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Thomson Learning Adapts to Market
James Lichtenberg -- 7/31/00
Christie: Moving
with the times.
A decade ago, college publishing in the U.S. was a collegial community of some two dozen players. Today, it has been consolidated to about half a dozen intense competitors, dominated by three companies: McGraw-Hill Higher Education, Pearson Education and Thomson Learning. With enormous market reach, deep lists and very defined corporate cultures, each is following a different path to e-space. An interesting, acquisition-driven evolution is occurring at Thomson Learning, under the direction of its president and CEO, Robert Christie.
In February, Thomson Corp. announced it was divesting all of its newspaper operations, except the Globe and Mail, in the U.S. and Canada. The sale by the parent company has allowed Thomson Learning to make e-focused acquisitions that are unusual for a traditional college publisher. These have included Course Tech (offering online IT training) and Prometrics (providing assessment worldwide). In 1999, according to Christie, Thomson Learning made seven acquisitions for a total of $25 million. In the new millennium, acquisitions have reached more than $900 million to date, including about $700 million paid for Prometrics.

Christie underplayed the notion that there was any grand vision or strategy. "We just asked ourselves two questions: 'What do we want to be as a content provider?'Answer: 'Information to gain knowledge.'And two, 'Where do we want to play?'Answer: 'Where the learner has made a decision that education is important.'"

While Thomson Learning will remain a company that provides learning content, it will focus on customers from late high school to college age, graduate students, businesspeople and lifelong learners--those who consciously make choices about what and where to study.

Christie told PW five fundamental ideas drive the steps Thomson Learning is taking to become a powerful competitor in e-space. These five drivers are strategy, scale, solutions, speed and solvency.

The first, strategy, is represented by the two questions noted above, as well as by the restructuring of the old, multidivisional International Thomson Publishing--with a sprawl of famous names such as Wadsworth, Brooks Cole, Delmar and Southwest--into a streamlined, two-division company, renamed Thomson Learning. The elements that make up Thomson Learning are the Academic Group, which includes higher education, foreign languages and international higher education, under the direction of president Ron Dunn; and Lifelong Learning, embracing corporate training, business vocational education and IT training and certification, directed by president Bob Russell.

The second is scale. "Scale is crucial for survival," Christie asserted. "You have to own major market share in the various disciplines in which you compete. In the k-12 market, we are major players in information technology and business, but only had about 20% share in mathematics." So Thomson Learning divested that line of books.

The third is solutions. Since what every publisher offers is "information," Thomson wants to provide its academic/business/lifelong learning customers with what Christie calls "total solutions. We can provide all the tools necessary to help students answer the age-old question of 'what do you want to be when you grow up.'We want to provide these tools when they need it, and the way they need it."

The solution-approach has resulted in a series of acquisitions, including the testing company Prometrics--with some 4,000 secure testing sites in 141 countries--as well as the noted college guide publisher Peterson's, which already fields thousands of online courses via Regents Universities, and whose Web site receives 3.5 million student visits a month. "In other words," Christie explained, "we have moved from owning information to providing solutions to the needs of learners, whether this involves content, or assessment, or information about applications, programs, curriculum, whatever it takes for customers to improve their education or their careers."

The fourth, speed, is the realization that "in e-space, you have to move extremely quickly. There are only three ways to develop the necessary margins: organic growth, joint ventures and acquisition," Christie noted. "Attractive as organic growth might be, it is too slow in today's competitive environment. I have approved small acquisitions on a phone call. We now have a small department just for mergers and acquisitions reviewing five or six deals per week."

The fifth driver, solvency, may be the most important of all. Not just publishing, but all businesses are confronting the problem of how to finance the infrastructure investments that are required to move effectively into e-space. Christie noted that the answer is (at least conceptually) simple: "You need to find a related business that is already producing revenue, and you leverage it. This not only finances the changes you need to make in the traditional side of your business, but it creates patterns that you can use as you move forward.

"In our case, the biggest surprise," Christie observed, "was that the business world has embraced technology and online learning much faster than the academic world. Academia is trying to do distance learning, but within the old academic paradigm--semesters, traditional courses, the hierarchy of professors and the like. Whereas business understands the speed and cost-saving that online learning provides." Thanks in part to its aggressive acquisitions, Thomson Learning now offers thousands of online learning programs in corporate training, adult learning, testing and assessment. This area, growing at 40%-45% a year, is financing the transformation of the more traditional units in the company.

Preparing for Changes
Christie still believes that the future of educational publishing will involve providing extensive online databases in specific subject areas, from which professors will construct their learning materials, to be offered online to students anywhere in the world. "Textbooks won't disappear tomorrow. Whatever happens, you have to stay on the leading edge. And when universities wake up to their own potential to provide learning materials, they may offer a real challenge to publishers," he said. "You have to be able to turn on a dime as the market changes. For this you need a 360-degree view of the world. We are making strides, having fun, and we are also making a ton of mistakes. And if you fail, you learn from it and go on. Any acquisition, any move in a new direction, is, at best, a calculated risk."
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