Enterprise lessons

Lessons from Giants – When Lack of Innovation Destroyed the Borders Enterprise

If you’re just reaching this post, you should definitely check out the previous one, the first of a three part series, “When Lack of Strategy and Innovation Destroyed an Empire – Blockbuster.” We believe that learning from current and past enterprise giants is the way forward, and we’re sharing lessons with you as part of our ongoing goal of helping startups and enterprises.

As companies grow, especially from the startup phase, one of the biggest risks they face is the challenge of staying relevant and keeping up with the times. One of the most classic examples of a company whose lack of innovation led to a quick corporate death is Borders Book Group. The legendary bookstore, a haven for bookworms and children, originally opened in 1971 in Ann Arbor, Michigan, and closed its doors in 2011. A third of their 659 stores were closed in February of 2011 and by July of that year, the remaining stores were liquidated. Gone was the bookstore giant.

Failure to Foresee a Shift

“What happened to Borders?” is a question both enterprises and startups should ask themselves anytime they discredit a new innovation or technology, as a “fad”. Simply put, Borders didn’t see the value of the web and software development until it was too late, showcasing the importance of keeping up with the times. Borders thought they were making an epic decision when they outsourced all of their digital book sales to Amazon, yet in reality they ended up losing both market share and customers to the digital marketplace giant. Instead of increasing traffic to their own site and focusing on building their brand, Border’s handed over their market to a competitor who was already beating them out. As Carrie Johnson, Forrester Research Inc. analyst puts it, “It’s only gravy for Amazon… They’re already in the book business, they’ve eliminated a competitor and they will possibly get new customers and some incremental revenue.” Borders did not try to incorporate or test new technologies, did not run any Proof-of-Concepts with startups, did not aggressively pursue pilot as a service innovation and did not attempt to move forward with the shift towards web-based sales.

Enterprise LessonsBeyond lacking foresight to recognize the importance of playing in the digital space, Borders continued to discredit the importance of innovation by not focusing on the e-reader trend when it mattered most. Before e-readers became a must-have item in over 50% of American households back in 2014, Amazon launched the first Kindle in 2007, a product which sold out within 5.5 hours, signaling the start of a new era. From there, the introduction of e-readers to the market was quick; Sony launched the Sony Reader in 2008, Barnes & Nobles released the nook in 2009, and Apple released iBooks for iPads in 2010.

It was only then that Borders realized they needed an e-reader to stay relevant in the space, however it was too late to develop their own technology. Instead, Borders invested in Kobo Inc., an e-reader and e-book company and became a minority stakeholder, a move that could have been its saving grace… had it not been too little too late.

Coupled with too many stores to upkeep and a large amount of debt, Borders tried to hold on to their market share by making the same mistake Blockbuster did – up selling with different products to increase the basket value of the sale, but not strengthen their name as a leader in their field. Instead of positioning their brand as the best place to buy books, Borders entered into unsuccessful partnerships with music labels, becoming a hybrid entertainment store rather than a go-to bookstore.

Not being able to compete with existing music labels and record stores, being pushed out of the market by the very vendor they first turned to and being dominated by their largest competitor, made for a quick and painful death of Borders, a former book-store enterprise giant.

Lesson Learned for Enterprises

Simply put – innovation has the power to drive a brand to become and stay a market leader or crush a brand to its death. While everyone knows this deep in their hearts, the Borders Group case shows us that this is a reality enterprises need to be weary of. As technology rapidly changes on a seemingly daily basis, it’s important to understand that this is the direction the world is going in and failure to comply with innovation means ultimate death.

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The solution here is (our favorite) to collaborate; enterprises collaborating with startups ultimately creates a win-win for the companies as well as the end clients who enjoy the benefits. Whether a B2B or B2C business, an enterprise needs to constantly ensure client satisfaction or risk losing them to a competitor. The ability to merge with another company or acquire a new and innovative solution is the quickest way to implement a proven technology and leverage existing market power to scale quickly and reap rewards.