Monday, December 17, 2007

Reed Elsevier: How to Expand a Market

Professional publishing companies are leading the industry in the transformation from a print single volume paradigm to an integrated, unified platform approach to content delivery. This latter approach combines the integration of content across categories with third party content and the integration into/with client workflows. Leading the charge are companies such as Elsevier, Kluwer and West each of which are investing significant amounts in electronic delivery of content. This investment goes beyond simply digitizing and indexing their content to building applications, webservices and supplemental databases that materially improve the productivity of their clients work environments.

This weekend TimesOnline discussed the impact this strategy was having on Reed Elsevier with CEO Sir Crispin Davis:
Davis said that the shift, which has taken place in the past 18 months, was “a natural but important evolution from print to online and then from online to workflow solutions”, Where possible, Reed is linking its own online platforms with a firm’s intranet, joining them at the hip. It is no wonder, then, that contract retention has gone up from 88% to 97% in science and is almost as high in legal. To a certain extent, the shift maps Reuters’ move from selling share quotes and news to more graphical data and research. But Reed has gone even further. For small legal practices, it will more or less run the office, providing administrative software that can track billable hours and keep a diary of court appearances.
Integration and the corollary understanding of the clients workflow is only part of the story. Using their content as their spring board, these publishers have radically expanded their potential market. In the article, Davis notes that they could be limited to participating in a $18billion market but in adding applications and services their potential market could exceed $48billion. Interestingly, when we discuss the size of the publishing market in revenue terms the boundaries will start to be much less clear as integrated products take hold.

Elsevier's experience and strategy is no less important for other segments of the publishing community. Education is the next publishing segment to adopt a platform approach to learning and leading this transition is Pearson. As I have commented before, this company has systematically acquired companies that now enable it to supply a broad array of products and services to the education community. The lines between content supplier and solutions provider are blurred as Pearson can provide content, assessment, remediation, school management applications and community solutions to their clients. Admittedly the sales process is likely to be more complicated; however, the market for Pearson's products is now radically larger, seasonality can be mitigated and their products can now be embedded in workflow and infrastructure. Switching costs are raised for the customer as a direct result of 'embedded' solutions which, while an obvious benefit for the publisher, also enables the publisher to maintain a consistent level of customer directed investment.

While Pearson has led this move in education in the last several years, the privatization of Thomson and Houghton/Riverdeep will result in these companies rapidly making up for lost time in the development of similar solutions for education. Providers like Elsevier have already identified a large new market for their products/solutions which will enable them to post annual revenue gains as they deliver radical new productivity gains for their customers.


Adam Hodgkin said...

Interesting trend. I wonder to what extent these new platform strategies are based on a 'web services', or Web 2.0 model, and to what extent on an older Microsoft office/SQL server model? If its the latter, which I suspect, these platforms will face quite a challenge from more open and anarchic business strategies. Open and collaborative solutions will be particularly attractive to educators.

Adam Hodgkin said...

Follow-up to earlier comment. CSI is exactly the kind of closed platform providing a highly regarded and needed service which is highly vulnerable to a more Open/Web 2.0 business model. See this post from Peter Suber