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