The perfect storm (part 3)

Much of Britannica’s success in the decades leading up to 1990 had to do with the effectiveness of its sales team. Britannica representatives were hired carefully, were trained well, and, most important, believed in the value of what they were selling. Few teams did direct selling better, or with more sincerity, than the Britannica sales force (which had a strong vested interest in its product, with commissions of $500 - $600 per sale).

Not surprisingly, when the personal computer arrived, in the early 1980s, Britannica’s sales department dismissed it as a threat. In 1983, the department even produced a set of talking points on the subject for its sales representatives, who increasingly were encountering prospective customers who said they might prefer an electronic encyclopedia to a print edition. “One of the questions we are most frequently asked,” the memo began, “by both our own people and outsiders, is, ‘When will Britannica be available on a computer?’ The answer we give is ‘Not for a long time.’”

The memo gave four reasons for that answer:  Home computers didn’t have enough capacity even to store just the index of the encyclopedia, much less the content. Storing the encyclopedia on a mainframe computer and then offering access via dial-up from a home computer would create an experience that was expensive, cumbersome, and slow. Only small portions of an article would be visible at any given time on a home computer’s screen, creating a “disjointed” reading experience. Keyword searching, which would be critical for a digital encyclopedia, was a very blunt instrument.

Concerning that last reason, think of what would happen, the memo told representatives to ask consumers, if you searched for “orange” on a computerized encyclopedia. You’d get references to the references to the color orange; the fruit orange; Orange County, California; William of Orange; and all sorts of other orange-related search detritus. You would then have to pick through that mess to figure out what might be useful to you – a laborious and time-consuming job that the editors of the print encyclopedia had already taken care of. “Britannica has already done all that work for you,” the memo read. “Our indexers have read every article, analyzed what they read, and have determined exactly which entries should be in the index.

They have separated the colors from the fruits, etc., and have grouped the references accordingly. They have eliminated trivial references, so that when you follow an entry you can be sure you’ll find a piece of relevant and significant information.” The print encyclopedia, in other words, was easier to use than any computerized version could be. Until that changed, the memo concluded, “we will not change our delivery method from the printed page to the electronic form.”

Whether Britannica liked it or not, however, the tide was turning. Two years later, in 1985, the company received an overture from Microsoft, which, after much study, had decided that a CD-ROM encyclopedia would be a “high-price, high-demand” product that would diversify its product portfolio significantly. Microsoft proposed paying Britannica for non-exclusive rights to use its text as part of a multimedia digital CD-ROM of its own – and Britannica summarily turned the offer down. “The Encyclopedia Britannica has no plans to be on a home computer,” the company’s director of public relation said at the time. “And since the market is so small – only 4 or 5 percent of households have computers – we would not want to hurt our traditional way of selling.”

“We would not want to hurt our traditional way of selling’’ – in those eleven words lay the seeds of Britannica’s impending demise. But in 1985 that was a perfectly reasonable statement for the company to make. It had several strong incentives not to accept Microsoft’s offer. For one thing, it feared the reaction of its sales representatives, who depended on the big commissions that selling print encyclopedias produced. If electronic copies of the encyclopedia were made available at a significantly lower cost, surely that would cannibalize sales of the print edition, which would lead to the departure of many highly trained sales representatives – one of Britannica’s most important assets.

The company also feared that a digital version of the encyclopedia would be perceived as a plaything and would undermine the aura of sober authority that Britannica had worked many years to establish. Home computers were a geeky novelty item at that point, too – hardly the sort of thing Britannica felt it should be risking its reputation on. In “The Crisis at Encyclopedia Britannica,” a 2009 Kellogg School case study of the Britannica’s troubles, Shane Greenstein and Michelle Devereux cite yet another reason that accepting the offer didn’t seem a good idea:

Britannica had no reason to take a risk with a young, unproven company like Microsoft, or to fear competition from it. After all, Britannica effectively controlled the top end of the encyclopedia market, charged the highest price premium among the encyclopedia publishers, and had strong and stable profits. The Britannica c orporate culture was thriving, and the Encyclopedia delivered strong returns. In fact, one former employee noted that “anyone who messed with the goose that laid the golden egg would have been shot.