The New York Times carried an ominous story this week on the souring outlook for Barnes & Noble’s Nook business, portending perhaps its exit from the e-reader and tablet markets. The Nook’s decline comes despite its technical competence and the recent infusion of $600 million of capital by Microsoft.
As the Times notes, “going into the 2012 Christmas season, the Nook HD, Barnes & Noble’s entrant into the 7-inch and 9-inch tablet market, was winning rave reviews from technology critics who praised its high-quality screen. Editors at CNET called it “a fantastic tablet value” and David Pogue in The New York Times told readers choosing between the Nook HD and Kindle Fire that the Nook “is the one to get.”
Unfortunately, high marks from pundits didn’t translate into sales. Nook sales stalled over the Christmas season, losses mounted and profit and revenue guidance has been reduced.
The Times article shares this explanation: “In many ways it is a great product,” Sarah Rotman Epps, a senior analyst at Forrester, said of the Nook tablet. “It was a failure of brand, not product. The Barnes & Noble brand is just very small.”
I beg to differ. The Nook’s problems go far beyond B&N’s brand strength. There are three fundamental reasons for Nook’s failure that have implications for any company (and eventually this means every company) facing technology disruption:
2. Disruption redux
More broadly the Nook story is yet another example of how disruptive technologies transform value chains, destroying incumbents who no longer create value in the new industry order. With the advent of e-reading devices and digital publishing, book retailers and publishers are severely threatened. We’ve been to this dance before in the music industry, where incumbent retail leaders were essentially wiped out.
For a variety of reasons, bookstores (if not the Nook) are likely to survive for quite some time, but only at a fraction of their former scale.Was B&N’s decline inevitable, given the transition from print to digital books? One could ask the same question of Amazon, whose dominance of book sales on amazon.com was equally threatened by e-reader technology. But to Jeff Bezos’ credit, Amazon chose to disrupt itself by aggressively launching the Kindle business, which quickly established itself as the dominant digital book platform. By the time B&N responded with its own Nook devices and e-bookstore, it was too late.The willingness to disrupt one’s own core business before someone else does it to you is a hallmark of inspired leadership.
3. Stuff Happens! What’s up with Microsoft?
As a play on the well known adage, “Disruption Also Happens”! In every industry, the question isn’t whether but only when. The only way to survive and prosper through successive waves of disruption is to be the disruptor, not the disruptee!One would think Microsoft would have learned this lesson by now. Over the past decade, Microsoft has managed to miss five of the most transformative disruptions in the high tech sector:
Bottom line: Serial innovation is the only proven antidote to the accelerating pace of disruptive technologies. It certainly looks like Barnes & Noble and Microsoft have not been up to the task.
After 40 years in management consulting and venture capital, I joined the faculty of Columbia Business School, teaching courses in business strategy and corporate entrepreneurship
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