Encyclopedia Britannica

• 1768 – first encyclopedia in the English-speaking world

• World’s 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%

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 (?)

Britannica’s 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 it’s book value

Britannica

• Market research showed that the typical encyclopedia is opened once a year

• Sales force played on parent’s anxieties about their children’s 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

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• Britannica’s 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