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If Video Killed the Radio Star…Who Killed Borders?

Mar 2011/in /by

I was so very sad to see the news that Borders is failing and has not being able to keep up with the digital era. I saw it with Tower Records — falling to iTunes and other downloadable music; Blockbuster  –falling to Netflix, and now Borders falling to…Amazon’s Kindle? Barnes and Noble’s Nook?

The top 3 comapnies we see in this industry:

-Amazon.com, inc.

-Barnes & Noble, inc.

-Apple inc.

There are many reasons as to why the bookstore giant is losing share, but at the heart they simply missed the digital trend and did not keep up with the rapidly changing industry. The lesson here is they are in a long line of businesses that failed to adapt to digital media fast enough and they will probably not be the last.

This same fallout happened in the movie rental industry, with Blockbuster going down for the count. In 2000, Blockbuster declined several offers to buy Netflix, for a now trivial price; ten years later they declared bankruptcy. Netflix now has more subscribers than the entire population of Australia, and the thought of driving to the store to pick out a movie seems archaic. The problem is that Blockbuster can’t keep up with mail delivery and Redbox type vending machines. (Full disclosure – I have been a Netflix customer almost from the beginning because I knew the management team so I am a little biased.)

This chart illustrates the effect that Netflix has taken on Blockbuster.

Also, Netflix streaming video, which was in their strategy from the beginning but which took a while to make reality is what’s making them #1. Netflix now accounts for more than 20% of the bandwidth in America during peak internet hours and it is going to get worse from here. With the flexibility of streaming to your PS3, Xbox 360, television, Nintendo Wii, iPad, Tivo, iPhone and more—it’s hard to beat the immediacy.

Tower Records also missed the mark in this age of downloading, and it cost them greatly. They prospered through the days of the cassette tape and compact disc—but when Tower didn’t react fast enough to the decrease in sales of tangible items, current music giants like iTunes quickly took over. Tower filed for bankruptcy in 2006, and their failure to adapt to the ever-changing technology cost them everything.

With even the Dalai Lama making appearances on twitter several times per week, it is no surprise that everything is becoming virtual. Medical records, newsstands, bank accounts, and college textbooks…what’s next?

Back to books. It is also interesting to see why Barnes and Noble has survived and may thrive in contrast to Borders even though on the surface they seem the same. The fundamental difference is that BN saw and acted quickly on the digital trend, unlike Borders who dragged their heels and only brought up their website 3 years ago. Barnes and Noble’s “Nook” has more than 2 million titles to download, and its easy-to-read screen and inexpensive price has made it a tough competitor. Amazon’s fabulous Kindle has increased their share price over 60% in the last year.

The bottom line is that our society is going digital. Perhaps it’s our laziness, or ability to create, but as H.G. Wells puts it nicely—“adapt or perish… is nature’s exorable imperative.” So who is responsible for killing Borders, Blockbuster, and Tower? Themselves.

vacation

Changing to a new (really cool) vacation policy

Jan 2010/in /by

We’ve made a terrific change this year to our vacation policy – which is basically not to have one. As of January 1 our employees can take as much vacation as they need provided they are getting their work done. The idea of doing this for all employees was pioneered by Netflix and we’ve decided to follow their excellent lead for our US team.

This change is one more thing we’re doing to build a great culture. We have a very intense culture today. People work hard, they work long hours inside and outside “normal business hours”, from home, from airplanes, and we don’t clock or watch the hours they work. So if we don’t clock the hours they are here, why should we clock the hours they are not? Why should we be tracking paperwork and forms when an employee takes the day off but we don’t do the same for when they work over a weekend.

It is much more trusting and respectful to simply say:

Work the hours you need to to get the job done,

Take the time off you need to take care of yourself and your family and

Talk to your manager about the time you need and how to fit it in with your work.

After all – if we entrust an employee with critical algorithm design, or with talking to customers – why wouldn’t we trust them to manage their own time? And one of our five values is “Take ownership for the company’s success” so people managing their own time is really consistent with that – I trust them to do what’s right.

This is a very popular move as you can imagine and one I am really pleased to be able to do. I asked Ana to give me a Letterman list – the Top Ten reasons this is a great move for our team – here is her list:

1. Each employee gets to make their own decision about when it makes sense to take time off
2. Each employee gets to decide how much time off they need
3. It rewards folks for working smarter, not longer
4. It places trust in our employees – trust gains trust back
5. It differentiates us from our competition – especially when hiring
6. Vacation is good for physical and mental health – so this supports good health
7. It reduces administrative paperwork – always a good thing!
8. It’s one less policy we have to document and explain
9. No more accrued vacation liability on our balance sheet
10. It’s just very cool to say, “at FirstRain we take as much time as we need, as long as your work is done”

p.s. This last Christmas we shut down between Christmas and New Year to encourage people to take vacation and take a break. It was so popular – both restorative and productive – we’re doing it again at the end of 2010 even within this new policy to encourage the break.

p.p.s. The basic idea of not clocking vacation has been around for “executives” for years but for financial reasons – if you store up vacation then the company has to accrue the financial obligation of paying for that vacation on the balance sheet and so, since executives typically cost more, companies often did not accrue or track vacation for VPs and above so they could reduce the accrued liability.

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