Or, thoughts on Barnes & Noble versus Amazon, Internet disruption and the iPhone
The New York Times Business page is really stepping up its coverage of how digital disrupts, or has disrupted, the world of business. There were three articles alone in yesterday's paper that resonate deeply in the aftermath of the Kodak bankruptcy. There's no better place to start than with an interview with Harry West of Continuum, an innovative design consultancy. He has some good insights regarding business and the future: here's a few.
"I think it was Roy Amara, who said about technology, “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” And I think the same applies to change within an organization."
"I think in most companies you’re surrounded by the past. This is true for most of the companies that we consult with. And, to some extent, I’ve realized it’s true for us, too, because you can look back and see what you have done. You may have a Web site or archives or a lobby that sort of shows off your work of the past. The future is not as tangible. It’s not as clear, and so there’s always a tendency for people to go: “Well, I know the business we’re in because I can see it. I see it every day. That’s the business we’re in, right?” Well, that was the business you were in."
"Right now we are in the process of inventing the business we will be in. When people see that, it takes off. But until people can see it, until it’s in some way real and relevant to them, they don’t know what they can do to be part of it."
Smart man. In a cruel coincidence there was also an article on Barnes & Noble and its beleaguered CEO, William J. Lynch Jr., titled Barnes & Noble Taking on Amazon in the Fight of Its Life. The big difference between the approach that these two CEO's are taking is obvious; Harry West is refusing to look back and also realizes that he has to "invent the business we will be in." He speaks, or ought to be speaking, to all business leaders when he says that. William Lynch, unfortunately, has decided to spend money in the present to fix the problems of the past. He wants to have his cake and eat it.
Simply put he wants to maintain the Barnes & Noble bookstores, keep book publishers happy and fight a battle against Amazon and its Kindle e-Reader by developing more versions of the Nook. I would argue that it's an impossible task. B&N shareholders seem to think so too, the stock is down 17% in January.
Here's one problem - the publishers and what they desire:
“For all publishers, it’s really important that brick-and-mortar retailers survive,” said David Shanks, the chief executive of the Penguin Group USA. “Not only are they key to keeping our physical book business thriving, there is also the carry-on effect of the display of a book that contributes to selling e-books and audio books. The more visibility a book has, the more inclined a reader is to make a purchase.”
A question: Why should he save the book publishers with his own shareholders money?
Here's a bigger problem:
Barnes & Noble’s stock closed on Friday at $11.95, putting the value of the company at $719 million. Amazon’s shares closed at $195.37, valuing Mr. Bezos’s company at $88 billion.
Another question: How can a company worth $719 million compete with a company worth $88 billion? And one that already has about 60% of the e-book business, not to mention a huge percent of the printed versions. And then there's the shareholders, a good many of whom are institutional. They drove down the price of B&N stock when Lynch suggested spinning off the digital business. Lynch is right when he says "shareholders seemed to be underestimating the Nook’s potential." The Nook might just be able to compete in the e-reader category as it already has a 27% share of the market.
Yet Mr Lynch can't compete, with the Nook as the backbone of his digital strategy, by also attempting to shore up B&N's retail stores and also helping to keep book publishing companies in business. Check this out for an inane-statement-of-the-year-to-date award:
Carolyn Reidy, president and chief executive of Simon & Schuster, says the biggest challenge is to give people a reason to step into Barnes & Noble stores in the first place. “They have figured out how to use the store to sell e-books," she said of the company. "Now, hopefully, we can figure out how to make that go full circle and see how the e-books can sell the print books.”
And there was one device that wasn't mentioned in the article - the iPhone [the iPad was dismissed as no threat to bookstores by Mr Lynch.]
Which brings me to the last article - Blackberry Aiming to Avoid the Hall of Fallen Giants.
It starts with this classic Kodak Moment [Pun intended..] from Mr Heins, the Blackberry maker RIM's former CFO, now its CEO:
“We make the best communications devices in the world,” said Mr. Heins, who met with editors and reporters from The New York Times on Friday. Not everyone feels the same way. Over the last year, RIM’s share price has plunged 75 percent. The company once commanded more than half of the American smartphone market. Today it has 10 percent.
The article goes on to list some giants of technology past; the Sony Walkman, the Polaroid Land Camera, the humble Pager and the Palm Pilot. When you consider the demise of those products, one word comes to mind: iPhone. Mr Lynch should never underestimate Apple.
The curse of knowledge lurks in every institution.
Meanwhile: Businesses Look for a Blackberry Substitute.