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What every company should take from Barnes & Noble: a page from their corporate playbook

November 14, 2011 by Aaron Shapiro — CEO, HUGE

Time and time again we've seen the same story play out: An established industry player ignores digital and ends up in a fight for survival against a brash startup, empowered by a little user focus and unencumbered by the burdens of maintaining the status quo.

But last week Barnes & Noble did something to turn the tables. With the launch of the Nook Tablet and the announcement that it expects to generate $1.8 billion from the Nook line this year, Barnes & Noble did something that anyone who cares about technology and business should find inspiring: It became a technology company.

It built a product that can compete head-to-head with the Amazon Fire and the iPad (Amazon Fire on specs; the iPad on price). That's something HP, Samsung, Sony and a score of other technology heavyweights have all failed to do. Think about that. A company whose core business is in paper books is now in direct competition with the two best technology companies in the world: Apple and Amazon.

I'm not saying that the Nook is the greatest thing since sliced bread, or that it can beat the Fire or iPad. And I'm not even sure if the product will ensure Barnes & Noble's long-term future--after all, its primary business is still the declining business of selling print books in physical stores. But with the "bookseller's" new tech cred and revenue stream, it could stay relevant, survive, and even succeed. Compare that to Borders, its erstwhile competitor. It essentially watched the digital revolution from the sidelines while its business slid into bankruptcy--a chain of events I highlighted through a recent stunt.

Here's what Barnes & Noble did to transcend its would-be analog and fruitless future:

• The Right Management: Barnes & Noble hired William Lynch, an Internet executive who had previously worked at HSNi, IAC, and Palm, to run its digital operations. He was soon promoted to CEO--a radical move as he had no prior experience in the book business or physical retail.
• The Right Strategy:Management imagined a digital future where the products it sold (books, music, and video) were all digital, and saw themselves as a big seller of that digital content. Then they took a great risk to make it happen by building an organization that could create, market, and sell what became the Nook. This is no easy task. It means creating a new organizational structure, attracting new talent, and most importantly having a willingness to cannibalize the core business.
• The Right Leverage: Traditional companies have some things going for them that technology pure-plays lack, namely, "traditional" assets. The smartest companies leverage those assets to create a new solution that's superior to what the technology-only companies can produce. In doing so, they turn their business' legacy from a weakness to a strength. In the case of Barnes & Noble, it's their stores, which they're turning into giant showcases for the Nook, like mini, B&N versions of the Apple store. It's great for sales and customer service, and it's something Amazon cannot offer.

These are important lessons for any business leader. The only companies that have a chance of surviving the digital revolution must enter the technology fray and compete head-on. Of course, that doesn't always--or even often--mean the company needs to develop the newest gadget. More often it comes to life as a software business that's run as a companion to the core, existing business. In either case, though, the technology side must be built and run, as Barnes & Noble has shown. A digital-savvy manager must have enough influence to execute great, company-wide change based on a strategy where technology is used to increase the value and relevance of legacy operations.

When the world is run on software, the only businesses that will survive are technology companies. So learn from Barnes & Noble. Become a great technology company and own your future.

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