Innovation in online book sales


21 April 2005

Why did Barnes & Noble lose out to upstart in the battle for our online book purchases? Simply put, the new company out-innovated the established bookseller. By innovating and bringing innovations to market consistently faster than their competitor, Amazon was able to dominate the market.

Barnes & Noble launched their own-branded online store in May 1997, less than two years after Amazon went live.

There is nothing difficult about selling books. They are completely standard products that even have a universal identifier, the ISBN. Barnes & Noble understood the market well, and while they were not the first online, as what Markides calls a “fast second”, they had every chance of dethroning Amazon from the number one slot.

At the time of writing, the Barnes & Noble web site barely makes it into the global Top-500, while is number thirteen on the list and receives twenty times more visitors per day who stay 30% longer. Amazon has won.

Over the last ten years Amazon has introduced innovation after innovation at a pace that has left the competition unable to compete. These innovations include process improvements like the store design we now take for granted because everybody has copied it, the simplification of the check-out process down to the famous one-click purchase for which they received a controversial patent; product information enhancements such as more and better product information and lately the Look Inside feature that allows you to see scanned pages of the book; customer usability features like wish lists and wedding lists; and most famously the recommendations and community features with reviews and recommendations.

Quite a few innovations fell by the way side – remember the idea that different users would see different prices? – but overall the picture is one of relentless successful innovation. Anybody visiting the Barnes & Noble site after seeing Amazon will not only notice that most of these features are missing, but will actually miss them.

How does Amazon do it? Not by ignoring the traditional management objectives. Amazon has one of the most efficient fulfillment processes and a returns and complaint handling process that is incredible smooth. This doesn’t happen by accident, but by constant management focus on core business processes and incremental improvements, just like in any other company.

Managing innovation is in addition to the management tasks that you are already performing, not instead of them.

What Amazon seems to have been able to do is to turn innovation into a core business process at the same level as order taking, debt collection, or returns management. What we propose in our recent publication Actions for Enterprise Collaboration is a systematic approach to turning disruptive innovation into a core business process with all the usual management tools and techniques, and we show you how to start on this change.

This is important because innovation is not simply for Internet companies, but for everybody. Amazon is not special.