Computer technology: harbinger of the death of print or catalyst of a printed revolution? For John Ingram, head of US book distributor Ingram, it was the latter: on-demand computer manufacturing inspired him to set up Lightning Source more than a decade ago. Ingram was seeking to reduce the volume of stock crowding the pallet stacks. "It's the Dell model. Build it, buy it," says Suzanne Wilson-Higgins, commercial director of Ingram's books on-demand subsidiary Lightning Source. Ingram realised this model could transfer seamlessly to the book industry. "It was about marrying the fact you could do just-in-time production with this idea you don't have to have all this stock," explains Wilson-Higgins. The model became not just about reducing stock, but essentially eliminating it altogether. Lightning Source's USP hangs on the idea of producing a single book at a profit. Its average order is for just 1.7 books. So how did the company create a viable business with such an extreme target in what was essentially a non-existent market?

Home computer assembly lines inspired the production approach, but it was another branch of computing that turned it into a reality: digital printing. Toner technology wasn't to thank for the company's print on demand (POD) vision, but it did offer a delivery method for Ingram's dream of the stockless supply chain. Considering the low quality and non-existent halftones of early digital presses, technology wouldn't make that vision a reality overnight. Lighting Source president David Taylor says: "It took longer than anticipated to get the UK book publishing industry to embrace POD. The UK is an innately conservative industry. The other factor was that the technology in those early days was not as good as it is now."

Kit check
Technology is vital to the modern business. Servers at the Milton Keynes facility store 800,000 titles as PDFs, separated into text and cover pages. When an order comes through, files are dropped into the workflow that links production across its new aircraft hanger-esque 7,400m2 facility. There's a cavernous amount of empty space, thanks largely to its ambitious growth plan. Covers roll off one of two HP Indigo 3050s, or a pair of Xerox Phasers for larger-size A4 jobs. The text pages are fired to a bank of four Océ VarioStream 9210s; in keeping with the growth plan, there's space for another six if and when Lightning Source needs to invest to boost capacity. After soft- or hard-cover binding, each and every book is given a visual check before finally being carted to the distribution department. A paperback can be ready for shipping within 12 hours and a hardback within four days.

The entire set-up is geared toward the one-book-at-a-profit strategy, which has a marked impact on the sales approach. The basic premise is that as soon as someone somewhere demands a book, Lightning Source kicks into gear and that title is created from scratch.

The main sticking point is to assure the customer that there is a cost-benefit of choosing on-demand, rather than the somewhat reduced unit cost of short-run digital or the much lower unit cost of volume litho. Staying price competitive is no mean feat, especially in the current market. "Digital short-run pricing is quite aggressive - printers are going bust by giving silly discounts," says Wilson-Higgins. She won't be drawn into detail on Lightning Source's pricing. "Because we're a family-owned business, I can't even tell you how much the company is worth." As a rule of thumb, the printing cost of each book equals the page count multiplied by a cost per page, plus unit cost, handling and shipping. According to its marketing material, for a 352pp, 5.5x8.5-inch paperback with a wholesale price of $10, it would charge $5.48 and reimburse the publisher the $4.52 balance. Wilson-Higgins says that over its eight years in the UK, Lightning Source has passed on two price decreases, bringing prices down to about 25% less than when it started.

Print-only policy
One big question is whether Lightning Source would look for a larger slice of that price by moving up the supply chain into the publishing space. "Ingram has made it clear that it doesn't see its role as owning content," says Wilson-Higgins. "There have been business opportunities where we could have done that and we haven't. It's a matter of policy from John Ingram's point of view that we stay as a middleman."

It's a different tack to Amazon, which made the high-profile - and somewhat controversial - downwards move into the production sphere with Booksurge. On one level, Wilson-Higgins says the two companies have a "really strong relationship", on the other, Booksurge means they're now competing. What does she think of Amazon's print strategy? "They don't manufacture sporting goods or refrigerators or jewellery, so let's see how it pans out," she says.

The answer then, seems to be stick to what you do best. For Lightning Source, it's enough work just to stay on top of an ever-changing customer proposition. Are many publishers holding onto a traditional model even though it is becoming outmoded and lacks financial sense? "Yes, I would say definitely," says Wilson-Higgins. "Some people are just waiting to retire."

Managing director Dave Piper believes there will be a tipping point where POD takes centre stage. "A lot of the hesitation is tied up around warehousing. If they've got long leases on their warehouses, they're tied into them and they've already spent that cost."

Wilson-Higgins says the sell starts with education, particularly in ensuring publishers' content is in the right format for POD. This begins with the backlist. "Most traditional publishers would come in with a backlist offering. Take your old stuff and bring it back into availability," she explains. Lightning Source can then upsell into the front list.

Stockless trading
This customer service requires a high degree of client communication. To this end, Lightning Source holds ‘user groups' where it brings publishers in for 360° feedback forums. This feeds directly into strategy. Negative user comments over halftone quality drove the company to turn its back on InfoPrint technology and invest in 18 VarioStreams in 2006 for its US and UK sites. This approach is helping eliminate market resistance to POD. "We have customers that have totally embraced a stockless approach. They're gradually moving over to that model as they see the economics of it," says Wilson-Higgins.

The recession is accelerating that shift. The usual post-Christmas lull hasn't occurred this year. "Publishers who were looking at a larger print run with a slightly better unit cost are now thinking: ‘We don't want to tie all our cash up in a long print run.' That plays very much into our space," says Taylor. (Lightning Source set up 26 accounts in January, all from unsolicited enquiries.) Taylor believes POD will slowly eat into the offset sphere. "Probably the thick end of 90% of books published in terms of volume and retail sales will fall within a POD model at some point in their life cycle," he says.

However, future growth is not just about taking volume from the traditional book printers, but also from more creative initiatives, keeping in mind that the POD model on show in Milton Keynes has its own set of on-demand rivals. The distributed production model offered by manufacturer On Demand Books' (ODB) Espresso Book Machine is one challenger. But Lightning Source has taken a ‘don't beat them, join them' angle - it has a strategic partnership with ODB. E-books are another key on-demand rival and are potentially a threat to the entire book supply chain. Hence Lightning Source's parent firm launched its Ingram Digital arm in 2006 to focus on electronic content distribution. Finally, no one knows what other threats - or opportunities - are lurking just over the horizon. The internet has spawned countless trends and generated vast tracts of content unforeseen only a few years ago. Wilson-Higgins says social networking is one potential business area. Another hit the headlines just recently: Lightning Source is to supply print for German start-up publisher PediaPress, which is offering consumers the chance to compile their own personal encyclopaedias from Wikipedia content. Lightning Source last month appointed a senior executive of research and development, while there is also a chief technical officer and development team in the digital print heartland of Rochester in upstate New York.

So while developments in the world of computers, from social networking to online encyclopaedias to e-publishing, throw the book sector in a spin, Lightning Source is turning technology to its advantage to write a new chapter on book printing.

PRINTER Lightning Source
SECTOR On-demand books
LOCATION Milton Keynes
UK STAFF 98
ESTABLISHED IN UK 2000
ISSUE Setting up and succeeding in a new, non-existent sector
SOLUTION Using technology and customer communication to win market approval