Lessons From Barnes & Noble: Surviving The Threat Of Amazon

Forbes

6 hours ago

When Amazon disrupted the bookselling business model in the 1990s, some established bookstores ... More folded while others persisted. The key to survival was in the so-called "opportunity framing" adopted by CEOs.
Words matter. When a company is faced with a disruptive new business model, leaders can respond in a number of ways: They may brush it away as unimportant, they may sound the alarm about it, or they may urge their employees to get creative and adapt to the opportunity. Each response impacts the actions the company takes. And that, in turn, can make or break the company's future.
In our research published in the Strategic Entrepreneurship Journal, my co-authors Christoph Zott (IESE Business School), Andreea Kiss (Lehigh University) and I shed light on a subtle but powerful driver of corporate survival in the face of disruption: how CEOs frame the situation.
Our findings stem from a study on the bookselling industry in the U.S. between 1996 and 2011. Throughout the 1990s, American bookstore giants Borders and Barnes & Noble ruled the industry with their megastores. But when Amazon came into the picture, with its new online bookselling model, both Borders and Barnes & Noble recognized the shift that it represented. Both invested in e-commerce. But only one survived.
What defined this fork in the road? It wasn't about money or access to technological solutions. It was about leadership framing of the new business model and the way it was sustained over time, which impacted the direction taken by the two incumbents.
The importance of CEO framing
When Amazon first launched as an online bookselling company in 1994, both Borders and Barnes & Nobel were at their prime. Hundreds of stores across the U.S. offered an array of books and music, with each company worth billions of dollars. But the emergence of Amazon's new business model (online-only browsing with fast home delivery) shook the two retailers' foundations. Each company responded in its own way: while Barnes & Noble worked continuously on integrating the online business model with its traditional store model, Borders focused on its physical stores and managed the online business model separately.
By 2007, Borders was no longer profitable, filing for bankruptcy in 2011 and closing all of its stores. Barnes & Noble managed to survive, with around 600 stores still operating in the U.S today.
Several factors account for the stark difference in the two competitors' journeys – among them, that Borders was late to invest in e-commerce and never properly integrated it into their physical stores. Those decisions, which determined the companies' futures, were largely propelled by the way each firm's CEO framed the new online model.
Barnes & Noble's CEO spoke about the internet as a transformative force and outlined concrete strategies like introducing in-store kiosks, integrating logistics systems and aligning salesforce incentives for in-store and digital sales. This sustained 'opportunity framing' galvanized internal support and led to what we call a blending logic of integrating online and physical stores. Borders, on the other hand, engaged in ambiguous and shareholder-focused framing. Its CEO framed the online model as a secondary, 'adjunct' business. What's more, Borders outsourced its online presence to Amazon for several years, foregoing an important learning opportunity for digital innovation.
Why language matters
Though rooted in bookselling, our findings can extend beyond the business of books. Today, one of the biggest disruptors is the introduction of AI into the workforce – whether it's creating images and texts for media or changing the way pharmaceutical companies do clinical drug trials. By looking at how legacy industries responded to disruptive business models in the past, we can extend those lessons to today's leaders so they can better navigate change.
It's particularly difficult for established firms to adapt to new, emerging business models because incumbents are often set in their ways. There's resistance to disruptive challenges, especially for companies with an existing commitment to a business model that works and has been working well for some time. In our research, though, we found that a successful adaptation requires CEOs to frame new business model opportunities in four complementary ways: intense (signaling excitement and growth potential), concrete (clearly articulating how value will be created), future-oriented (focusing on the future potential, not just short-term risks) and inclusive (involving key stakeholders like employees, customers and partners).
The key lies in persistence. Our analysis of Borders and Barnes & Noble shows it's not enough for a CEO to check those boxes once. What truly made the difference was sustained framing over time: repeated, emotionally resonant and specific communication that continually reinforced why the opportunity mattered and how the organization should respond. If a CEO wants to see real change in their organization, they need to engage in sustained opportunity framing, over the span of several years, in order to yield results and push the company forward.
Our research adds to growing evidence that language is a strategic tool, especially in times of disruption. This research suggests that leading through disruption is not just about vision or strategy; it's about sustained, multidimensional communication. By framing new business models as exciting, specific, forward-looking and inclusive of stakeholders, CEOs can help steer their organizations toward innovation, even when the future is uncertain.
By Yuliya Snihur, Associate Professor of Entrepreneurship at IESE Business School.