Encyclopaedia Britannica, the 244-year-old company, recently announced it would stop printing encyclopedias. Of course this triggered a flurry of talk about the end of printed books, magazines, and newspapers and a once-great company humbled by shifts in technology. But to fall into that narrative is to miss the greatest lesson of the story. Innovating, creating something new, playing the beginning of the game is the easy part. Britannica offers us invaluable insight into the much harder half of the innovation process: how to play the end game.
You see, every game--chess, tennis, business--has an end. Every business will eventually die. We cannot escape this inevitability. Yet we hold on to the fantasy that somehow OUR company will be different, that our company is “built to last.” The key to long life in business is knowing how to play the end game so that you can position yourself to play the next game. Britannica seems to be doing that well.
The Wi-Fi Pattern
To understand what is going on here, think about Wi-Fi (wireless Internet) service. Ten years ago when you walked into a Starbucks you had to pay for Wi-Fi access. Now you get it for free. If something doesn’t cost anything to provide, eventually someone will give it away for free. Or as an economist would say, over the long run, the market price of any competitive product or service reaches its margin cost.
Wikipedia has proven that there are lots of smart people out there who are willing to write content for free. Microsoft recognized the implications of this years ago and so dissolved its encyclopedia business, Encarta. Britannica recognized it was sliding down this Wi-Fi pattern as well, so they started adapting.
The Ostrich Strategy
Unfortunately most companies, when they start slipping into the Wi-Fi pattern, adopt the Ostrich Strategy. That is, they stick their heads in the sand. Kodak seems to have done this, unable to commit to a clear strategy for a world without cameras while their rival, Fuji Film, somehow has. The Ostrich Strategy gives you a temporary sense of comfort but ends painfully.
Three Ways to Win the End Game
The vast majority of Britannica’s encyclopedia customers have been accessing their encyclopedia content digitally for years now. The abandonment of print has been in the works for a long time. If we look into what Britannica is doing, we see at least three strategies to intelligently play the end game:
- Ride the turtles: As your product/service races toward free, some customers are fast rabbits and some are slow turtles. There are parts of the markets that will take a longer time to reach free. So you find those “turtles” and ride them as long as you can. For example, Britannica has business units focused on serving schools, defense forces, and homeland security units, all of which have compelling reasons not to depend on free content.
- Control the high ground: HBO has been successful at charging high prices from cable companies by owning proprietary, premium content. Britannica can leverage proprietary content from Marie Curie, Albert Einstein, Arnold Palmer, Bill Clinton, and others to become the place for “content people can trust.” Sure, you can get cheaper coffee from your local dive diner, but you still pay $3.50 to Starbucks because Starbucks controls the high ground.
- Move the action: Starbucks may be giving away free Wi-Fi, but they are selling you coffee too. If you must give something away for free, see how you can collect the money somewhere else. This is like Best Buy profiting from warrantees, not radios, and U-Haul profiting from selling boxes, not renting trucks. Britannica’s “Digital Learning” and “Knowledge Systems” businesses allow them to leverage their reputation and content in providing profitable consulting-like services.
While Outthinkers are good at opening up new games, they do so intelligently, planning already for the end game. What is your end game strategy?
- What “turtles” can you ride?
- How can you start controlling the high (premium) ground?
- To where can you move the action?
[Image: Flickr user David Hoffman]