Friday, August 20, 2010

Barnes & Noble And The Nature Of Change

Remember black rotary-dial telephones? Heck, maybe that's too far back. How about 8-tracks? Wait, that's even further back. Okay, music cassette tapes? Vinyl records (oh, they're still around, but more as a niche product now)?

Okay, how about pagers? Analog cellphones that couldn't text? Er, um, even those typewriters I still like very much?

The earliest business example I can think of is the pony express.

The manufacturers of all these products, and the ones behind the pony express service, were all superseded by newer technologies. The newer technologies were better in different ways. Some were faster. Or perhaps cheaper. Others had more convenient or exciting features. Yet even others were easier for consumers to use or acquire. There was nothing wrong with the older technologies; they still did what they were designed to do. For example, I still can type my documents on my typewriter; that's what it was meant for anyway. But unlike on a computer, I can't change the font, or even its size. If I make an error in typing, I'll need correction fluid, which is more inconvenient than a backspace button. A computer can print out more special characters than a typewriter can, which is limited to whatever keys the machine comes with. The only advantage a manual typewriter may have over a computer is that it can still be used even during a power outage.

So this article, Barnes & Noble Didn't Evolve Enough, is really a case of history repeating itself. An excerpt:

How did Barnes & Noble (NYSE: BKS - News) fall so far so fast?

The giant bookstore chain, whose superstores once struck fear into the hearts of independent booksellers everywhere, put itself up for sale this month, rendering it the corporate equivalent of the remaindered books it sells at a discount.

The company said it made the move because its shares are undervalued, but to me there was an air of desperation about it.

The simple explanation for Barnes & Noble's decline is the Internet, which spawned Amazon.com (Nasdaq: AMZN - News), e-readers and digital books. But that didn't have to be the end for B&N, which had a dominant market position and should have out-Amazoned Amazon, leveraging its brand and innovating when it began marketing and selling books online.

I know exactly when B&N lost me as a customer. Some years ago, to compete with Amazon, B&N began offering free same-day delivery in Manhattan if you placed your order over the Internet by 11 a.m. I did so several times -- and not once did the books arrive when promised. Everything I have ordered from Amazon has arrived on time or earlier. Then came Amazon's game-changing Kindle, and instant delivery. Nothing I've read about B&N's belated rival Nook has tempted me to try it.

My hunch is that B&N never really embraced the Internet or e-books, tied as it was to the old-fashioned world of physical books and stores. As B&N focused on managing decline, a much more nimble Amazon could concentrate exclusively on the new world it was forming. B&N needed to destroy its business model to prevail. Now it is probably too late. There is a lesson for all businesses here.

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