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Sunday, September 20, 2009

Fortune on going digital -- the next big thing

In a sidebar article Fortune magazine notes that industries that one of the next big things for investors will be in industries that have not yet "hopped on to the digital wave." Specifically, she notes that health care and education are "two industries that haven't yet made the migration to a digital age." The example given? Textbooks. The quoted speaker notes that an average consumer pays an average of $100 for a textbook, but the originator gets only $3 to $5 for every book. She claims the "rest is lost in an archaic distribution system." The source of this data was not given. The assumption may be correct -- but that archaic system is also not well understood by those outside of it. That has led to some "replacement" models that have failed, primarily because they did not replace core functions that outsiders would not know even exist.

As an interesting additional note, the speaker noted that
The major barriers for these industries entering the digital age: They are ridden with local politics, have an embedded employee base, and have a disproportionate number of non-profits attached to them. The way that we run our lives is changing. The key for these industries is figuring out how they can keep up.

Well, those are some arguments that are hard to deny. The non-profits element is an interesting observation. Most college stores are non-profits, but as a colleague of mine is fond of noting, that is a tax status, not a business model. However, it would be interesting to ask if the cost of textbooks would truly decrease if the businesses were all for-profits instead. I am skeptical, but willing to ponder the possibility. Any thoughts?

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