and visit, but we were really looking forward to your presentation, and you were going to talk about a topic that I think a lot of publishers should be considering and thinking about, and that is specifically preparing for the next crisis, right? We’ve been through crises in publishing. We’ve had situations come up, and it’d be really nice to kind of be prepared for that and not be waiting and just kind of anticipating that there’s something coming, and I’m not really ready. So I wanted to talk about that today and maybe dive into some of the stuff that you would have shared at the presentation at the Innovation Forum, and maybe dive into some of the kind of the ramifications and maybe strategies that publishers can take. Sound good?
David Hetherington
That’s very good. Thank you.
Joshua Tallent
Awesome. Okay, so let’s talk about it. Publishers really should be paying attention planning for these things that might change, things that might make a material difference in their fortunes as a company. What kind of events should publishers be planning for?
David Hetherington
Well, I think the one point I’d like to start with is I think that publishers have a tendency to look at the world through rose colored glasses, that things are not going to change. And I think what we learned over the past four years, particularly as evidenced by the events associated with the pandemic, is that things can change and can change dramatically. And I think that over the course of my career, I’ve noticed that publishers have a tendency to react rather than anticipate. And I would liken it, I’ve used the expression in conversations. It’s what I call the Home Depot syndrome. And by the Home Depot syndrome, I mean the house catches fire, and then you decide to go out and buy a fire extinguisher, as opposed to having one in the house on standby. So you know, when you think about everything we’ve gone through in the past few years, the pandemic, the effect on the supply chain, the concerns about international shipping, the paper crisis. There’s a whole raft of issues that have come up. The fact that the pandemic is nominally behind us does not mean that they cannot happen again. And I think that my advice to publishers would be to, you know, start to think about what the implications are for your business as of November the fifth, because depending upon the administration that comes in, there could be some dramatic changes in the publishing landscape that I think few publishers are really giving much attention to. So as an example, there was a front page article the other day on the New York Times about how the Chinese government has spent $50 million, excuse me, $50 billion dollars building up a military bases on the island of Hainan, right, in anticipation of possible hostilities with Taiwan. Now consider, now hopefully that’s an event that will not rear its ugly head, but consider the implications for the book publishing business in the event that that happens. Everybody, I think, has suffered in one form or another from the crisis in the Middle East, rerouting of shipping, buyer container costs, insurance, extended schedules. What’s going to happen to those publishers who rely on Asian manufacturers in the event of a shooting war between the Chinese and Taiwan, or the Chinese and the United States? I think that that is a distinct possibility. And if there is a conflict, it’s not going to just affect manufacturing in China. It will invariably affect India. Worked on a Vietnam, worked in Korea, worked in Malaysia. So publishers should be thinking about what they’re going to do. Yeah, a couple of weeks ago, we had the the labor negotiations on the brink between the Longshoremen and the ports. And now there was a alleged settlement within three days. But everyone should be mindful of the fact that there has to be a signed contract between now and January, December 31 of 2024. If there is no contract, the ports shut down again. If the Trump administration comes in, right? Mr. Trump is talking about 20% tariffs. What does that do to the economics of kids books, right? So a whole raft of things that could happen, not that they will, but I think they are worth giving some thought to.
Joshua Tallent
Yeah, and there’s a lot of different types of events too. It’s not just the big events. Some of them, I think you actually categorize these as Black Swan events versus Gray Rhino events. Can you describe what that means and give an explanation of that?
David Hetherington
Yeah. So Black Swan event is what one might describe as a once in a lifetime event that takes place. And I think COVID might be considered a black swan event. A Gray Rhino event is something that can happen more frequently. And perhaps the paper crisis that we all went through last year could be considered a Gray Rhino event. We have a number of things going on in the manufacturing community. We have the number of manufacturers in the US shrinking, capacity being taken offline because of acquisitions and pressure for sustainability. So it’s becoming much harder for for book manufacturers to make profit. You know, and publishers should be considering what’s going to happen if that manufacturer that you have a commercial relationship decides to go out of business. I mean, one thing that I think is particularly important, and I will confess to this sin up front, is that early in my career, my relationships with book manufacturers, at that time I was on the publishing side, were transactional, so it was always a relationship based on getting the best price, not necessarily building a relationship that delivered long term value for both parties and I would encourage publishers to to spend more time thinking about building those long term relationships, and also to begin building alternative relationships to the ones that you have right now, just in case something goes wrong. At Books International, what we found during the paper crisis is that, I found a whole raft of friends I never knew I had, until it hit the fan, you know, and people were looking for paper or press time. That’s not the time to build relationships. Now is the time to build relationships and to nurture those relationships and pay attention to those relationships. Yeah, that makes sense. What are some of the risks then organizations might face with these different types of events? Besides making a connection to your printers and other vendors, what are some other risks that might be faced, and what do you think publishers should be doing to address those risks? I think you know, one of the things that that we tend to do in the publishing industry is to spend an awful lot of time on unit manufacturing costs as opposed to the total cost of ownership. I think there’s also a certain amount of, I hesitate to use the word arrogance, but I think I will use it that we as publishers can do it better, when, in fact, there are some operations in the publishing workflow that I think are much better outsourced for a variety of reasons, right? There’s absolute truth, absolute wisdom to the notion that cash is king. And one of the things that I urge publishers to do right now is to focus their time and effort on making sure that they’re managing their cash resources effectively. So I’ll give you an example. What happens if you’re a small publisher, and you’ve got half a million dollars in receivables from the 800 pound gorilla in the room, or the 8,000 pound gorilla, and you’re expecting that check to come in. Well, what happens if that check doesn’t come in and you get paid with $500,000 worth of returns? How are you going to pay your people, right? You know, so my caution there is that publishers should be spending time looking at cash, looking what can go right, looking at what can go wrong, and not assuming that the status quo will remain in place, right? Be aggressive. Be assertive in how you manage your business, because if it can go wrong, I think the odds are it will go wrong. If not now, at some point in the future.
Joshua Tallent
Yeah, it’s about building resiliency. It’s about having strategies in place that can help you be prepared in advance.
David Hetherington
Yeah, I think that that’s absolutely correct. You know, we talk about technology, making sure that your technology, that you have the safeguards in place for information. System Security after you’ve been hacked is not the time to find out that you should have had insurance, right? After you’ve been hacked is not the time to investigate your providers, the rigor of their their security precautions. Those are things you want to do in advance. Before they become a problem, you want to prevent the problem. It’s like taking care of your health, right? What’s the old saying? An ounce of prevention is worth a pound of cure? And I think that certainly prevails here.
Joshua Tallent
Yeah, so we’ve had some of these events. Mentioned COVID before. We’ve mentioned some other things, the paper crisis and everything else. Are there other broad lessons that we’ve learned, anything that you’ve learned, especially about those events that might be instructive in future planning for a publisher? We’ve mentioned a couple of things to be aware of, but I’m wondering if there’s any wondering if there’s any other lessons you’ve learned.
David Hetherington
Yeah, I think what I would encourage publishers to do is to pay attention to the elements of your environment that could possibly have an effect on on your business. So as an example, The New York Times is a wealth of information about our environment. So when you see a front page article in The New York Times that enrollments in higher education are down by 5% year over year, that, to me, is something to pay attention to, because what that says to me is that you should be thinking about, you know, what the implications are for your print quantities. When you see that many of the institutions of higher education are moving from the traditional textbook to inclusive access, what are you doing to adjust your forecasts to that? Now, obviously, some of these need to take place further up in the chain of command. But some of the things like, you know, looking for alternative manufacturers and making sure that you have strong, robust, mutually satisfactory relationships with your manufacturing partners, with your paper mills, are all just good business, and I would encourage publishers to pay attention to it.
Joshua Tallent
Yeah, that makes sense. So what happens if they don’t? S I mean, we’re, if we’re thinking about like we want publishers to build resiliency, to be prepared, to think through these crises before they could become crises. But none of us were prepared for COVID. It hit without any of us really thinking about it, and we then had the after effects of that. What are some strategies that publishers should be preparing to implement if the negative events do happen, maybe they can’t prepare for everything in advance, but what are maybe some broad strategies they can take, or what can they do when it happens? Maybe we’ll talk about it from that perspective. Something happens, what’s the first thing that they should be thinking about or doing to shore up in the midst of crisis?
David Hetherington
Well, I’m going to speak about this primarily from the supply chain perspective, because I think in many ways, the supply chain suffered the most in COVID. And, you know, my first piece of advice would be to examine your supply chain from end to end and consider what might possibly go wrong and how you can protect yourself against that. The other thing I would encourage publishers to do is shorten your supply chain. And because the longer your supply chain is, the more links there are in the supply chain, and there is an inherently more risk. At Simon and Schuster, I may regret bringing this old Simon Schuster adage, up, but we used to have an adage: one neck, one noose, right? And the idea here being that as much of your supply chain under one roof as possible is a very good strategy, because what it does isif you print in the same place, and you buy your paper from the printer, and you manufacture your components in the same place, and you fulfill from that same location, you’ve taken four potential risk elements out, and you put it in one and it’s a much easier process to manage, right? And I think your controls are better. You can extend your decision point before you have to go back to press. Their whole range of benefits from looking at the supply chain. And then on the flip side of that, though, now you’ve narrowed down your risk to all one place, and God forbid that one place gets hit, you know, some flood or something else happens, and that’s when you need to diversify as well, like you said, build relationships more broadly.
David Hetherington
Excellent point, exactly. So it’s, it’s an element of two pieces, right? So I think it’s a process where you try to put as much as you can under one roof, right? But that is not the only roof that you want to put her under, right? You don’t want to be building friendships when you need to. You don’t want to be at that point in your relationship with different organizations. You want to have those relationships built in advance. So it’s very much a good idea to invest in relationship building. It’s a good idea to visit these organizations and build personal relationships with people, right? And the other thing that I would encourage publishers to think about is that the fact that you are sending someone a purchase order and writing a check to them does not mean that it gives you license to make unreasonable demands, right? You want friends on the other side of that phone line. You want friends on the other side of that Zoom call, right? You want to have productive relationships. You don’t want to have antagonistic relationships. Because when push comes to shove, that’s when you’ll find out who your friends are.
Joshua Tallent
Yeah, so on a broad level, again, we’ve talked a lot about supply chain, but this applies to everything that a publisher does. It also applies internally within the publisher, so making sure that you have cross training among your staff, making sure that people are aware of who’s doing what, who’s responsible for what, having plans in place that you know, God forbid someone wins the lottery, as we like to say, that you can very easily kind of shift people around and have coverage where you need it. Those kinds of plans help you be more resilient when, you know, bad things happen.
David Hetherington
Unquestionably. But the other thing I think that’s important is that the supply chain community, the production community, should have a place at the executive table. In my experience, production departments and manufacturing departments have been too often looked at as places where money is spent, not where money is made. And I think having a good relationship with your manufacturing department, having a good relationship with your production department, having that department viewed as an essential part of the company’s success pays untold dividends. There are some companies that I think do that very well, you know. And I would encourage all publishers, large or small, to make sure that the people in those chairs feel like they are part of a team and they have a spot at the leadership table, not that they are somehow a nuisance to be tolerated, right? Because they’re spending money, right? In fact, they are vital to the organization’s success.
Joshua Tallent
Yeah, that’s great. Thank you very much. David. Aany final thoughts? Anything else you’re like, man, I really wish we said that.
David Hetherington
No, no, I want to thank you for the opportunity. I am going to be for anyone who’s interested in attending the Protestant Church Publishers or Association of Catholic Publishers event in April. I’m going to be speaking on this in the meantime, and I believe we will be having a BISG webinar about managing through the next crisis. And I’d welcome if anybody has any questions or concerns, they’re more than welcome to contact me at Books International. My email address is d.hetherington@booksintl.com. and there’s no a in Heatherington, okay?
Joshua Tallent
We’ll put iin the show notes as well, so people can click on that link and send you an email if they’ve got questions or ideas for you. Thank you very much. I appreciate you joining me on the podcast.
David Hetherington
Thank you, and I wish everyone a healthy and happy holiday season.
Joshua Tallent
That’s it for this episode of the BookSmarts Podcast. If you like what you’ve heard, you can leave a review or rating in Apple Podcast or Spotify, or wherever you listen to the podcast. Also, we really recommend that you share the podcast with your colleagues. I want to get that fan club going. So get a fan club going for me. If you have topic suggestions or feedback about the show we’d love to hear from you. You can email me at Joshua@firebrandtech.com. Thanks for joining us and getting smarter about your books.