Print on demand is a key part of the supply chain now, with Ingram’s Lightning Source as the leading independent vendor, but that success was hardly a foregone conclusion. As we learn in the forthcoming book THE FAMILY BUSINESS: How Ingram Transformed the World of Books by Keel Hunt, Ingram’s early entrance into the business required extraordinary patience and long-term investment in order to become a success. The book publishes next Tuesday, April 20. Following on our excerpt from last month, we now present an edited version of the chapter, Lightning in a Bottle:
What would become one of the most striking intrapreneurial triumphs of John Ingram’s career started in 1996 with a conversation inside Ingram’s book distribution center in La Vergne, Tennessee.
John and his friend Y. S. Chi were walking through the super warehouse, surveying its vast arrays of tall metal shelving that rose, row upon row, thirty feet above the floor. It was a vista reminiscent of the closing scene of the film Raiders of the Lost Ark, in which a lone workman pushes a crate containing the hidden ark itself into a storage shelf, one of thousands of shelves that seem to recede into infinity. But in La Vergne, the tall racks were stacked with books. The enormous assortment of some 300,000 different book titles, each one available almost immediately to any Ingram customer, represented a core part of the company’s value proposition. But each unsold book on those shelves also represented a cash investment by Ingram as well as a small but ever-mounting cost for warehousing and its associated expenses. And while some bestsellers and classic books were constantly being ordered, the demand for others— perhaps 200,000 of the 300,000 available titles—was weak and inconsistent. John remembers turning to Chi, and asking, “Why in the world are we wallpapering the warehouse with all these books?”
At first, Chi wasn’t exactly sure what John was referring to. But then John added, “After all, why couldn’t we be storing the content digitally and then printing the books off once they’re ordered?”
It was a simple question, but the answer would be complicated. It would require an aggressive planning and development effort that would lead to the creation of an entirely new business unit for the Ingram enterprise—one that would eventually come to play a major role in shaping the future of the family business and of the entire global book industry.
* * *
John’s simple but visionary question hadn’t come out of the blue. The mid-1990s were a time of startling growth for a Texas-based maker of personal computers known as Dell Computer. Dell’s youthful founder, Michael Dell, had conceived a way of responding to customer orders for his products while keeping stand-by inventories as low as possible. Rather than pulling a computer off a warehouse shelf, Dell invited customers to visit the company’s website and select the design specifications for a custom-built computer from a list of options. Not only did this business model reduce inventory costs, it also eliminated the problem of unsold merchandise while enabling consumers to buy a specially designed machine with only the features they wanted. For a time, Dell’s ingenious system appeared poised to take over the computer business. Perhaps inspired partly by this innovation, John hoped to introduce a similar approach to the book business: “First sell the book, then produce the book.”
Up to this point, the Ingram companies were not directly involved in the manufacturing of books…. Print-on-demand, or POD (as this new technology came to be called), could eliminate most of the guesswork involved in predicting future demand for a book by tying print quantities directly to demonstrated demand in the form of orders actually placed. If it could actually be done, it would dramatically reduce the uncertainty and financial risk faced by publishers, as well as improve the cash flow positions of book retailers. And for Ingram itself, it would represent a natural expansion and enhancement of the company’s core value proposition—its vast, almost unlimited array of book titles available— without demanding a huge increase in investment capital.
But there was the rub: Could it actually be done?
As the members of the Ingram team examined what it would take to realize John’s vision, the complexity of the challenge quickly became obvious. POD would require a high level of technical and systems skills and ingenuity. New software programs of great complexity would need to be designed. An even greater challenge would be integrating the twin processes of printing and binding. Not only were these separate jobs, performed by different machines, but their operating speeds were very different. Modern offset printing machines, the dominant technology in book publishing, can produce the large sheets that are folded and cut to make “signatures” of sixteen or thirty-two book pages very quickly. But binding the pages is much slower. The difference in speed means that integrating the two processes is very challenging—and doing so automatically is particularly difficult.
There were other technical barriers to realizing John’s POD dream. Offset printing is extremely fast once a print run of a single book title is underway, but the preparation process, called make-ready, is labor-intensive and time consuming. It involves clamping thin metal plates bearing the images of the pages onto printing cylinders, adjusting ink settings, and running one or more test runs to make sure the sheets are being printed correctly. The inefficiency of make-ready is one reason that offset printing would be an extremely wasteful and expensive process to use in producing one or a few copies of a book. Part of the projected benefit of POD would be the ability to produce just as many copies as needed, and to do so affordably—provided the entire make-ready process could be eliminated or drastically reduced.
This, then, was the challenge that Ingram took on.
* * *
The new business would be called Lightning Print Inc., and John delegated the task of building it to Chi. Their first hire was Larry Brewster.
Brewster was not a veteran of the book industry but a specialist in modern computer-guided printing systems. Tall and lanky, Brewster had been a college basketball star at the University of Florida. He was selected by the San Antonio Spurs in the 1978 NBA draft. He joined IBM instead, and for the next fourteen years worked in its printing systems division, which brought him to Nashville. When Chi contacted him in 1997, Brewster also had established his own private consulting business in computer systems.
“Ingram was one of our customers at IBM, and I had met with them before,” Brewster remembers. “They were looking for somebody to come in and work out the business case for on-demand printing and get it started. I went and interviewed with John Ingram and Lee Synnott, and they hired me in April 1997. We figured out pretty early that we wanted a technology partner to figure out how to do this. It would require technology and resource experience that was not then at Ingram.”
Soon the Ingram executive team put together a strategy to outsource the early work of developing Lightning Print. The result was a new joint venture among Ingram, IBM, and Danka Business Systems. This is how Danka’s Edward J. Marino joined the Ingram team. In 1999, Marino would become Lightning Print’s first president, with Brewster as his general manager and second-in-command.
“We needed Lightning Print to be separate and independent from the rest of Ingram,” Brewster remembers.
It required an entrepreneurial spirit and a technology knowledge and a willingness to move fast—things that were really not at Ingram at that point. It was a great place to work, but not like a technology-oriented company.
One of the best things John Ingram did was that he put Lightning off to the side. He made us a different company. That was key to the whole thing working. If we’d gotten bogged down with the rest of Ingram, it would not be the right place for a company like Lightning. We would have been “the thing on the side.” John and Y. S. were very smart to pull it out and make it separate—to give us our own structure and funding and make it independent.
We could’ve turned a profit sooner, but it wouldn’t have been the best thing for the business. You can do things to restrict growth and improve profitability. Part of that seven-year period, we decided to get in the ebook business. If you look at it alone, it was a loss and didn’t make money, but on the other side it brought in the technology to handle huge amounts of data that contributed to the success of the print-on-demand business. People thought POD wasn’t going to work long-term. But we kept plowing along.
In line with that initial “Why wallpaper the warehouse?” question that John had raised with Chi that day when they walked among the high shelves in La Vergne, the new business concept now took tangible shape. Brewster, among others, remembers:
Our whole concept was “one book at a time”—where all the books would be stored on the computer, and you’d print out books that were needed by publishers or booksellers on that day. This required a tremendous amount of software innovation that could operate at the speed the orders came in. The idea was a little ahead of the technology—not only the printing technology but the ability to store these books digitally and bring them online very fast. That’s what was different and new. Nobody else had tried to do this.
“I loved the business model,” Marino says.
John Ingram’s vision back then was to really make this not some small supply-chain strategy to support the book company, but he saw the value of the digital technology in creating new and better business models in the book business. What he leaned on us for was the combination of good vision and good execution. Others had come at this from the standpoint of print. We did not. We looked at it as an information technology business, not as a book printing business. What that allowed us to do was treat every order as a unique product and do it in a very efficient fashion. It was all data to us. That was one of the breakthroughs.
Lightning Print produced its first book for a customer in January 1998— a mystery titled The Hanged Man, by Trish MacGregor. Lightning printed one thousand copies of the bound galleys of the MacGregor book for Kensington Publishing, a New York–based publisher, to be distributed to the media and booksellers as part of the pre-publication publicity for the book.
Just producing a product using the new POD technology was an impressive feat. But for publishers, who licensed ownership of the content of books from authors, it was not only a matter of data and technical competence but also trust. Marino recalls:
The other part that was really important was getting publishers to participate—the owners of the book content. I remember, very early on, Y. S. and I were talking to Larry Kirshbaum, the longtime head of the Time Warner Book Group, in New York.
Kirshbaum said, “So, I’m going to give you my precious content, and you’re going to store it in your data system. And at the end of the month I get a statement on what you’ve sold and then I get a check?”
I responded, “Exactly! That’s what we’ll do!”
The only reason that worked is because Ingram was a trusted partner to these publishers. That trust had been hard-won by Ingram over a long period of time.
Lightning’s acquisition of publisher content became a long march. At the end of 1998, after a year in business, Lightning Print had about 1,500 titles in its library. A year later, the number had grown to 5,380 titles. Not bad—but not yet enough. The internal business plan had set a benchmark of having 100,000 titles in its digital database as the crossover point to profitability for Lightning Print.
Ultimately, transforming Lightning from a fascinating novelty into a profitable business would require great patience, both in the boardroom at Ingram Industries as well as among even the most senior management team at La Vergne.
When it all began, in the mid-1990s, the notion of “print on demand” as a new core function of Ingram’s business was seriously questioned inside the company. John remembers this early phase of Lightning’s development as the time when some insiders dismissed POD as “John’s little problem.”
“I would go to those board meetings, and people would get a little testy,” Marino recalls. “The issue was money. The business consumed a lot of cash. We weren’t profitable yet. We needed to hit a hundred thousand books to become profitable.”
Unwavering support from a handful of key individuals made all the difference during these challenging early years. Marino and Brewster recalled one Ingram Industries corporate board meeting where the discussion about Lightning Print’s prospects went on for many minutes. Then, from the head of the table, chairman Martha Ingram spoke up. “Every now and then,” she reminded the directors, “you have to plant some new trees in the forest.”
From The Family Business, © 2021 by Keel Hunt, West Margin Press, reprinted by permission.