It's been a rough week for Barnes & Noble. And month. And year. And it may get worse before (if) it gets better. For those of you who have been in cryogenic sleep the last few weeks, here is a brief recap:
Barnes & Noble reported a fiscal fourth quarter loss of $188.6 million, over double what it was the same quarter a year ago, a feat accomplished by only a few other greats like MySpace, Enron, and the MC Hammer farewell tour. The Nook tablet was asked what it would like for its last meal, and William Lynch "voluntarily" removed himself from both the CEO post and the B&N Christmas Card list. Oh, and they are still planning on closing at least a third of their stores over the next decade. (Place your bets in Vegas on the over/under on the timing and number of stores.)
If we surveyed multiple astronomers on planet alignment, they may concur that B&N is preparing itself not to try and save the Nook Media, but to spin-in off, sell it, prepare for crash landing, etc. This speculation is supported when you take into account that the Nook tablets are going to be put to rest, and despite what the public is being told, these devices had to bring in a significant portion of the declining revenue stream. Underneath all of this, there has been a quiet exodus of talent from B&N over the last few months which is a huge red flag.
The biggest problem that Barnes & Noble has right now is time. Time is not its friend. It has a gunshot wound and the band-aids that have been applied will not save it, but will only slow its death. It is bleeding cash and without a decisive plan and talented people, even more things will begin to unravel.
So, now what? There is value in the Nook Media infrastructure, but transformative, strategic decisions will have to be made to turn this around. Here are a few ideas for Barnes & Noble (or whoever owns the Nook Media assets in the near future):
- Stop Trying to be Amazon - The "us too" and "strong number two" approach has to be ditched and replaced with a new strategic vision. In a street fight, don't ever go blow-for-blow with a bigger, stronger opponent in their own backyard. B&N needs to do what Amazon won't do, and most of it is related to their closed ecosystem. B&N needs to create an open ecosystem, which allows independent bookstores and anyone who wants to sell books to build into their infrastructure, via APIs, iframes, and other tools. Instead of asking publishers for money, build closer partnerships with them to help them build audiences, capture metadata, and establish new sales channels like corporate and special sales. Imagine IBM having an internal ebook library which leverages B&N books, a white-labeled reader and app, and community aspects. What if every author could leverage their own networks to drive sales and then gather data and users on their sales? In other words, B&N has to be willing to shoot any sacred cows and approach the digital world with a vision of supporting authors, partnering with publishers, and doing things Amazon is unwilling to do.
- Be Radical and Transparent - Anyone who is not playing in oncoming traffic on a daily basis knows that B&N is in trouble. Yes, there are those pot-smoking optimists who can't fathom B&N going the way of horse-drawn carriages, 8-track tapes, and VCRs, but the transition is already happening. Atari used to be a powerhouse. MCI Worldcom a behemoth. Lehman Brothers and Bear Sterns were household names. Barnes & Noble doesn't have to have its brand disappear, but they do have to start making some radical changes and being transparent about them. As good strength coaches will tell you, go two steps beyond what is comfortable. Instead of closing one third of the stores in ten years, close them this year. Tactically sift through your staff, cut all B and C level players, which may be half the company, and empower your A-level team to be decision makers. Anything that is dead-weight needs to be discarded, sold, or ignored. By making radical changes upfront, the market will adjust to all the news at one time, and new optimism can be injected with a fresh vision and leadership.
- Look Outside for Innovation - All great executives and entrepreneurs I know have adopted the mantra of "not invented here." Instead of trying to come up with every great idea and plan, they are constantly looking for talented individuals, great technology, and new ideas that can be mapped into their company. With all of the changes in publishing, there is more unencumbered strategic and technical talent floating around than ever before. Stealing a page from the Google playbook, they need to do acqui-hires, plan joint ventures, recruit entrepreneurs-in-residence (EIRs), and seed book ecosystems. They have been staring at the trees for too long and need to take a step back and look at the forest. Other companies and individuals who envision the same type of book future can help.
Nearly everyone I know in publishing is cheering for Barnes & Noble. But the clock is ticking. As a publishing and reading community, we need to realize that Barnes & Noble is not the answer for the future of books, but they can be a catalyst and significant player if their next steps are decisive and well played. Let's hope they are.