From the ten-year chart of Amazon.com's stock, a clear upward trajectory can be discerned from the days of financial panic in the last quarter of 2008 even in spite of the plateau in mid-2010. On May 10, 2011, AMZN was trading at around $204 a share. At the time, Amazon's new "cloud music" service was said to be behind the surge. In general, the general uplift since late 2008 can be ascribed to the company being on the right side of the computer technology changes that were transforming not only industries, but modern society itself. As Amazon.com was benefiting from its move into music, Microsoft was buying Skype for $8.4 billion in order to get into communications. The hefty price tag can itself be taken as a confidence vote in the continuance of the technological shift as well as the value in moving to a new, hybrid industry model rather than limiting the company to its existent industry model. In other words, even in companies facing a serious technological threat in the business-environment, even top managers can fail to adopt a broader perspective within which the threat can be seen as an opportunity to change the company and even its own "micro-climate," or immediate industry. Hence by 2019, Borders no longer existed whereas Amazon was still profiting. Even the dinosaur McDonalds had tried to shift into a hybrid coffee-shop/restaurant industry model.
10 year Amazon.com stock chart from Investorguide.com
Almost a decade earlier, in 2011, Borders had found itself holding paper books, music CDs and movie DVDs even as e-readers such as Kindle, on-line music in Cloud--both at Amazon.com, and on-line delivery of movies at Netflix were growing by leaps and bounds. To be on the heels of momentous technological change is very different from riding the crest of its wave.
Rather than fighting gravity itself, Borders executives would have been smart to pivot off reliance on the antiquated forms to expand on the one area that was not doomed to replacement--namely, Borders' cafe. Borders strategists would have been wise to think beyond a narrow conception of a particular industry sector. Rather than looking over at Amazon.com and Netflix, Borders executives could have studied why McDonald's was engaged in a $1 billion face lift designed to move the restaurants closer to Starbucks, a place where customers could buy a beverage, connect to wifi, and read material on the internet. In other words, Starbucks was expanding its food products (even going into consumer packaged foods in grocery stores) while McDonald's was moving closer to the coffee house model, a hybrid restaurant-coffee shop, just as Borders was clinging to paper books, CDs and DVDs rather than forging a new, hybrid industry for itself.
Were Borders executives to have spoken to their customers, perhaps the suits would have discovered that being able to get a latte and some food, find a comfortable seat, and spend an hour or so looking at magazines and books were a significant part of the "Borders experience." Rather than being viewed as a way for customers to evade buying books, the customer experience could have been given more priority in Borders' business strategy.
More tables and comfortable chairs could have been added in the stores throughout the store; this would play on a strength that was not so much at odds with technology. In fact, flat screen televisions could have been mounted in the expanded cafe area of a store, while other areas remained quiet. Expanding on drink and food products--even going into premium products--would have enabled Borders to capitalize on an existing strength, using it to sell--even integrating technology with it. For instance, ebooks could have been linked; customers could perhaps have been able to "rent" ebook readers and a timed access to read from or even peruse the books.
More tables and comfortable chairs could have been added in the stores throughout the store; this would play on a strength that was not so much at odds with technology. In fact, flat screen televisions could have been mounted in the expanded cafe area of a store, while other areas remained quiet. Expanding on drink and food products--even going into premium products--would have enabled Borders to capitalize on an existing strength, using it to sell--even integrating technology with it. For instance, ebooks could have been linked; customers could perhaps have been able to "rent" ebook readers and a timed access to read from or even peruse the books.
Of course, no strategy is problem-free. Increasing food and drink around books could mean that more customers would render books unsaleable by spills or smears on the pages. Also, customers could have spent time in the stores only to read paper books and magazines for free. Retaining books could therefore have been difficult financially even if they contributed to the in-store experience.
On the other hand, the strategy could have meant that Borders would eventually have been able to compete directly with McDonalds and Starbucks even as links are made with Amazon.com and Netflix. The "free use" risk would decrease as the food and beverages, as well as paid access to material via technology become more prominent in terms of revenue. In short, Borders could have morphed into a "hybrid" industry-wise while gradually departing from the traditional book-and-mortar bookstore model to capitalize uniquely on the evolving technology.
On the other hand, the strategy could have meant that Borders would eventually have been able to compete directly with McDonalds and Starbucks even as links are made with Amazon.com and Netflix. The "free use" risk would decrease as the food and beverages, as well as paid access to material via technology become more prominent in terms of revenue. In short, Borders could have morphed into a "hybrid" industry-wise while gradually departing from the traditional book-and-mortar bookstore model to capitalize uniquely on the evolving technology.
In general terms, companies cannot long afford to be behind the curve while a relevant technological change is altering how customers prefer to get or use the products. The managers would do well to think beyond the steady industry in which they have been comfortable to consider more broadly how the new technology could be integrated even in creating a hybrid or new industry. Amazon.com has clearly been a beneficiary of "high tech," so there was no need to shift from a status-quo industry to a hybrid; Amazon itself could be said to have begun as its own industry, and thus qualitatively different from Walmart and Target, two traditional retailers. Simply arranging loans of $50 million to pre-pay publishers was not enough for Borders; in fact, the response evinces a traditional rather than novel perspective.
Sources:
Amazon on Investor Guide
Bruce Horovitz, "McChanges," USA Today, May 8, 2011, p. A1.
See also Kit Eaton, "Amazon Sells More E-Books than Paper Ones," Fast Company, May 19, 2011.
