VS Partners LLC

This week Borders Group filed for Chapter 11 bankruptcy protection.  I can’t help but wonder, why didn’t they do more to fix their business?  Didn’t they see what the future held?  After all, more than any other bricks and mortar book merchant, Borders saw what happened to their music sales as purchases shifted to iTunes.  Shouldn’t they have learned their lesson and aggressively retooled their business strategies?  Yes, they should have, but the fact is, they didn’t.  Instead, Borders did the exact opposite and entrenched themselves further in their core superstore format.  Finally in July 2010, over three years after the Kindle was introduced, Borders opened up their e-bookstore.  Talk about being late to the party!  Certainly their slow response on e-books was not their fatal mistake, but it’s indicative of poor strategic thinking.  The truth is, Borders had a long history of strategic mis-steps and bad decisions that led to their bankruptcy (for a detailed timeline of Borders woes, check out this article – Borders Mistakes:  Chapter by Chapter), but the late move to e-books seems unforgivable.  How could they have been so out of touch?

Unfortunately, it’s pretty easy to see how Borders and other big companies like Blockbuster, Ritz Camera, and Circuit City have lost their way.  My guess is that they fell victim to human nature, and if we don’t watch out, we can too.  One of the basic traits of people is we hate bad news.  In fact some CEOs and business owners refuse to listen to it – they’d rather kill the messenger than deal with it.  Or sometimes, if they do listen, they try to convince themselves that cheaper, short-term fixes address the problem.  At best these minor changes just cover things up while the real, underlying issue continues to fester and cause decay.

So how can you prevent yourself from falling into these traps?  The answer is to be ruthlessly honest about your business and to stop ignoring problems.  Even if the issues threaten the very core of your business, ignoring them is not the solution.  The best companies out there have a vision, constantly reinvent themselves, and develop products or services with a strong, sustainable competitive advantage.  If you don’t have a vision for where you are going, take the time to develop one.  Uncover your core competencies that can be leveraged in new arenas if a certain aspect of your business is going away.  Also, be aggressive and test new growth engines and explore new ways of doing business.  The key word here is TEST.  Yes, tests will cost money, but they don’t require you to bet the bank.  If Borders had been testing an e-bookstore platform when they saw the Kindle launch, they would have been in a better position to respond quickly.

So learn from the lessons of Borders et al and don’t allow yourself to be complacent.  Getting your business back on track can be a painful process, but I promise, ignoring it will only lead to much bigger heartache.

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The world of  the written word is undergoing a revolution unlike any it has seen since Johannes Gutenberg invented the printing press in 1440.  Yes, a battle is brewing in books, and Google just made it bigger with its long anticipated début of the Google eBookstore this month.

For the skeptics out there that mutter, “Who cares!  eBooks are going nowhere!” I say, “Get your head out of the sand!” The latest statistics tell a very different story.  The Association of American Publishers reported that eBooks now make up 9% of total consumer book sales.  That’s compared to 3% at the close of 2009.  eBook dollar sales topped out at $263 million in 2010, nearly triple their 2009 level.  And, further proof of the eBook tipping point came in October when Amazon reported that its customers bought digital copies of its top 10 best-selling books twice as often as the hard copy. [Source:  Top Trends of 2010:  Growth of eBooks & eReaders by R. MacManus, 12/24/10]

As the BIG 3, digital behemoths line up for this battle, they each bring their respective strengths and weaknesses to market as the chart below illustrates.  Certainly there is no clear heir apparent, but to survive, some obvious moves must be made quickly.

For example, Apple desperately needs to expand its content.  If iTunes has taught Apple anything, it has impressed the value of content on the consumer experience.  Why else would Apple advertise the recent addition of the Beatles to their iTunes library? And for Amazon to stand a chance, it’s going to have to recognize the importance of the ePub format.  Right now Amazon is the odd man out, and given the growing support for an open standard format, if Amazon doesn’t get on board, they may find themselves left out in the cold like a modern-day Betamax.  Finally, Google needs to raise the ante.  So far their entry seems more like a test than a real effort.  But, if Google can improve their eReading apps, they certainly have the marketing and advertising muscle to drive consumers to their eBookstore!

Knowing your competitive landscape and doing a market segmentation is always critically important.  Have you invested the time and energy to really understand your the market and your competition?  And if not, can you afford to keep ignoring it?  Great business strategies depend on a solid understanding of the battlefield.  Make sure you don’t caught surprised.  Just look at where Blockbuster and Hollywood Video have ended up.  Not paying attention to your competitive landscape can be a fatal move.

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