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W O R K I N G  P A P E R  S E R I E S
The Human Capital “Impact” on
E-Business:  The Case of
Encyclopedia Britannica
John W. Boudreau
Benjamin B. Dunford
Peter M. Ramstad
Working Paper  00 - 05
Advancing the World of Work
Advancing the World of Work
Human Capital and e-Business at Britannica WP 00-05
The Human Capital “Impact” on e-Business:
The Case of Encyclopedia Britannica
John W. Boudreau
Center for Advanced Human Resource Studies
School of Industrial and Labor Relations
Cornell University
Ithaca, New York 14853-3901
jwb6@cornell.edu
Benjamin Dunford
Center for Advanced Human Resource Studies
School of Industrial and Labor Relations
 Cornell University
 Ithaca, New York 14853-3901
bd33@cornell.edu
Peter M. Ramstad
Personnel Decisions International
Minneapolis, MN 55402
peter@PDI-CORP.com
5/15/00
Working Paper 00-05
http://www.ilr.cornell.edu/cahrs
This paper has not undergone formal review or approval of the faculty of the ILR School.
It is intended to make results of Center research available to others interested in
preliminary form to encourage discussion and suggestions.
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Human Capital and e-Business at Britannica WP 00-05
The term “New Economy” has been coined to describe the remarkable economic
performance of the 1990s. Stiroh, (1999) an economist at the Federal Reserve Bank of New
York observes that its defining characteristic is a “focus on increasing globalization and
expanding information technology” (pg. 87). Research suggests that revenues from electronic
based business to business trade will double over the next five years from $43 billion in 1998 to
$1.3 trillion in 2003.  Revenues from business to consumer trade are predicted to rise from $8
billion to $108 billion over the same time period (Forrester Research, 1998).   However, there is
increasing attention to the challenges facing business in the new economy, and an increasing
chorus of analysts suggesting how tenuous many of these business models really are.  A recent
Barron’s article showed that many dot-com companies have only days of remaining cash
(Willoughby, March 20, 1999).
Such a key emerging phenomenon has not escaped the attention of writers, though the
existing body of writing has some important gaps.  We would classify existing e-business
literature into two groups.  First, there is a growing body of literature that discusses the how the
Internet is transforming business models and organizational strategies.  A second, much smaller
body of work has focused on e-HR, or more specifically, the implications of the Internet on
various HR practices.
E-Business and Strategy
The business press describes how electronic commerce has enabled firms to extract
value from markets in new ways (See for example: Garr, 2000; Hagel & Singer, 1999; Rayport &
Sviokla, 1995). For example,  Hagel and Singer’s (1999) concept of the Infomediary suggests
that in the future, firms can create value by acting as  “information agents” to consumers.   In
this model, consumers give Infomediaries access to their personal information (e.g.,
demographics and purchasing habits) in return for an array of “concierge-like” personalized
services (such as advice on which products to buy).  The Infomediary markets their clients
information to companies that match the consumers’ profile and pass the revenues onto the
consumer.
Much of this writing discusses the strategic implications of the internet.  From this
literature, two major points emerge.  First, the Internet enables firms to streamline their value
chains, by making existing processes more efficient or by eliminating them altogether (Evans &
Wurster, 1999; Tapscott, 1999; Rayport & Sviokla, 1994).  This streamlining effect of business
processes has become known as disintermediation (Evans & Wurster, 1999, Tapscott, 1999).
The internet also eliminates the tradeoff between richness and reach of information (Evans &
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Human Capital and e-Business at Britannica WP 00-05
Wurster, 1999).  The Internet enables high bandwidth communication of very rich or dense data.
This has the effect of reducing the hierarchical structure of industries, (e.g., in the supply chain),
facilitating transaction between firms where it was never before possible.
Despite the attention given to business models, there is a great deal of confusion
regarding how they are defined, and how they may be formulated.   One framework (Timmers,
1999) proposes the business model as having three elements:  (1) The various business actors
(e.g., consumers, or retailers) and their roles; (2) The potential benefits for each of the business
actors; and (3) The sources of revenues for the organization.
Timmers (1999) describes new business models using two variables: a firm’s value
chain and its market interaction patterns. The value chain is a concept from Porter (1985), and
involves the processes used to create value and competitive advantage, such as inbound
logistics, throughput, outbound logistics, marketing and sales, research and development, etc.
The four market interaction patterns are: “one-to-one”, “one-to-many”, “many-to-one”, and
“many-to-many.”
Several of the business models that result are shown in Appendix 1, which  vividly
illustrates the potential strategic impact of e-business on organizations.  However, business
models provide only a starting point.  Organizations must move beyond broad descriptions
toward strategic analysis in order to identify how they should direct their businesses in the
context of the e-business revolution. Thus, though observations about changing business
models and industry strategies are helpful, they do not easily direct decisions about human
capital.
The Impact on e-HR
What, then, is the state of writing about the human capital implications of e-business?
Unfortunately, it is substantially smaller than the  writing about business strategy writing noted
above.
One area of writing on human capital focuses on how information technology reduces
the value of  traditional hierarchies.  In the new economy, alternative employment forms have
emerged, such as virtual teams and free lance workers (Malone & Laubacher, 1998; Townsend
et, al 1998). Malone and Laubacher (1998) propose that e-lance workers will emerge as a
dominant form of employment in the 21st century, where individuals will function primarily as
independent contractors or consultants, leveraging information technology to complete specific
tasks, and the moving on.  Traditional command and control HR practices will be less effective
than practices that support autonomy, collaboration, and innovation.
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Human Capital and e-Business at Britannica WP 00-05
Regarding the e-business implications of individual HR practices, much of the attention
in the popular business press associated with the increased use of stock ownership in
compensation systems, (Business Wire, April 18, 2000), recruitment wars (Business Week,
August 9, 1999) in the tight labor market (e.g., for tech talent), and in emerging technologies for
electronic training (Internet Week, October 5, 1998).
The Gap in our Knowledge:  Linking Strategy and Human Resources
The writing about e-business strategy and models provides no way to directly develop
human capital strategies tied to competitive shifts, while the writing on e-HR focuses mainly on
specific labor market developments, or specific HR techniques that are affected by new
technology.
Thus, It is important to develop an approach to strategic analysis that provides a rich and
actionable logic linking human capital to these significant shifts in the business landscape. In
this paper we describe an approach to strategic analysis that identifies the links between
strategic success and human capital, articulating the key strategic elements, and then
translating them clearly into implications for human capital and human resource management.
There is a need for rich strategy diagnosis, that is seamlessly linked to implications for
organizational talent.  This has been variously described as a need to develop richer and more
detailed descriptions of strategy and its implications for human capital (e.g., Chadwick &
Cappelli, 1998), as well as the need to look inside the “black box” linking HR practices to
organizational success (Boudreau & Ramstad, 1997, 1998).
Specifically applied to e-commerce, such an analysis would begin to answer questions
such as:  “What human capital response is most appropriate when technology fundamentally
shifts the relationship between our firm and our suppliers?”  “What is the appropriate human
resource strategy to optimize the value of a sales force when our customers receive more
information through the web?”
The HC BRidge™  framework (Boudreau & Ramstad, 2000), is one model for
articulating and understanding these links.  The diagram below shows the HC BRidge™
framework.  The upper three linking elements of the HC Bridge framework (see Figure 1)
comprise the “Impact” part of the model.  These elements focus on articulating strategic success
with enough detail to identify key business processes and the link between processes and the
talent pools of the organization.  The “Impact” part of the model provides the strategic context to
differentiate the HR response to different talent pools.  With the talent pools identified, the lower
part of the HC BRidge™ framework focuses on enhancing the “effectiveness” and “efficiency” of
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HR investments.  Effectiveness links the HR practices to changes in the key talent pools.
Efficiency determines if resources devoted to HR practices are used wisely.
Identifying Impact is often the most difficult task in applying the model, yet the most
critical, because it ensures that effectiveness and efficiency are “directionally correct” and
focused on the most critical talent issues.  Moreover, many of the unique elements of human
capital strategy in the internet era require a detailed understanding of the “Impact” elements.  So
we will devote special attention to “Impact” in this paper.
Figure 1
HC BRidge™ Framework
ANCHOR LINKING
POINTS ELEMENTS
Sustainable Strategic
Advantage
Impact Business Processes
Talent Pools
Aligned Action
Effectiveness
Human Capacity
HR Practices
Efficiency
Investments
We will illustrate how the model can be applied, using a case study of Encyclopedia
Britannica originally described by Evans & Wurster (2000).   The Britannica example has
implications for the methods that other organizations use to translate their e-business
challenges into human capital implications.  Our goal is to help organization and human
resource leaders not only understand some of the strategic challenges created by the
emergence of electronic commerce, but to show how strategic analysis tools can help HR
executives who must translate the strategic changes into specific implications for their key
talent.
The Encyclopedia Britannica Case
Encyclopedia Britannica, founded in 1768 in Edinburgh, Scotland was the world’s first
compendium of knowledge.  As Britannica grew, it built a reputation for having solid,
authoritative and comprehensive content. Britannica maintained its position as a content leader
by continually revising and adding innovative features to its content, such as an atlas and a
yearbook.  Britannica’s initial market was with institutions such as libraries.  While this was a
slow-growth market, it provided a reliable source of income that allowed Britannica to build its
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Execution
Human Capital and e-Business at Britannica WP 00-05
financial foundation.  However, the key to Britannica’s market success was recognizing and
extending the market to homes.
Britannica created an aggressive and direct sales force that targeted middle income
families by going door to door.  At its peak in 1989, Britannica’s worldwide sales force numbered
7,500, and was the envy of nearly every sales oriented industry. Britannica’s executives realized
that middle income parents had intensely strong desires to provide their children with
educational opportunities.  The sales force learned that they could convince parents to purchase
the $1,500 to $2,500 encyclopedia as a means of improving their children’s education.  A
fundamental value proposition for Britannica was alleviating parents’ guilt, and the in-home
sales experience made that guilt even more tangible, and provided the product to assuage it.
Market research demonstrated that the encyclopedias were actually opened less than once a
year, on average, after the initial excitement of the purchase wore off. Britannica maintained its
position as the industry’s dominant firm.  By 1990, sales reached a peak of $650 million.
Britannica’s decline began with the CD-ROM.  The CD made a natural replacement for
the bound encyclopedia, because it was able to store large quantities of easily-searchable
information (text, sound, video and photos).  In the mid 1990’s competitors such as Funk and
Wagnall’s (later renamed as Encarta when it was acquired by Microsoft) and Grolier (formerly
Encyclopedia Americana) devoted themselves entirely to CD-ROM production and stopped
printing the bound editions.  Encarta and Grolier quickly gained market share by distributing free
versions of their products with new home computers. Britannica failed to see that parents would
buy a personal computer for their children (with its free CD-ROM based encyclopedia) in favor
of purchasing a bound product for roughly the same amount of money (about $2,000).
Britannica developed its own CD-ROM in 1995, but it was too expensive (originally
priced at $800) and its initial version was text only because Britannica’s vast and rich content
was too large to fit onto a single CD.  Consumers opted for the cheaper, more interactive multi-
media products offered by Encarta and Grolier. By 1995, Britannica’s future looked bleak.  Sales
of print bound encyclopedias had plummeted 80% from the 1990 peak, and company revenues
dropped to $400 million.  Consequently, Britannica was sold in 1996 to Swiss financier Jacob
Safra (an avid reader of Britannica since childhood), for half of its book value.
Lessons from this era of Britannica’s experience show that “Richness” of the sales
experience (a vast in-home personal sales force) made sense when expanding into a new
market (moving from institutions to homes), but “reach” can become more important when
selling into an already-developed market (CD’s bundled with personal computers).  “Richness”
(Britannica’s vast and unique content) can become a liability (CD’s couldn’t hold the content)
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Human Capital and e-Business at Britannica WP 00-05
when the market shifts toward “reach” and convenience (CD’s on the PC).Since 1996, Safra
has made sweeping changes to Britannica’s strategy in an attempt to save it from sure failure.
Safra began by eliminating Britannica’s once dominant sales force.  In addition, he has
broadened Britannica’s fundamental value proposition in a crowded industry dominated by
computer and Internet related product and strategies.  Britannica now defines itself as the
preeminent information community on the web.
The core of Britannica’s new value proposition is its new website, Britannica.com, which
offers a wide range of products and services, from news (e.g., sports scores, stock quotes) to
filtered search capabilities (edited by their expert staff) to e-mail accounts, all free of charge.
“This is not an encyclopedia online,” explained one marketing executive, “but a community  of
intellectually curious people.”  (Fortune, November 22, 1999, Useem).  The internet now makes
it possible for Britannica to deliver its vast content very efficiently.  The new value proposition is
that this unique content, and the information-based meeting place where it resides, will attract a
critical mass of repeat customers who use the site as their home base for information.  With a
critical mass or “community” of loyal users, Britannica can then attract advertising revenue and
more effectively sell specialty educational products (such as the $2,500 Encyclopedia of Art),
offered online. Ironically, Britannica is now one of the few on-line information sites to offer the
content free of charge. What was once a source of price premium has now become the vehicle
to attract customers in a crowded web space.
Britannica’s recent efforts to increase their web presence appears to be paying off. “USA
Today” (Farrell, 4/25/2000) reports that home user traffic has increased over 75% since January
when their Super Bowl ad aired.  Over a three month period, the number of unique users to the
web site has jumped from 594,468 to 1,003,216.   Britannica has also introduced a free software
application called “Britannica Traveler” that allows Palm handheld computer users wireless
access to its web site (see “Palm Users Get Encyclopedia Britannica”, USA Today, 4-17-00).
Using the latest global positioning technology, the new Britannica software can be programmed
to automatically send users information relevant to where ever they are located.  For example,
visitors to San Francisco could be sent articles about its history and landmarks as well as
information about local restaurants or entertainment.  This not only provides Britannica with
additional e-business partnerships, but more importantly, increases traffic on its web site, and is
another example of Britannica’s effort to reach its goal of becoming the preeminent on-line
information community.  Britannica’s emerging Information Community business model reflects
the Infomediary concept (see Hagel & Singer “Net Worth”, 1999), because revenues are
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Human Capital and e-Business at Britannica WP 00-05
generated through generating a critical mass of regular users, who make direct purchases from
the Britannica marketplace and attract advertising revenues.
A Framework for Understanding The Human Capital Lessons
We have seen how Britannica’s strategic response to the advancement of information
technology provides an instructive business case study, with lessons for other companies
striving to redesign their businesses to meet technology challenges.  It is interesting that while
the marketing and technological aspects of the Britannica case are well known, the human
element remains unexamined.  Of course, we know that the traditional sales force has been
removed, but other more subtle human capital lessons can be learned.
However, examining the lessons for human capital requires a framework that can look
beneath the strategy and business elements of the case.  It requires a mechanism to translate
the strategic shifts into implications for talent, and then into implications for human resource
management.  Next, we use the HC BRidge™ framework to analyze Britannica case, and to
derive strategic talent and human capital implications.
Ramstad and Boudreau (2000) have expanded the Impact part of the HC Bridge™
framework into the nine detailed elements shown in the diagram below.  Isolating the elements
of “Impact,” it is possible analyze strategy and competitive advantage so that they link clearly to
implications for organizational talent.  They have also analyzed how the changes created by the
internet and the new e-economy.
Figure 2
Detailed Elements of Strategic Impact
Linking to Talent
• Industry
• Industry Context
Sustainable Strategic • Dimensions of Differentiation
Advantage • Strategic Intent
Impact Business Processes • Strategic Resources
• Value Chain/Business Processes
Talent Pools • Constraints
• Talent Pools
• Pivotal Roles
Industry and Industry Context
Industry describes the markets in which the organization competes to create value, now
and in the foreseeable future.  It includes the list of key competitors, defined as those
organizations whose actions should spur a competitive response (Ramstad & Boudreau, 2000).
For example, if increases or decreases in the prices of a potential competitor would cause an
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organization to adjust its prices, then those competitors should be included in the “industry.”
The same analogy would hold true in the areas of supplier relationships, regulatory activities, or
customer impressions.  The result of an industry analysis is a list of competitors or future
competitors.
One of the most distinct characteristics of the Internet era is the speed at which the
composition of industries can change.  Advancements in information technology can create
rivals out of previously unrelated firms.  The application of the competitor definition is seen in
Table 1.  When the industry was defined by printed reference materials, the sole competitors
were other makers of encyclopedias.  However, with the development of the CD-ROM and later
the Internet, the competitive landscape changed dramatically.  For example, Britannica’s new
strategic direction places them in direct competition with a host of companies representing an
array of previously unrelated industries.  As an information community, that also sells retail
products Britannica now competes with the likes of yahoo.com, CNN.com, Amazon.com and
many others.  By defining competitors systematically and broadly, whole new competitive
arenas are identified.
Table 1
Britannica’s Industry, Then and Now.
“Print Only Era” (Circa 1980) Internet Era (circa 2000)
Competitors Competitors
• Compton’s • Compton’s • CNN.com
• Americana (Now Grolier) • Grolier • USAToday.com
• Funk & Wagnall’s (Now Encarta) • Microsoft Encarta • Yahoo.com
• World Book • IBM/World Book • Altavista.com
• Encyclopedia.com • MSN.com
• Amazon.com
• eToys.com
In the same way, “Industry” analysis can be applied to any organization to make more
specific the implications of emerging e-commerce challenges.  Broad strategic patterns such as
the rise of “infomediaries,” disintermediation, hypermediation, the virtual value chain, and the
network economy are useful frameworks.  By specifying how they change the competitor space,
we begin to better understand their implications.
Industry context describes the forces that impact the industry (Ramstad & Boudreau,
2000).  These forces might include: the industry’s size and growth rate (including the life-cycle
stage and the “value migration” pattern), factors affecting industry profitability (competitors,
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Human Capital and e-Business at Britannica WP 00-05
suppliers, buyers, new entrants, and substitutes, as noted by  Porter, 1985), government
regulation, and turbulence (including hypercompetition or technology development).  Industry
context defines the factors that determine the amount of available “rents” or profits for the
players in that industry.  Size and growth rate affect the absolute amount of rents, the Porter
(1985) dimensions affect the amount of “excess rents” likely to be available due to imperfect
competition, and regulation and turbulence reflect the riskiness of the stream of rents.  Thus,
industry context identifies common challenges and opportunities facing all the industry
competitors. For example, identifying that the industry will become increasingly regulated
suggests developing resources such as strong relationships with regulatory agencies.
Identifying that an industry is entering a period of more rapid growth suggests that the emphasis
might shift from gaining market share from competitors to increasing sales from emerging
customer segments.  Before we can understand how an individual organization will choose to
compete, we must understand the profit potential of the industry.
Table 2 depicts a strategic context analysis that might have occurred circa 1983, as the
emergence of the PC was apparent, but before technology had actually changed the industry.
In a non-electronic world, the encyclopedia makers had significant bargaining power over
content suppliers, and over in-home buyers, because printed versions were the only form for the
information.  New entry into the  printed reference industry was limited due to the need to build
up production, content, sales, brands and distribution. Moreover, Britannica had developed a
reputation and relationship with libraries and other institutions.  While this market was very
small, it provided a reliable source of revenue to cover the fixed costs of content development
and production.  Libraries, once sold, ordered encyclopedias regularly, paid the asking price,
and placed standing orders.  In fact, the two-year cycle of encyclopedia production was in part
due to the two-year purchase cycle of libraries.  This reliable revenue base is one factor that
made it feasible for Britannica to consider investing in an in-home sales force to expand the
market.
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Human Capital and e-Business at Britannica WP 00-05
Table 2
Britannica’s Industry Context:   Then and Now
“Print Only Era” (Circa 1980) Internet Era (circa 2000)
Bargaining Power of Suppliers Bargaining Power of Suppliers
Suppliers- Suppliers-
• Manufacturers of book printing • Content suppliers (e.g., AP wire),
materials • Manufactures of  print & CD ROM materials
• Content Suppliers • Toy and educational product
manufacturers.
Bargaining Power of Buyers Bargaining Power of Buyers
Buyer reach-
• Door to door Buyer reach-
• Schools • Online sales
• Bricks and Mortar retail
• Some schools
Threat of Potential New Entrants Threat of Potential New Entrants
Threats-
• Companies that could match Threats-
Britannica’s value proposition but do so • Companies that can copy and/or expand
more cheaply and more conveniently Britannica’s new value proposition (as a
(Grolier & Encarta) reference information community), e.g.,
Yahoo or some variant.
Threat of Substitutes Threat of Substitutes
Threats-
• Technologies: CD-ROM, PC, Internet Threats-
• Still technologies, which increase the ease
of information flow.  But which information
and which technologies?
Technology also transformed the  size and growth rate  of the industry.  In the print only
era, the market for encyclopedias was small, and static.  The expense of producing and
purchasing the print volumes kept the market small.  In the CD era, however, rivals such as
Encarta and Grolier’s exploded the market for encyclopedias by distributing their products free
with new PCs.  Very quickly, millions of consumers had cheap and easy access to rich
information content and the market was instantly transformed from small and stable, to rapidly
growing. Admittedly, hindsight is easier than foresight, but the case does illustrate the potential
value of a structured and logical approach to strategic context analysis.  As e-business
technology emerged, this analysis might also have helped to anticipate the emergence of
competition from search engines, news services, retail educational products, and even makers
of other education-related products (such as PCs as discussed earlier).  Thus, identifying the
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industry context takes the competitor list and specifies the implications for how competition will
be defined in the industry.  The next step is to determine how the organization will define itself
within that competitive space.
Dimensions of differentiation and Strategic Intent
Dimensions of differentiation, the third element of the “Impact” builds a “map” showing
the dimensions on which industry competitors distinguish or “differentiate” themselves to gain
economic value (Ramstad & Boudreau  2000). Traditionally, these dimensions focus on
customer relationships, such as price, service, product customization, innovative features, etc.
(e.g., Treacy & Wiersema, 1997).  However, competitors can also create sustainable
competitive advantage in production, resource acquisition, distribution and support functions,
such as patents, relationships with regulatory agencies, or organizational features (such as
Dell’s “Be Direct” model). These dimensions may be “invisible” to ultimate customers
(Chatterjee, 1998), but they are often key to competitive advantage now and in the future. This
is why identifying buyers, suppliers and substitutes was so important in defining the strategic
context.  The differentiation dimensions provide the “map” of possible competitive positions.
Each current and potential competitor can be placed on the “map” according to their position on
the key dimensions.
With regard to e-commerce, defining the dimensions of differentiation is particularly
important, and is a key source of insights regarding the competitive space.  For example, the
emergence of on-line providers of information about automobile features, availability and pricing
options made the information itself an element of the competitive space.  Previously, such
information was necessarily connected to the manufacturer or the dealer.  Now, the timeliness,
detail and comprehensiveness of such information is an element defining competition in this
industry.  Similarly, while personal health advice  was not traditionally considered an element of
competition between pharmaceutical companies, because the necessary information and
expertise resided with physicians and in their offices, consumers increasingly look to the web for
such information, making it a new arena for competition.
 “Strategic Intent” defines the organization’s target position on the map (Ramstad &
Boudreau, 2000).  For each dimension of differentiation, it will show how different or similar the
organization strives to be, compared to competitors.  Deciding the organization’s intended
position on each dimension articulates strategic intent at a detailed level. The Britannica case
illustrates how information technology can change the dimensions of differentiation within an
industry.  Table 3 contrasts selected elements of the differentiation and strategic intent “map”
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that might have been constructed for the encyclopedia industry in the 1980’s, to the emerging
map with the advent of the internet.  Prior to the emergence of electronic technology, the
differentiation map at was fairly simple.  Firms differentiated themselves on the bases of price,
content quality, and alternative products. In particular, Britannica differentiated itself as a high
margin leader on the basis of its premium content and packaging leadership.  Britannica
leveraged its history of having world class contributors to generate a strong content reputation.
Second, Britannica sought out and obtained powerful endorsement of libraries and schools, that
provided an even greater boost to their reputation as a content leader.  A key source of
Britannica’s profit were packaging options (e.g., premium leather bindings) which carried very
high profit margins.  In fact, selling these additional options was both a reason for the in-home
sales force and a requirement to cover the high cost of the sales force. In contrast, Funk and
Wagnall’s differentiated itself as a discount product, available in grocery stores.  Others, such as
Compton’s and World Book made their mark by serving the middle of the price and content
market and also by targeting schools as a primary customer. They did not employ the in-home
sales force.
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Table 3: Differentiation Map of the Encyclopedia Industry, Then and Now
The “Print Only” Era (circa 1980)
Britannica Compton’s Funk & Wagnall’s World Book The New Book of
Knowledge (Grolier)
Retail Price $1,500 $599 $144.99 $499 $398
(1984)
# Volumes 32 26 29 22 21
Primary Door to door, book Book stores Grocery Stores Schools Preschools & Mail order
Distribution stores and libraries
Channels
Content Quality World-class expert Average content Average content. Average content. Average content.  Little
content providers and little library “Grocery Store” Strong reputation library representation
Reputation representation image not high in with schools
endorsement from reputation.
libraries
Additional Premium Webster’s None World Book Atlas, None
Products & Packaging (e.g., Dictionary Medical Journal, &
Options leather bindings) Dictionary
The Internet Era (Circa 2000)
Britannica Compton’s Encarta World Book Groliers Encyclopedia.com
Product CDROM, Web, Print CDROM, Print, Web CDROM, Web CDROM, Web, Print CDROM Web
Channels
# Base Articles 72,000 40,000 42,000 21,000 37,000 14,000
Retail Price CD: $69 CD: $14.95 CD: $100 CD: $89.95 CD: $49.95 Free (Revenues through
Web: Free Print:  $599 Web: $49/year Web: 49.94/year advertising)
Print:  $1,250 Print: N/A
Other Products Web: News services, Web: e-Games, Virtual Web: eagles, Web Literacy programs and Retail Children’s None
feature articles, search tours, Books, Personal based Lesson plan products, electronic books, reading clubs,
engine, e-mail, improvement products archives, various CD learning aid toys educational CDs
educational toys, products
navigation software
Source:  New York Times (Dec 23, 1984).  Bookshelf: Section 7, p 20.
Sources: www.britannica.com, www.comptons.com, www.msn.encarta.com., www.encylopedia.com, www.grolier.com., www.worldbook.com.
(See reference list for additional source articles).
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Table 3 also depicts elements of the industry’s current differentiation map. There is
much greater parity among competitors.  All have a web based encyclopedia, and most offer an
array of alternative products (e.g., retail books, toys and educational services ) that are sold
online.  Thus, competitive advantage is more difficult to create through the sales experience and
through optional product features.  Unlike the earlier era, in which Britannica was virtually the
only competitor reaching into the home with a direct sales force, in the internet era everyone
can reach directly into any home with a web connection.  “Presence” in the customer space is
no longer differentiated through the sales force.  So, what is Britannica’s “strategic intent” in the
internet era?
Britannica is now trying to create a first mover advantage through an “information
community” business model,  offering their premium content to consumers for free, and
generating revenue by attracting a critical mass of repeat visitors to entice advertisers.  The
information community model requires that users make the Britannica their primary source for
news, stock quotes and quality reference information, even e-mail.  Now,  Britannica’s
differentiation depends on two key factors.  First, they must maintain the high standard of quality
and authoritative content that brought them their long standing reputation.  Second, they  must
ensure that users have a unique and satisfying experience when they access the site.  In other
words, premium content is not enough to attract a base of repeat users if the experience on the
web is poor.  To accomplish the first mover advantage and obtain the critical mass, Britannica
must ensure that user experiences are uniquely compelling.
It is interesting to note that Britannica’s much larger number of base articles (see Table
3) hints at a potentially valuable differentiator– the ability to offer users a uniquely authoritative
experience.  In the print era, this authoritative distinction led to endorsements by libraries, and
added to the compelling message of the in-home sales force, but it was seldom experienced by
actual customers (the encyclopedia was seldom opened after it was sold).  Now, it may emerge
as a strategic resource for a very different reason.  To understand that, however, requires that
we move to the next level of specificity in the strategic diagnosis, and identify strategic
resources and market power.
Strategic Resources and Market Power
Strategic resources and market power define the factors necessary to achieve the
strategic intent and protect it from imitators (Ramstad & Boudreau, 2000).  Strategic resources
are the valued organizational elements that make the biggest difference in achieving, sustaining
and protecting strategic intent.  Traditional examples include physical assets (locations, raw
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Human Capital and e-Business at Britannica WP 00-05
materials, plant/equipment), exclusive rights (patents, leases on raw materials), brands, core
competencies and data.  The Internet has created a whole new array of strategic resources.
For example, having a unique and recognizable URL, having a large customer base who has
“book marked” your site, and having top web development talent are all strategic resources that
never existed before the emergence of the Internet.  Market Power is the organization’s ability to
extract value from others in the market (buyers, suppliers, etc.).  For example, market power
with buyers can be used to charge higher prices, and to hold or increase market share, while
market power with suppliers can be used to lower costs or obtain exclusive rights to key inputs
(Ramstad & Boudreau, 2000).
While firms should be aware of their existing resources and market power when
formulating their intent, it can be dangerous to base strategic plans strictly on existing resources
to the exclusion of the industry context.  Resources that are sources of sustainable advantage in
one setting, due to their rareness or difficulty to imitate (Barney & Wright 1998), can become
liabilities if clung to in the face of fundamental changes.  For example,  Britannica’s decline
illustrates that their key resource in the print era -- their superior content and sales force -- could
not prevail over competitors who adapted to changes in technology that altered the value of key
resources.
Table 4 illustrates the analysis of three strategic resources in the Britannica case.
Traditional resources may be valuable only if translated to fit the electronic content acquisition
and distribution channel.   It is ironic that despite technological advancement and strategic
transformation, one of Britannica’s current key resources is also one of its oldest:  it’s content
and brand recognition.  Although Britannica has quickly transformed itself into a web based
information community, nothing prevents rivals from imitating them.  What rivals cannot imitate,
however, is Britannica’s content tradition and famous brand.  It is especially notable that the
trusted brand name and content leadership (in terms of authority and uniqueness of experience)
has the potential to create the critical mass of users, but also a differentiated user community
that rivals will be unable to duplicate.  Users who choose Britannica’s web site for the
authoritative content are likely to represent a desirable demographic group for advertisers, and
are likely to respond more predictably to product offerings.  The power of the authoritative
content is now that it attracts only those web users who value high-end and education-oriented
experiences and products.  This potential additional resource could potentially be as powerful as
Britannica’s massive sales force once was.
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Human Capital and e-Business at Britannica WP 00-05
Table 4
Strategic Resources and Market Power in the Britannica Case
Resource Market Power Britannica’s Unique Competitors’ Position Future Value and
Created Position Sustainability
Exclusive & • Unique information • Well established through • Few in-house content • Easily duplicated
Extensive thwarts substitution & exclusive, long-term relationships suppliers—reliance on cheap & • Britannica’s uniqueness is less
unique content infrastructure with in-house and outside content ready access to web based sources valued by customers in Internet era
Content creation suppliers • Pure content providers (CNN)
• Allows price & market • Historically oriented towards 2 quicker in updating information
share maintenance year revision cycle • Technology providers
(Microsoft) can compete on content
to threaten market %
Brand • Unique Customer trust • High customer brand trust • Competitors inferior in quality, • Brand can retain its value in trust
Recognition creates awareness and limited to printed product. but superior in price and and quality if translated into key
habitual purchase • Brand attributes are oriented accessibility. features of the e-market.
decisions. toward a printed and bound • Short-term difficulty in matching • Potentially sustainable if
• Product awareness product, & not well-transferred to Britannica’s brand- image, but can successful as a trusted advisor in the
creates market share and electronic products/channels. emphasize other product features in e- information arena.
allows price maintenance the e-market. • High potential for building a trusted
community of users around a known
brand and shared experience with
print product.
Knowledge of • Anticipating customer • Long-term understanding built • Search engines and software • Sustainable only if quickly applied
Customer desires creates market through intimate, in- home makers do not have expertise in to the electronic information area.
Buying share and price premium. customer contact. encyclopedia and information sales. • Significant risk of loss through
Patterns • Customer information • Sales force understands • Both types of future competitors attrition of our sales force to
allows market innovation buying decisions and selling will amass information competitors.
that new entrants cannot processes electronically, that could eventually
duplicate. • Focus on printed product and match this resource.
door-to-door selling
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Human Capital and e-Business at Britannica WP 00-05
Value Chain and Constraint Analysis
Value chains are the processes that create and exploit strategic resources and market
power.  Physical value chains, for example, often reflect a sequence of acquiring materials,
services or components; then transforming those components into products or services,
followed by outbound movement of finished products, then sales and customer management,
then order-to-payment processes.  Porter (1985) proposed that in most industries, firm-level
value chains consist of the following elements:  (1) inbound logistics, (2) operations, (3)
outbound logistics, (4) marketing/sales, and (5) service, plus these support activities: (6)
technology development, (7) procurement, (8) human resource management, and (9) corporate
infrastructure. Describing value chains helps us see precisely what “happens” to create or
exploit strategic resources and market power Value chain elements not only change with e-
business technology, but they can also be “re-constructed” when information is combined
across several value-chain elements (Timmers, 1999).  For example, information from service
encounters and marketing/sales might be combined to better predict customer needs and to
identify customer segments where high-margin service will be possible after the sale, and where
additional sales can be made through the service encounter.
Figure 3
Britannica’s Value Chain
Collect, Edit &
Organize
Content Content
Design &
Presentation
Sales
Production
and Delivery
User
Experience
and Support
Constraints are bottlenecks in the value chain (Boudreau & Ramstad, 1997, 1998;
Ramstad & Boudreau, 2000).  They are important because relieving bottlenecks not only
enhances value at the bottleneck, but allows other processes to create more value because
they are no longer limited by the constraint.  For example, if an organization with limited
distribution adds distribution channels, it creates more valuable distribution, but it also allows the
organization to exploit existing production and sales resources more fully, because there is
sufficient distribution capacity to accommodate them.  Augmenting sales and production
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Human Capital and e-Business at Britannica WP 00-05
capacity makes little sense until the distribution constraint is addressed.  Thus, understanding
constraints is one key to focusing on the most critical internal processes, and avoiding
potentially wasteful attention to important, but less critical, processes.
Figure 3 depicts Britannica’s basic value chain. The first element involves collecting,
editing and organizing  the content of reference information.  In the second stage, the content is
designed and the presentation approach is determined (printed, burned onto a CD-ROM, or
organized into a web page.).  The third stage involves the sales process (in-home sales in the
print era, and web-based sales in the internet era). Next, the production and delivery of the
product is either physical (via ground transportation in the printed product) or virtual (year round
maintenance of a network server on the web).  Finally, the user has a distinct experience,
including the impressions and feelings the user has toward the product.
As we have noted, in the print era the user experience after the sale was not critical to
success, because the volumes were rarely opened after the sale. Still, content was important,
because it sold the product to the much smaller institutional market, which in turn created the
reputation as a content leader, and generated the basic financial returns to cover the fixed
costs.  The in-home selling experience did create a unique value point, but the content and
experience were not closely tied.  In the new “community of users” model, the experience and
content are much more closely tied. Britannica’s content gets customers to the website, but they
will return based on their entire web experience: the accessibility of the content, the uncanny
ability of the editors to steer the user toward the most useful websites, and the presence of
useful products and features that the user did not expect.  It is this unique product experience
that is instrumental in building the critical mass of customers, the community of users that will
give Britannica the competitive advantage over rivals who also offer web based information.
Content and experience were largely distinct in the print era, but are now inextricably linked.
This realization flows from the systematic analysis of Britannica’s strategy through the
earlier elements of the model. Moreover, as we shall see,  understanding this value-chain link
has significant implications for talent planning and analysis.
To illustrate the concept of “constraints,” we will focus on the factors driving sales in the
Britannica example.  Recall that one of Britannica’s dimensions of differentiation was sales
margin they could generate from premium packaging options.  One of the reasons that
Britannica was able to succeed on these high margins is because of its ability to expand the
market for print encyclopedias. In the print era, a primary constraint was the size of the market,
limited to institutions.
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Human Capital and e-Business at Britannica WP 00-05
Figure 4
Constraints in Print Era
Sales
= Market MarketVolume Size x Share
(Units)
Product
Product Hit
Line x Presence x Rate
Density
In the print era, the constraint was on the size of the market.
The sales force was critical to expanding the market to new
families.
Britannica successfully addressed this constraint with its massive sales force, who
expanded the market door by door, family by family. When cheaper, more accessible CD
products made by competitors were packaged with the distribution of new PCs, millions of
consumers had access to this information, and Britannica’s edge in artificially expanding the
market became obsolete.  In an immense and quickly expanding market, the constraint was no
longer the size of the market, but rather market share. Encarta and Grolier’s created an edge
through alliances with PC distributors, and quickly overtook the lion’s share of the market.
In the internet era Britannica faced the technological transformation, by embracing the
“online community” business model.  As a result, Britannica’s primary constraint shifted again
(see Figure 5).  Market share is still more important than market expansion, but now the specific
constraint is product presence rather than hit rates.  For the information community to succeed,
Britannica must now expand their presence among consumers.  A marketing executive at
Britannica recently noted, “We are entering a new stage of our evolution into an Internet and
news media company and our new model requires that we raise our profile among consumers
in a significant way” (Business Wire, 1999).  It is ironic that despite all of the transformation of
the value chain due to information technology, Britannica’s key constraint is still centered
around sales.
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Human Capital and e-Business at Britannica WP 00-05
Figure 5
Constraints in Internet Era
Sales
Market Market
Volume = Size x Share
(Units)
Product
x Product HitLine Presence x Rate
Density
In the internet era, the constraint is on presence.
The nature of the market power created by sales and marketing in the internet era is now
clearer, because we can link it to the competitive analysis, and to the interaction of marketing
and sales with the other key value-chain processes. Specifying the value chains and constraints
thus calls into sharp focus the need to clearly define the nature of the talent required to create,
enlarge and support those business processes.  It allows us to identify key talent pools and their
specific actions necessary to carry out the new strategy (Boudreau & Ramstad, 2000).  We now
describe how talent links to the strategic analysis in e-business.
Talent Implications of Constraints
Talent implications link the analysis of constraints to human capital by identifying the
specific human capital with the greatest potential to relieve the key constraints (Boudreau &
Ramstad, 2000).  Thus, through talent implications, we create the tangible link from strategic
success to human capital.  Moreover, because the implications are built on the foundation of
constraint and resource analysis, they are seamlessly linked to the broad strategic imperatives.
Talent pools are thus the “linchpin” in the impact model—the element that provides the bridge
between strategy and people.
Pivotal roles describe the specific elements of talent that combine to create the talent
pools.  As we have seen, roles can be pivotal through their effect on critical constraints, but
roles also become pivotal if they are clearly linked to critical resources or when differences in
performance in those roles have a large effect on a key resources or constraints Job
descriptions are helpful, but not usually identical to pivotal roles.  For example, a role in drug
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Human Capital and e-Business at Britannica WP 00-05
development is managing subjects for clinical trials.  This role is a combination of elements of
the jobs of clinical subject recruiters, schedulers, data managers, and clinical experiment
designers (Boudreau & Ramstad, 2000).  Translating strategic resources and constraints into
talent and role implications reveals the key human capital areas that will have the most impact
on strategy.
In the past, Britannica’s key talent pool was the sales force because of the market
constraint, driving the need to expand the market into homes.  The sales force was extremely
expensive to support, but worth the investment, because it was so successful in bringing new
families into the market.   The high margins gained from the premium packaging allowed
Britannica to support the massive sales force. However, in the era of the Internet, Britannica’s
primary constraint has shifted once again.  Now the path to increased market share is centered
around increasing product presence rather than increasing hit rates.
Britannica’s new critical talent pools will center around those involved in designing,
refining, and promoting the new information community.  Of course, important talent pools will
be web site designers, information specialists, and market researchers.  However, the strategic
analysis reveals that the talent implications go well beyond simply eliminating in-home sales
representatives and replacing them with web designers and programmers.  The competition to
create an information community still revolves around delivering an experience that is uniquely
informative.  It seems likely that many of the same capabilities that made  the Britannica content
unique in the past will remain important now.  Talent pools that identify and deliver uniquely
informative web content will be just as important as in the past, when unique content motivated
libraries to purchase the product.  Now, web customers experience this content first-hand.
The elimination of the in-homes sales role does not eliminate the need for customer-
savvy talent pools.  Britannica’s “community of users” strategy requires that it differentiate itself
to attract precisely the education-oriented customers who might have purchased a print
encyclopedia in earlier times.  In fact, the Britannica web site still features high-end bound
collections, such as an $8,000 “Encyclopedia of Art.”  The expertise of the in-home sales force
and their intimate customer knowledge may well be valuable in creating a unique and user-
driven community.
Our analysis above shows vividly that the internet era will place even greater strategic
value on cross collaboration among the various talent pools.  The users of the Britannica web
site will now not only be sold the content, they will experience it first hand.  The experience must
integrate with the content, and vice versa. Web designers, information specialists, and market
researchers  must draw on one another’s knowledge and expertise.  This is a good example of
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the Pivotal Role concept in action.  Roles become pivotal when differences in their performance
make very large differences in key resources, business processes, etc.  Roles go beyond jobs,
to specify the combined work of different talent pools.  With Britannica’s new internet focus, a
pivotal role is understanding what consumers want from the information community (e.g., what
to improve about the search engine, understanding which supplementary products are in
demand) and then quickly designing ways to maximize “stickiness. Stickiness, in the world of
electronic-commerce, is how well a site holds its visitors, brings them back, and becomes one of
their favorites (Masie E., Jun 7, 1999). This “role” depends on the combination of expertise from
those in jobs with customer contact, market analysis and product design.
For HR and business leaders concerned with managing talent, the implications are now
much clearer.  For example, enhancing these pivotal roles requires creating opportunities for
customer contact experts, technology designers and content experts to work more closely
together than in the traditional print product.  By linking the talent analysis to the earlier
elements of industry, processes, strategic resources, value chains, and talent, richer human
capital implications can be identified.  We move well beyond the idea of reducing the sales force
to add web designers. In fact, our earlier analysis suggests that it may be possible, perhaps
even critical, to capture the intellectual capital of the former sales force by creating new
capabilities, opportunities and motivation systems to bring that knowledge to bear on the new
electronic community.  The next step, then is to specify precisely what it is that these talent
pools would do, in their pivotal roles.
Aligned Action
Aligned actions are observable human behaviors that support key talent (Boudreau &
Ramstad, 2000). By translating talent pools and pivotal roles into aligned actions, human
resource and business leaders specify what it is they are looking for and “how we’ll know it
when we see it.”  Specifying aligned actions is essential for building “line of sight” among
employees and their managers (Boswell, 2000; Boudreau & Ramstad, 2000), by specifying how
individual behaviors relate to the strategic objectives of the organization.  Tables 5 and 6 show
the contrast between the talent pools and aligned actions in the print and internet era at
Britannica.
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Human Capital and e-Business at Britannica WP 00-05
Table 5
The Print Era:  Talent Pools and Aligned Actions at Britannica
Strategic Advantage Library-Endorsed Content Expanded Market of In-Home Users
Talent Pools and Pivotal Authoritative writers. In-home sales experience providers
Roles Strong, trusted relationships with
libraries.
Aligned Actions Find and develop unique authoritative Sell the upgrades
content Sell the in-home idea
Sell to libraries Trade on “educational guilt”
Table 6
The Internet Era:  Talent Pools and Aligned Actions at Britannica
Strategic Advantage Professionally-Endorsed Content Web-Based Content Experience
Talent Pools and Pivotal Authoritative writers “Discerning customer” marketers
Roles Creative information locators Designers of information communities
Aligned Actions Find and develop unique authoritative Build “community-enhancing” features
content Make the experience match the
Alleviate “information overload” content uniqueness
Develop content to fit the “community of Respond to visitor questions
users” marketing concepts consistent with the Britannica “brand.”
Aligned actions were always important.  For example, even in the “print” days it was very
strategically important for Britannica’s sales force to focus on the fundamental value proposition
of alleviating parental guilt.  The internet vividly reveals the value of collaboration across pivotal
roles.  For example, web designers could maximize their strategic impact by collaborating with
information specialists to design optimal marketing strategies.  The need for collaboration
across the value chain was always important, but it is even more imperative in increasingly
competitive Internet era.  Creating “presence” in an internet market is very different from the
traditional role of selling a physical product, or even from determining what to put on a CD.  In
the present era, not only must the sales force understand and build “stickiness” and presence,
but they must bring key market information to the design team to help them constantly
understand customer changes.  Not only must the design team be very good at technical
innovations that support a “community,” they must be good at translating those technical
possibilities into language that allows the sales and marketing talent to understand their
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Human Capital and e-Business at Britannica WP 00-05
implications and communicate them to customers.  The traditional strengths of each group must
be integrated.
Moreover, traditional sales actions may have new counterparts in the internet era, where
customer interactions often occur by phone or e-mail.  Amazon.com reportedly has hundreds of
“blurbs” that represent scripts for responding to customer complaints (such as the late arrival of
an order).  These “blurbs” are carefully written to appropriately convey Amazon.com’s core
customer messages (Wall Street Journal. April 17, 2000, p. R6).  At Britannica, this may
suggest a role for former in-home sales representatives.  Experience in-home representatives
undoubtedly learned effective phrases or selling points in dealing with customers.  Thus, former
top salespersons may become top “blurb” writers in the internet era.
Human Capacity, HR Practices and HR Investments
The bottom three elements of the HC BRidge™ framework link Human Capacity, the
potential to carry out aligned actions, to the HR Practices, the array of HR programs that serve
to nurture and create the necessary capacity, and finally the HR Investments, or resource
deployments designed to put in place the HR practices (Boudreau & Ramstad, 2000).  Table 7
shows how the human capacity and HR elements flow from the aligned actions identified earlier,
using two of the key talent pools discussed earlier --  In-home sales for the “print” era, and
information-community designers for the “internet” era.
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Human Capital and e-Business at Britannica WP 00-05
Table 7
Effectiveness and Efficiency Elements of HC BRidge™ Framework  at Britannica
PRINT ERA (CIRCA 1980) INTERNET ERA (CIRCA 2000)
Talent Pools In-Home Sales Experience Providers Designers of the Information Community
Experience
Aligned • Sell the upgrades • Build “community-enhancing” features
Actions • Sell the in-home idea • Design experience to  match the content
• Trade on “educational guilt” Respond to visitor questions consistent
with the Britannica “brand.”
Human CAPABILITY CAPABILITY
Capacity • Knowledge of door to door sales • Market research skills, understanding
techniques what is valuable
• Extroverted personality • Knowledge of what features cause
• Ability to accept rejection “stickiness” behaviors in users
OPPORTUNITY
OPPORTUNITY • Frequent chances for designers and
• Place the Direct sales force in content finders to share knowledge
middleclass neighborhoods where • Frequent chances for designers to work
Britannica sells the best—avoid areas directly with user groups.
where Britannica’s value proposition • Eliminate structural barriers to
doesn’t work collaboration
MOTIVATION
MOTIVATION • Enjoyment of web design/ e-commerce
• Passion for door to door sales •  Desire to be on cutting edge of the
• Perceive a strong link between industry
performance and pay • Pride in being a part of the Britannica
• Pride in being a part of the Britannica “community”
brand
HR • Train on the “guilt alleviation” value • Provide recognition awards based on
Practices proposition ranking of features by key community
• Provide updates on new product members
upgrade features • Redesign the organizational structure to
• Pay emphasizing sales commission, create cross-functional teams with
especially on high-margin features content developers
• Select for door-to-door experience • Recruit from pools of specialized
“information” talent, such as libraries,
museums, and schools
• Select based on experience using high-
end educational websites
HR • Obtain time from top sales managers to •  Budget for recruitment ads in outlets for
Investments design and run classes on the professional librarians
“message” • Increase pay allocation, to attract and
• Budget for recruiting from leading in- retain the “best and brightest” in the
home sales organizations information world
• Provide budget for high-end samples for • Increase professional travel allocation to
all salespeople allow designers to attend professional
• Hold highly public sales conferences to information specialist events
recognize sales leaders
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Human Capital and e-Business at Britannica WP 00-05
 Human capacity consists of the following three factors: capability, opportunity, and
motivation (COM).  As Boudreau and Ramstad (2000) note, balance across these three
elements is essential to achieving aligned actions, though capability (such as skills,
competencies, and abilities) frequently receives the most attention. Here, Table 7 shows that in
the print era, the human capacity was driven by appropriate compensation and selection, but
also by the insight of placing sales professionals in the homes most likely to respond to the
Britannica value proposition.  Decades of successful in-home selling set Britannica apart in its
ability to target appropriate households, and thus to provide the sales force with unique
opportunities to excel.  In the internet era, for “community designers,” the matrix reveals an
array of HR practices and investments that go well beyond the typical qualifications in technical
web skills or programming.  Rather, at Britannica, their unique strategic value proposition
requires web designers with a strong connection to building an educational community,
including the motivation to promote the Britannica “brand” of on-line knowledge and the ability
and opportunity to work closely with content finders and designers. Ability, motivation and
opportunity to collaborate are much more important now, than in the print era, and more
important at Britannica than at other internet companies.
A similar distinction emerges comparing the HR practices and investments in Table 7.  In
the “print” era, the key practices involved standard sales support functions, with a significant
unique element to promote in-home sales, and investments in excellent high-end samples.
Compensation systems based on a straight sales commission were very effective in motivating
the sales force to extent the market into homes, alleviating a key constraint in the “print”
business process.  In contrast, the internet era requires a dramatically different business model
with processes that are constrained in different ways.
This analysis reveals implications well beyond the popular general notions of changes in
labor markets (“e-lance economy” or “talent wars” or “virtual teams”).  These developments may
provide important ways to accomplish the strategic human capital goals, such as by forming
virtual teams of designers and content developers.  However, unique strategic human capital
advantage emerges from the specific human capital processes that link to the rich strategic
analysis.  By understanding the key strategic resources, process constraints, it is possible for
HR leaders to be discerning adopters and responders to these developments.  It is critical that
HR leaders understand where to fight the “talent war,” where the “e-lance” economy provides
the greatest benefit and threat, and when and where investments in “virtual teams” will pay off
the most.
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Ideally, HR investments translate the decisions about HR practices into specific resource
deployments (Boudreau & Ramstad, 2000).  These resources certainly include money, so HR
budgets are important, but even more important resources include the time of key constituents
(such as trainees and managers to do the training, time from cross-functional team members,
etc.). With the analysis shown here, such resource commitments and requests are more
seamlessly and logically linked to the strategic imperatives of the business.
In the print era, Britannica likely tolerated the fact that its sales compensation and
support system was higher than competitors.  It was obvious that the in-home sales force was
allowing Britannica to strategically expand the market to areas where competitors could not go.
In the same way, the analysis of the internet era shows that Britannica’s “community” designers
must possess unique human capacities well beyond those of more typical web designers, and
thus must be supported by different HR practices and investments. Britannica will likely gain an
advantage by selecting web/product designers from unconventional talent pools that may have
unique insight into how to “sell” informative content. For example, Britannica may recruit and
select from libraries, museums and schools.  Compensation systems at Britannica are likely to
set higher base salary levels, because of the need for web community designers who can and
will work more closely with content developers than at other internet companies.  Incentives built
on positive feedback from users who best fit the target community profile make sense now.
Thus, in terms of HR “investments,” Britannica may actually appear “expensive” when simple
benchmark comparisons are made.  Cost-per-hire, pay-per-designer, and designs-produced-
per-month may well be higher for Britannica, but well worth the investment because of the
increased collaboration and integration with content that results.
Conclusions and “Take-Aways” for Managers
The Britannica illustration presented here shows how a rich and logical strategic analysis
can link strategic impact to talent, providing important insights as organizations anticipate
challenges and opportunities in e-business.  The importance of the “linking elements” between
strategic changes and HR practices is clear.
”One Best Way” in the Internet Era?
The debate rages on regarding whether a particular set of HR practices is best for many
situations (Arthur, 1994; Baird & Meshoulam, 1988; Boswell, 2000; Huselid, 1995; MacDuffie &
Krafcik, 1992; Pfeffer, 1998).  The temptation to search for “magic bullets” is certainly no less
apparent in the internet era.  As we have noted, there are already signs of emerging general
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prescriptions about the future of work (teams, free-lance deals, outsourced HR, individualized
incentives).  However, the logic and theory of sustainable strategic advantage suggests the
importance of uniqueness and protect-ability to achieving long-run success.  We continue to
believe that there will be opportunities to capitalize on differentiated human capital strategies.
However, identifying and executing those strategies will require the kind of rich and logical
strategic links depicted here.  There is no free lunch, and uniqueness comes through hard
analytical rigor.
The Britannica Illustrates this vividly, for the internet era.  It is certainly important to
engage the talent war for web design, but the analysis reveals the importance of authoritative
content in the internet era.  This reveals talent pools (e.g., library professionals) that may be
relatively untapped in the rush to attract more typical web design professionals.  Moreover, the
example revealed the value of drawing on traditional strengths (e.g., the knowledge of the in-
home sales force for writing “blurbs” or the value of traditional content experts in creating the
web “community”).   
Implications for Benchmarking
The value of uniqueness, richly integrated with strategy has implications for
benchmarking. HR practices need to “fit” the strategy, but more importantly they must fit an
entire array of linking elements (e.g., key constraints, talent pools, pivotal roles and aligned
actions).  Best practice and benchmarking approaches to HR management will become more
difficult in the new economy, precisely because of the exploding variety of ways to create value.
Moreover, new practices can be shared and adopted at a much faster rate, due to technological
communication and diffusion. The Britannica story illustrates that new business models
transform entire industries, making competitors out of previously unrelated businesses and
industries.  Critical constraints and key talent pools will change rapidly both between and within
organizations, making unique, strategic alignment will be crucial for survival in the new
economy.  Benchmarking will not go away in the new economy.  In many ways, it will become
easier due to greater access to information and greater cross-pollination as professionals move
between organizations.  However, the depth of strategic analysis necessary to benchmark
effectively will increase.
General Talent Implications of e-Business
Within the above caveats about over-generalizing, it seems likely that changes from
technology will make certain talent pools increasingly critical across a wide variety of industries.
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Human Capital and e-Business at Britannica WP 00-05
Certainly as internet related firms continue to thrive and bricks and mortar firms launch web
initiatives, it is clear that talent pools surrounding the technological support (e.g., programmers)
will be strategically important.  Malone and Laubacher (1998) note that one particular talent pool
will be especially important across all industries: those that are related to the development and
establishment of communication protocols, standards and procedures.  Evans and Wurster
(1999) note that often the primary constraint to mass communication (or “reach”) is not
technology, but a lack of communication standards that link different types of systems together.
They note for example, that EDI (Electronic Data Interchange) systems have been in place for
over 20 years but have been limited in their influence because they could only be used by firms
that had the same proprietary software.  The success of the Internet has been largely to due the
fact that it established protocols or standards by which all different types of systems could
communicate with each other. Standards may take the form of routinized processes such as
those in operating rooms that allow doctors, nurses and technicians who have never seen each
other to work together efficiently.  For Britannica, for example, talent pools with facility regarding
emerging standards for finding content on the internet may be a key talent pool for the future.
This is one reason for the importance of tapping library professionals, where existing knowledge
of these standards resides.
Malone and Laubacher (1998) also point out that information technology is likely to lead
to an decrease in the importance of the typical managerial role, as network organizations
become more and more common.  With the emergence of freelance (or e-lance) workers,
temporary, self managed work teams and virtual teams, managers are not needed for daily
tasks.  They do note however, that top leadership will be increasingly important in terms of
determining firms strategy (as technology changes the industry context) and creating a firm’s
culture that is supportive of that strategy.  Thus, talent pools that involve strategic leadership will
be important across all industries.  For Britannica, such leadership will be particularly key in
facilitating collaboration between content developers and content deliverers.  Developmental
experiences that take these technical experts and develop their ability to lead and facilitate
teams are likely to be valuable across a wide variety of future strategic possibilities.
The Importance of Context and Logic
The Britannica story clearly demonstrates that disruptive technologies such as the
Internet can change not only individual businesses (effecting their business model, strategy and
value chain), but also entire industries.  In particular, the Internet generates entirely new ways of
creating value, opening the door for an unprecedented array of potential substitutes and new
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Human Capital and e-Business at Britannica WP 00-05
entrants.  Responding quickly to such changes creates a paradox.  On one hand, it can appear
to make deep strategic analysis impossible, because changes simply occur too quickly to be
analyzed.  However, abdicating the responsibility to understand strategic context and innovate
in richly differentiated ways,  is likely to be counter-productive, especially with regard to human
capital.  Scarce and important resources require rich strategic responses.  The paradox is that
the rich logic provided by detailed strategic frameworks like the HC BRidge™ framework
illustrated here may actually increase the speed of response.  The logic can be applied
repeatedly, even if the information and conclusions change.  Over time, organizations that
develop shared logical frameworks can move more quickly and decisively precisely because
they have no need to reinvent their strategic language and logical linkages.  The strategies,
processes, pivotal roles and HR practices may change continually, but the logic of the links may
provide the kind of “standards” for human capital strategy that have allowed the internet to
flourish and evolve so quickly.
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Human Capital and e-Business at Britannica WP 00-05
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Appendix 1
 Emerging e-Business Models
Business Description Company Example Source of Value
Model
Web marketing by one company Dell.com Additional promotion
E-shop to end users. WillamsSonoma.com Fulfillment cost reduction
One-to-one interaction Additional outlets
Web-based negotiation for raw Automotive Network Exchange Additional input sources for buyer
materials, goods and services (ANX): General Motors Faster order fulfillment
E-Procurement with suppliers. RosettaNet:  Microsoft, IBM, Greater access for small suppliers
One-to-many interaction Sun
Electronic bidding, presentation E-Bay Suppliers and Buyers have
of goods, integration with increased efficiency and time-
contracting, payments and savings
E-Auction delivery. Technology provider sells access
Many-to-Many interaction and advertising
Suppliers sell surplus stock and
small lots and lower sales
overhead
Collection of e-shops, Barclay’s Square Customers gain access, ease of
integration under a well-known Microsoft use, and brand trust.
brand or market segment, Buy.com Shops gain lower cost of
enriched with a common transactions and additional traffic.
E-Mall payment method. Mall provider may charge
Integration of several one-to-one membership fees, advertising
relationships fees, and service fees
A common user interface to the Federal Express’s Virtual Order Members lower the cost of web
product catalogues of multiple TradeZone presence and gain traffic.
suppliers, common front-end Providers generate revenues
and transaction support. through fees for membership,
3rd Party ISP’s, banks, shipping service or transactions, or through
companies or others provide a percentage of transaction value.
Marketplace quick web presence and access
to their transaction support.
Integration of several one-to-one
relationships
A virtual meeting place for Amazon.com Providers sell information and
communication and interaction HealthNet analysis of member buying
on common interests or goals. TheGlobe.com patterns, and advertising.
Virtual Often added to other models to Community members benefit
Community increase user value and gather through access to information
detailed user information. such as product reviews by
Many-to-many interactions trusted peers.
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