Are large publishing firms agile enough to survive and compete with the digital textbook disruption or are they too big to succeed?

Sometimes big is bad. Consider the plight of The Learning Company (TLC), founded in 1980. This inventive educational software company created the wildly popular series, Reader Rabbit, and quickly became a market leader. Along the way, they acquired smaller software publishers to round out their offerings, beginning with the Minnesota Educational Computing Consortium (MECC). In 1995, SoftKey purchased it, keeping TLC’s name, and they continued buying companies including BroderBund and Mindscape. TLC was certainly the big name in educational software. That is, until Mattel purchased it 1999 for $3.8 billion. A  year later, Mattel sold the company for $27 million.

While a really bad business decision led to Mattel paying too much for TLC, I’ve witnessed quite a few software companies collapse under their own weight. As companies grow through acquisitions, they conserve money by laying off creative staff and rely on their current line of programs for income. This fatal flaw has led many companies to their demise.

What happens when a growing company creates a disruptive innovation that rocks their industry and in turn becomes the dominate player?

United Learning was a small, family owned, video publisher in the 1990′s selling quality VHS educational videos. Unfortunately for them, the industry was dying as an increasing number of schools and county offices were bailing out as video purchasers and distributors, leading to smaller profits.  Add the content standards revolution requiring teachers to utilize their time more efficiently and to teach to the standards and you’ve created a situation where educators are unable to view long videos during class.

In this atrophying environment, United Learning reinvented itself by creating a revolutionary model, streaming video that was both chopped into chapters but also was aligned with the content standards from each state. Educators could now search for video clips that developed specific content standards. The rest, as they say, is history as Discovery purchased United Streaming in 2003, becoming the leader in the educational video market.

However, big does not necessarily mean nimble. While Discovery Streaming has continued to add content to their service, smaller companies are beginning to eat into their market share, particularly Safari/Montage and Learn 360. Smaller companies often have both the incentive and the brain power to invent a better product.

Are textbook companies prepared to compete with the digital textbook disruptive innovation or will smaller, more nimble companies create a better product? Time will tell, but I’d recommend that they take Clayton Christensen’s advice from his book, Disrupting Class. Create a new division/company whose sole purpose is to create products designed to compete in the disruptive environment. A new, independent division would not have the creative, administrative, and historical limitations that tend to constrict larger companies.