Encyclopedia Britannica

1
Encyclopedia Britannica

• 1768 first encyclopedia in the English-speaking
  world
• Worlds most comprehensive and authoritative
  encyclopedia
• Aggressive sales and marketing
• Target middle-income families and their
  aspirations for their children
• 1990 sales of 650 million
• Dominant market share, steady growth generous
  margins
• Since 1990, sales have collapsed by over 80

2
What happened?

• Britannica viewed the CD-ROM as a toy
• Microsoft licensed content from Funk Wagnalls
• Third-rate content, poor quality sound and images
• Not serious competition (?)

3
Britannicas Response

• Britannica considered marketing the product on
  CD-ROM
• Britannica was too large to fit on a CD-ROM
• Britannica marketed text-only CD-ROM
• Sales force revolted because of losses in
  commission
• Bundled CD-ROM free with encyclopedia to avoid
  channel conflict
• CD-ROM alone sold for 1,000
• May 1995 Britannica sold for half its book
  value

4
Britannica

• Market research showed that the typical
  encyclopedia is opened once a year
• Sales force played on parents anxieties about
  their childrens education
• Now a PC is the most common way of easing
  parental guilt
• Incumbents are saddled with legacy assets
• Sales and distribution systems, brands, core
  competencies
• Competing in the digital economy may mean
  cannibalising these assets or destroying them

5
Moral

• New Economics of Information
• Evolving technological capabilities for sharing
  and using information can transform business
  definitions, industry definitions and competitive
  advantage e.g. Napster
• IT can destroy brands and businesses
• Britannicas vulnerability was due to its
  dependence on the economics of intense personal
  selling (sales force)
• Implications for real estate, insurance, cars,
  travel

Evans and Wurster (1997) Strategy and the New
Economics of Information, Harvard Business
Review, Sept-Oct