UK: DORLING KINDERSLEY'S LIMITLESS VISION.

The commercial and the creative are inseparable, images are as crucial as words - DK thrusts ahead by turning publishing practice on its head.

'The book is dead' proclaims a cheeky placard just outside the boardroom of Dorling Kindersley Holdings (DK) in one of the company's friendly Covent Garden offices. Inside the boardroom, however, the prospects for the book seem less revolutionary. True, a computer stands ready to demonstrate to users the animated wonders of Dorling Kindersley CD-Roms, but the light streaming through the high Georgian windows also falls upon a colourful display of the company's books stretching along the white shelves - tomes crammed with accessible practical information for adult readers and with entertaining enlightenment for children, illuminated with glowing pictures and photographs, punctuated with cross-sections and maps, with every page ingeniously designed to lead the eye from text to image and from diagram to detail.

Such DK books sold an astonishing 40 million copies in the year to end-June 1996, so the book is evidently far from dead within the DK business itself. But it is DK Multimedia which is the group's fastest growing division (sales of 800,000 copies in only its fourth year, turnover up 62% on the previous year to £21.1 million, or 12% of the group total) and which makes City analysts' pulses beat faster. And Peter Kindersley, chairman, chief executive and co-founder of the company, likes to stress that his interest lies in making information compelling and communicating it most effectively, through whatever medium.

Kindersley's enthusiasm for multimedia burns bright, especially for its potential in stimulating children's curiosity and for competing with the distractions of television or computer games. Unlike more traditional publishers, he expresses no reverential allegiance to the book as such, pointing out the enormous advantages a computerised database will have over 20 leather-bound encyclopaedia volumes, particularly once the PC becomes less bulky. 'Just as the car was invented just in time to save us from being buried in horse manure,' he says, striking a robust analogy, 'so now we have the computer to relieve us of the enormous problem of the vast quantities of information bearing down on us in the modern world.'

Dorling Kindersley is certainly a revolutionary company in other ways, too - especially in the context of British publishing, although it must be said that this is not the context in which Kindersley himself views the company. 'I don't feel myself connected with British publishing. DK is not a service to authors. It is a book creation and sales business.' As such, it is based on turning many publishing assumptions and practices on their heads.

For one thing, its publishing is market-led, a concept which would be anathema (or indeed impossible) to most publishers. DK does not publish on a hunch or bring out a vast list of titles in the hope that some will strike it lucky. On the contrary, titles are created only after extensive market testing, both with major booksellers and with overseas publishers: DK sent 60 staff to around 14,000 prescheduled meetings at this year's Frankfurt Book Fair, for example, to bring back a comprehensive and detailed world view of prospects for titles. The DK list, meanwhile, of around 90 adult books and 170 children's books a year, is but a fraction of what other companies the same size publish. Indeed, many publishers bring out as many books in one year as DK has in its entire 22-year history.

For another thing, while most of the bigger publishers have to select which of their titles they will promote whole-heartedly and which will be left to fend for themselves or find their way to the remainder piles and shredding machines, at DK each and every title will be promoted as a potential bestseller in the UK and the US. Elsewhere in the world, the company's foreign rights sales team sells not just the latest titles but extensive reprints and new editions. 'I've always believed that selling is the most important part of the process, and that selling round the world must come first,' says Kindersley (adding that this obviously presupposes a quality product). The result of the DK approach is that a remarkable 90% of the titles it has ever created are still in print; that sales to date average around 250,000 copies for an adult book and over 150,000 for a children's book, which is hugely in excess of the industry norm; and that 77% of sales arise outside the UK, across over 90 countries and in 40 languages, which is unique.

Then, too, the company was a pioneer in the use of new technology for designing and producing its books; and it ventured boldly into CD-Roms when the market was still very much terra incognita. It has been enterprising in other ways, too, such as its vigorously eclectic approach to opening up new sales channels, whether through Boots or garden centres or party plan direct selling, rather than relying solely on traditional bookshops.

So while most British publishers through the 1990s have been wringing their hands over the recession and shrinking their staff numbers, DK has been expanding sales, profits and employee numbers at a very healthy rate. Turnover has risen steadily from £42.8 million in 1991 to £174 million in 1996; pre-tax profit over the same period has gone up from £3.7 million to £17.4 million (albeit with a slight dip in 1994). Employee numbers, meanwhile, have jumped from 370 in 1991 to 1,600 today (although this figure includes around 400 freelancers).

Group managing director Rod Hare remarks that the compound growth rate of over 25% over the past three years has exceeded the 20% the company has aimed for: 'We are actually ahead of our strategic plan'. Amid all the whirligig of innovation and expansion, however, the culture and the principles of the company have stayed remarkably constant; and, to the outsider at least, DK still seems to have the buzz of a small, entrepreneurial company. 'We try to keep staff in smaller groups - four or five on a book (always with editor and designer working together) and up to 20 on a multimedia project,' Hare explains. 'That way they don't feel they're in some huge corporation.' They can see the impact of their own 'personal input' into a project, and their own names in the list of credits. They know the company's absolute and unstinting emphasis on quality of production: DK spends what experts agree is significantly more than its competitors (£1,200 per page for the average book, and £250,000 to over £1 million on entire projects, whether CD-Rom or book); it uses the best authors; and it gets the imprimatur of leading institutions like the Royal Horticultural Society or the British Medical Association or their overseas counterparts to add to the authority of the work. Staff also know their finished projects will be marketed to the hilt. All this, combined with the sheer interest of the work and the energies of youth (the average age being 31, and just 27 in the multimedia division), seems to evoke a remarkable sense of commitment, and a willingness to work round the clock and through the weekends, if need be.

Despite its rapid growth and its success, thus far, on the stock market (where it is now valued at £360 million), the company lives very leanly, with no sign of executive ostentation. The Kindersley family's interest in the company, of 32.7%, is worth around £120 million, but Peter Kindersley still shares an office and usually cycles into work. Directors fly economy class (and they have to fly a lot, given DK's international spread); like their staff, they also work very hard, and seem to love it.

Author of the DK vision is Kindersley, whose gentle manner, one imagines, conceals a rather more steely will. An idealist and enthusiast on the subject of the universal quest for education and self-improvement, given to quoting Chinese proverbs and, so it is said, snippets of Kant, Kindersley is also evidently possessed of a clear-sighted business mind. He spent his childhood in his sculptor father's studio, whence he traces his fascination with the crafts and 'how things work', later graduating from the Camberwell School of Arts and Crafts. The essential DK design principle is his - the belief that words and images (and more recently video, sound and animations) should work together on an information-packed but carefully designed page (or screen). With this in mind, editor and designer should collaborate from the start: 'Publishing the world over is dominated by Oxbridge or its equivalent - people who are primarily verbal. Yet in the real world we learn by doing and by eyesight more than the other senses,' he insists.

Kindersley also refuses to separate out the commercial from the creative: 'I see the whole company as a creative business. I am as interested in sales and management as in the design and creation of the books.' Although he leaves the operational side to others - first, to co-founder Christopher Dorling, and recently to Hare and finance director Peter Gill - Kindersley insists that 'there is nothing in the business that does not interest me', and it rings true.

He had originally thought of becoming a painter, he says, but turned instead to publishing, working at Mitchell Beazley as art director in the early 1970s. There it was that he conceived his ideas of high-quality, highly illustrated practical reference books, which would explain principles, skills and techniques through text, diagrams and illustrations to a degree not previously seen, and which would be marketed worldwide so that prices could be kept level with the less well illustrated competition. Traditional publishers were not interested in the idea so in 1974, after an 'unrelated disagreement' with Mitchell Beazley management, he and Dorling - a cartographer then working as a salesman at Mitchell Beazley - set up business in the back room of Kindersley's modest south London home. They had £10,000 capital between them, plus a further £10,000 available as bank loan on the strength of the Kindersley house.

As with any new company, but with publishing in particular, cash flow was critical: it is only too easy to go bust by printing long runs of titles, piling them high in warehouses and waiting for orders from the bookshops. Kindersley and Dorling started by preselling the licence to titles to other publishers, rather than publishing in their own right.

This way, they earned a lower margin, but could organise advance funding and leave the publisher to take the risks.

Having prepared samples for their three initial titles - examples of the DK page in all its informative and illustrated glory, a dummy book, and flow charts to explain the entire content - they set off to New York.

Thinking internationally inevitably meant they first had to crack the US market, the biggest in the world. Their break came when publishers Alfred A Knopf Inc bought the rights to all three titles, ordering 50,000 copies of each - roughly the amount needed to break even. They then sold the rights to publishers for translation in other countries, and despite a fire at their printers in August which destroyed all the proofs, they managed to bring out the books in time for Christmas.

Two of the titles broke even but the third, The Book of Photography by John Hedgecoe, went on to sell a million. The company was on its way.

Through the 1970s, several other titles reached the million mark. By 1982 the company was financially strong enough to start publishing under its own imprint in the UK, bringing out The First Aid Manual as its first title: this is still selling strongly (five million copies in 22 languages at the latest count). Later that year, it also published the Family Medical Guide, the company's best-selling title to date, which has now sold over six million copies in 15 languages.

In 1987, the company expanded into children's books - beguiling, colourful volumes with the typical crisp DK images on a white background, designed to educate and amuse in equal measure. (Today, children's books account for 33% of total turnover.) The same year, Christopher Dorling retired, selling his 50% share in DK to Reader's Digest. This proved to be less fruitful an association than hoped for, and by the end of the decade Kindersley was looking for an alternative publisher to take up a stake.

Then, in 1991, along came a representative from software giant Microsoft, wanting to buy the rights to publish one of DK's titles in CD-Rom form.

Kindersley wrote to founder Bill Gates, who promptly invited him to Seattle.

The upshot of the encounter was that Microsoft bought a 26% share in DK.

This link-up seemed eminently promising, since Microsoft had the software for CD-Rom production, while DK had the potential content - a vast and constantly expanding library of images and bite-sized chunks of information.

'It seemed natural to us that they should take our books and use their technology to do what we were trying to do anyway,' comments Hare. But the apparent promise of this DK-Microsoft alliance was not fulfilled.

The fledgling DK Multimedia division created its first CD-Rom title, Musical Instruments, for publication by Microsoft - but there, effectively, the collaboration ended. 'It became obvious to us - and it was Peter's decision - that we wanted to be a multimedia publisher, not a developer on Microsoft's behalf,' says Mark Van Weelde, deputy MD of the multimedia division. 'Microsoft, meanwhile, had its own ideas of what it wanted to publish.'

So the two companies went their own ways. In 1992 DK staged its highly successful flotation: shares jumped from the offer price of 165p to 213p on the first day of trading. By November last year, when Microsoft placed its share (diluted to 18% after the flotation) with the institutions, the share price had reached over 500p, so from that point of view it was certainly a profitable investment. Meanwhile, the DK multimedia team learned for themselves how to make CD-Roms, launching its first list in 1994.

'We develop all our titles in-house, unlike other publishers,' says Van Weelde. 'We're building a strong brand, with the true DK look and feel.' Also in true DK style, output is tightly focused - on family reference works and early learning - and limited to just 12 titles a year. 'Multimedia is very resource-intense, in terms of people, equipment and money,' stresses Van Weelde. Four of the latest titles, out for Christmas, include an on-line link to a web site on the Internet - one click and you're through (free of charge) to the equivalent of a readers' club.

The Dorling Kindersley CD-Roms consistently win high praise in reviews, and DK is also one of the very few multimedia companies actually making money. However, not everything is rosy. In the US market there has been aggressive undercutting in price from multimedia publishers Softbank and Broderbund, ahead of a launch by Disney at a rumoured retail price of $20 or £13.50 (compared with DK's average of $39); there are too many titles competing for limited shelfspace; and there are too many multimedia developers, because finance has been easy to come by. Yet stockbrokers James Capel comment that within the difficult environment of the US, 'We continue to believe that DK has one of the best product offerings and that it will be a long-term winner in this market'.

Van Weelde for his part points out that, unlike the other US publishers, 80% of whose sales are domestic, DK makes only 40% of its multimedia sales in the US. Furthermore, only 60% of that comes through retail outlets, the remainder coming from direct selling into homes and schools by DK Family Library and from 'bundling' (the supply of CD-Roms as part of new computer packages to such companies as Apple, Compaq, Sony, Gateway 2000 and Intel). DK's international coverage (publishing partners in 16 countries and exclusive English language distributors in four others, and 32 translated editions by mid-year) is part of its appeal to the original equipment manufacturers. And overall, the growth prospects for the CD-Rom market itself are promising: Intel has forecast that there will be 55 million homes with CD-Rom capacity by the end of this year, and 70 million by the end of 1997.

Meanwhile, although multimedia has attracted most attention, other investments in new business areas came thick and fast through 1991 and 1992. The group set up DK Inc, to publish under its own imprint in the US, established a large cartography team to build up a mapping database and, the company hopes, to build on the success of DK's Travel Guides and World Reference Atlas, and to become a major player in the atlas market. It launched DK Vision, a small team that produces video and television programmes, which not only reinforce the DK brand but create moving images, and it set up DK Family Library (DK Family Learning in the US), the direct selling channel, as well as DK Education which produced educational kits. Of these investments, only the last has proved unsuccessful. School budgets in both the UK and the US were tight, explains finance director Peter Gill, and what money there was had to be spent on the curriculum. The division was phased out after 18 months.

DK Inc, on the other hand, has been the main force behind the company's growth in recent years. Overall US turnover in 1996 increased by 41% to £66.6 million (38% of total sales), a doubling in two years. 'By focusing all our efforts on all our titles, and using our own sales force, we get synergistic benefits,' explains Gill. Still primarily a sales and marketing company, DK Inc is now starting to create its own titles, and has just recruited three leading editors from Orchard Books. 'To work with the top American authors, you need top American editors,' says Hare.

The DKFL direct selling network, meanwhile, aims to reach the 'huge numbers of people who don't go into bookshops', says Hare, 'people like mothers with young children'. It now has 8,500 commission-only representatives in the US and 7,500 in the UK; and has just launched a network of 100 in Australia. It also has a network of 80 in Russia, to overcome the extreme limitations of the retail outlets there. Russians are highly educated and interested in children, says Hare, while widespread unemployment makes it easy to recruit for direct selling.

'In the early stages, we concentrated on building up the network,' says Gill. 'You can have housewives at the bottom, but at the top you've got to have experienced managers to drive the business, people who have already built up networks, who make their money and support their lifestyle this way.' Direct selling needs careful managing: it is, he explains, very sensitive to discounts in the trade, for example. But 'as the networks mature, we can steer them: they are tailor-made for selling CD-Roms.' Encouragingly, DKFL turnover in 1996 of £16.5 million (up 76%) was achieved without hitting trade sales, thus genuinely widening the market. The company is now planning further direct selling operations in South Africa and India.

It is also pondering whether to publish under its own imprint in countries other than the US and UK. Comments Gill: 'The US was obviously the logical place to start because of the language and because it is the biggest market.

We have also seen good growth in licensing in other countries, and opened new markets in South America and the Far East. But we have found in the more mature markets (in Germany and France) that, while the macro-economy hasn't helped, we may have reached the point where just creating new titles will not bring growth.' Establishing a presence as publisher could be the answer. The company now has its experience of US to draw on: 'We have seen the cost profile, the areas to support.' But the matter is far from simple. Apart from the fact that the licensing income stream falls away for the first couple of years, there is the issue of translation, and the fact that some series have already been licensed and cannot be stopped halfway. In addition, the German market is very conservative, while the French is notoriously idiosyncratic. Would it be best to set up joint ventures with leading local publishers? The debate continues.

Since last year, the group has also made small acquisitions in areas where it has no expertise of its own. Last year it bought Henderson, which publishes for the children's self-purchase market ('pester purchase' or pocket-money books). And in October this year, it bought Hugo Language Books, for £1.2 million cash.

Kindersley sees 'no limit' to the geographical scope for the company since, 'It's no longer a luxury to have an education. It's an absolute necessity in this competitive world.' Closer to home, it seems that - at long last - the UK book trade is holding out hopes of a good Christmas.

And stockbrokers BZW are projecting overall sales growth for DK of around 17% for 1997 and 1998, driven not only by the expansion of DK Family Library and by new multimedia titles, but also by new book titles, such as the mammoth RHS Encyclopaedia of Gardening. Despite the slogan, it seems the book is not dead, not even sleeping.