Digital Transformation: Should the Incumbents simply Roll Over?
Don’t worry, we’re not here to waste your time, after all we know you’re likely to be a senior management type, or an executive who has relatively little of that stuff. So we respect that. Also we’re not trying to be ‘for everyone’, because we know that the topic of digital innovation can be somewhat of an ‘acquired taste’ in management land.

But we do have global experience, working with some of the worlds biggest brands on their own digital transformation journey, and we love being able to put that to work for our clients. So if you’re interested to know what that feels like, put down the social media feed for a second, and please, read on.

The reality is that most of us know it. In our hearts. We feel it, and we live it every day. Things are changing in the world. Even the weather is changing. But in business, technology is driving cataclysmic change like we’ve never seen before. Driving digital transformation across not only a companies products and services, but also their supply chains, business processes, and most of all what they knew of their customer experience. 

But if you’re in it for the long term, and you’re an established business that is being forced to transform, there are some lessons from the past that we can learn.

Take the Encyclopaedia Britannica, first published in 1768, it was the heart and soul of knowledge. For myself growing up, it was the absolute epitome of “brand trust”. An institution that represented the ultimate source of all knowledge.

If you manage a business, and you’re looking at your own digital transformation strategy, then this is for you.

Perhaps some of you may also recall such a time, in your early childhood, at home, having rows of printed hard copies nestled regally on their own bookshelf. Or maybe you saw them in school, in this building called “the library”, where a teacher may have asked you to go in order to source some information.

Fast forward only a few short decades and you have Wikipedia, the platform-based business model, with its global, online, and free to view content that is purpose built for the digital age.

Yet somehow (and I would argue unfairly) this has always been compared to Britannica, the

“traditional incumbent”, who after 244 hard fought years of publishing finally printed its last edition.

To many ‘onlookers’ and HBR types, the message seemed clear. Another traditional incumbent, over 200 years old, had been wiped out by the “mystic force” of the internet.

They had been disrupted. Made obsolete. Become extinct.

Except that wasn’t true.

In the two decades before Britannica had hung up the boots, it had already tried to go through the very difficult process of “digital transformation”. And whilst many will report in history that Wikipedia was Britannica’s dragon slayer, the reality is that they were not their first challenger.

Back in the PC era, (think Wall St, Gordon Gekko, Bill Gates, etc) Britannica tried to move its content from print, to CD. Microsoft had launched “Encarta”, which they were simply giving away as part of a larger strategy to position PC’s as the #1 educational tool for the American middle-class.

But Britannica’s thinking was that this “new move” from print to CD, might curtail the attempt by Microsoft to compete directly against Britannica’s “share of wallet”.

Even though Microsoft was a ‘technology’ company that lived well outside of the ‘publishing’ category, they were attempting to position PC’s as a great educational investment, by giving away the content for zero profit, a loss leader, and through this move they were competing directly with Britannica.

So Britannica made their editions available on disk for the first time, but they did this because they knew that Microsoft had thrown down the gauntlet to them, even though Microsoft saw Encarta as a loss leader, and were pursuing a different strategy.

CD’s quickly transformed into the World Wide Web. And Britannica again faced competition from a myriad of online players, such as Nupedia and later its platform-based successor, Wikipedia.

Britannica understood that customers’ behaviours were changing fast as consumers quickly adopted the internet. So instead of trying to defend their traditional business model, their exec team tried to go back to the needs of its core customers—home users and educational institutions.

They played around with various methods of delivery and media channels. Tweaking price points, and sales distribution channels for its content product. But it always maintained a focus on its core mission… editorial quality.

With this focus, they were able to pivot to an online subscription model for its core product, and were also able to develop new and related product offerings to meet the ever changing needs of today’s educational systems worldwide.

“By the time we stopped publishing the print set, their sales represented only about 1% of our business,”

[this quote from Britannica President Jorge Cauz on the anniversary of that decision]

“We’re as profitable now as we’ve ever been.”’ [see reference here]

Today though, the first part of Britannica’s story might not shock that many of us, simply because the setup of the story is becoming very familiar. In the wake of Kodak, Nokia, and others, it’s become an all too familiar cautionary tale that these powerful new digital technologies, who are driving dramatic changes in customer behaviour, are resulting in companies going down that we all thought were ‘too big to fail’.

Once started, the digitization of a product, interaction, or medium becomes irresistible. The old business model becomes obsolete. Inflexible and unable to adapt, the “dinosaur” gets wiped out. 

And we resign ourselves to a future that belongs to the new digital pioneers and start-ups.

But that’s not what happened with Britannica, and that’s not how it has to be for your business.

There is absolutely no reason why upstart digital companies should have some predetermined destiny to displace today’s established firms. There is simply no reason new businesses have to be the only engines of innovation.

Established companies, like Britannica, can set the pace, and become highly profitable online businesses.

The problem is that—in many cases—management simply doesn’t have a playbook to follow. They just don’t have anyone in their corner who understands the external environment and can help them address the competitive challenges of digitisation. 

For anyone reading this, understand that’s who we are, we can give you the playbook for the future, we’re here to help you understand, to help you make plans for, and compete and win on the digital playing field of tomorrow.

That’s who we are. That’s why we exist. And that’s what we do.

And we’re very good at it.

Stu Stevens

MD & Founder of Remap Online 

Connect on LinkedIn 

 

(Stu was previously Head of Development for Yahoo! Inc in ANZ, and Director of Digital for Bauer Media AU) 

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