Kerry's Week 10 Application Assignment

Organizational Culture and Crisis Management: Barnes & Noble vs. Amazon

McCray, J. P., Gonzalez, J. J., & Darling, J. R. (2012). Transformational crisis management in organizational development. Organization Development Journal, 30(1), 39-52.

Since the focus of our instructional materials this week was on organizational culture and its impact on crisis management, I thought I'd look for an article that addresses how companies deal with crisis management on a somewhat smaller scale than the Columbia disaster. Since I am not a huge fan of Amazon (especially after my negative experience when ordering books for this class!), I found the above-referenced article on how Barnes & Noble, the leading bricks and mortar based retail book distributor, tackled the competitive pressure brought to bear on their organization by the book (and everything else!) online retail giant.

What few people know is that prior to 1992, Barnes & Noble was a private firm that printed, distributed and sold books in 68 B&N superstores, 720 B. Dalton bookstores and a number of smaller company-owned bookstore chains. When CEO Leonard Riggio decided to raise cash by selling B&N stock in an initial public offering (IPO), his goal was to grow the brand through vertical integration and store expansion. At the time, no one was giving the internet much thought as an outlet for retail book sales.

In contrast, Amazon founder Jeff Bezos's concept of selling books online could not have come at a better time. In 1995, the dot-com boom made it easy to raise start-up capital, especially for a 28-year-old Wall Street hedge fund vice president! Bezo managed to survive the subsequent dot-com crash by focusing on hiring the best and brightest creative and technical team that would provide customers with a great online experience and keep them coming back.

By the time Barnes & Noble saw the looming crisis in 1997, two critical years had been lost. Yes, the company quickly put together its own online presence--Barnesandnoble.com, a stand-alone firm--but by then B&N was relegated to playing catch-up with Amazon who was already established as the dominant online retailer of books. Barnes & Noble wisely chose to focus the bulk of its resources on remaining the dominant bricks and mortar retail bookseller by investing heavily in expanding the number of its superstores in the U.S. By also acquiring some technical internet-savvy talent, B&N was covering its bases and continuing to hold its second-place online bookseller position.

Where Barnes & Noble first ran into difficulty in managing the Amazon online threat was the fact that the recent shift to selling books online did not fit with the traditional B&N corporate culture. Additionally, even though Barnes & Noble was able to hurriedly put together an online presence in order to remain competitive with Amazon, its "new" technology was perceived by the high-tech community to be outdated when compared to Amazon. This perception made it increasingly difficult for Barnes & Noble to attract the type of technical talent necessary to move its online product forward to the point where it would rival Amazon's. Even with the 2000 launch of the refocused Barnesandnoble.com by Stephen Riggio (Leonard's brother), B&N still remained at least two years behind Amazon.

But would it have made a difference if the Riggio brothers had earlier paid attention to the growing popularity of online shopping, enabling them to be first in line to hire the most talented tech-savvy professionals? Would it have been Barnes & Noble, rather than Amazon, that became the dominant online retail bookseller? Or should the company have even tried to make a run at internet dominance or simply continued to fill the need for more traditional bricks and mortar retail bookselling, remaining true to its organizational culture?

The question in my mind is: Was the decision of Barnes & Noble to continue to focus on growing its bricks and mortar business while at the same time developing enough of an online presence to remain in the internet retail game a conscious one? Or was it the best response Leonard Riggio was able to muster at the time? Without having done any further research into the subject, my instincts tell me it's entirely possible that Riggio knew exactly what he was doing by recognizing that Barnesandnoble.com would never surpass or even equal Amazon as an online bookseller. Therefore, he put enough resources into the new technology to retain those of his customers who (like me) are attracted to the ease of shopping online but also like to go into a bookstore and touch and feel the books before you buy them.

Perhaps, when all is said and done, responding to a crisis doesn't have to mean coming out on top...it just means being able to adjust your strategy enough to stay in the game with your corporate goals and values intact. Which sounds exactly like what Leonard and Stephen Riggio did, in my humble opinion.