Publishers and the Smiling Curve: Why Value Is Shifting to the Edges

Publishers and the Smiling Curve: Why Value Is Shifting to the Edges

In the world of IT-related manufacturing industries, there is a concept known as the smiling curve. This curve represents the value-adding potential of different components of the value chain. Interestingly, in the personal computer industry, both ends of the value chain – the critical component makers and the systems integrators – command higher values added to the product than the middle part of the value chain. This phenomenon is visually represented as a "smile" on a graph, with the Y-axis representing value-added and the X-axis representing the stage of production.

Acer, a prominent player in the personal computer industry, finds itself at the bottom of this smiling curve. While they put PCs together, it is the critical component makers like Intel and Windows that capture most of the value on the left side of the curve. On the right side, systems integrators and value-added resellers like IBM or Accenture capture the rest of the value. Acer and other original equipment manufacturers (OEMs) compete for single-digit margins and struggle to achieve significant growth. The undifferentiated middle of the value chain simply does not hold much value.

This phenomenon of value shifting to the ends of the value chain is not unique to the IT manufacturing industry. Traditional publishers are also experiencing a similar shift. The home page, once the primary attraction for readers, is now becoming akin to the print edition – nice to have, but not the main source of traffic. More than half of the visitors to The New York Times, for example, now come via mobile. When people follow a link on social media or through other channels, their affinity is not necessarily for the publication hosting the link. Instead, they may ascribe any positive feelings to the author or explore their other work.

Over time, as people increasingly rely on aggregators like Facebook, Google, and Twitter for their news, value moves to the ends just as it did in the IT manufacturing industry. Traditional publishers find themselves stuck in the middle, struggling to maintain relevance and capture value. The New York Times, the epitome of traditional publishing, is worth a mere $2.03 billion in comparison to the tech giants dominating the industry.

The paradox for publishers is that while their addressable market has expanded with the internet, they no longer have exclusivity. The free distribution provided by the internet is available to every other publisher as well. Publishers must find ways to provide unique value to their readers and writers to remain relevant. Successful writers and publications will likely pursue strategies that focus on their core strengths and accrue outsized value relative to publishers that are shifting from platforms to obstacles.

In another realm, research suggests that individuals with "too many interests" are more likely to be successful. Many of the most impactful individuals throughout history have been generalists rather than specialists. Elon Musk, Steve Jobs, Richard Feynman, Ben Franklin, Thomas Edison, Leonardo Da Vinci, and Marie Curie are just a few examples of highly successful generalists. In fact, the founders of the five largest companies in the world – Bill Gates, Steve Jobs, Warren Buffett, Larry Page, and Jeff Bezos – are all polymaths.

Becoming a generalist or polymath can lead to extraordinary success. By becoming competent in at least three diverse domains and integrating them into a top 1-percent skill set, individuals can bring the best of humanity's discoveries from various fields to excel in their core area. Polymaths have the advantage of creating atypical combinations of skills, which can lead to world-class expertise. Most creative breakthroughs come from combining skills in unconventional ways, and it is easier than ever to become competent in new skills with abundant free or affordable content available.

Being a polymath also positions individuals to pioneer new fields, industries, or skill sets. By combining old and new areas of knowledge, polymaths can make unique contributions to society. Additionally, the global economy rewards individuals who differentiate themselves with unique skills. Polymaths are more likely to stand out and compete in a world where original thinking and problem-solving are highly valued.

To embrace the advantages of being a polymath, individuals should cultivate mental models – the invisible links that connect disciplines together. Mental models help improve efficiency and impact in every area of life and study. By constantly learning and integrating knowledge from diverse fields, polymaths become "anti-fragile," gaining strength from changes in the environment.

In conclusion, as value shifts to the ends of the value chain in various industries, traditional publishers and specialists face challenges in capturing value. Meanwhile, generalists and polymaths have an advantage in today's world. By embracing diverse interests, integrating skills, and constantly learning, individuals can position themselves for success and make unique contributions to society.