Avoiding the Path to Obsolescence

Riches-to-rags tales in retail business hold survival tips for libraries

Posted Mon, 09/05/2011 - 16:59

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Blockbuster was much in the news last fall, though not in the favorable light it once enjoyed. The cultural phenomenon and former stock market darling that once prospered through aggressive marketing, savvy exploitation of technology, and keen insights into customer preferences filed for bankruptcy in September 2010. Though some analysts thought the filing could give the franchise time to reinvent itself, others predicted that the onetime video-rental colossus is steps from the graveyard of retail obsolescence.

There is a lesson or two for libraries in this riches-to-rags story.

In the New Yorker’s October 18, 2010, “Financial Page” column, James Surowiecki catalogs a few of the causes of the company’s decline. Blockbuster was born in the age of the “category killer”—bricks-and-mortar stores that “killed off all competition in a category by stocking a near-endless variety of products at prices that small retailers couldn’t match.” Many of these establishments are still healthy, Surowiecki explained. But others—Toys R Us, CompUSA, Circuit City, Borders Books and Music, and Barnes and Noble, for example—have either given up the ghost or seem to be in their death throes.

The internet has played an important role in this trend. Newer businesses that were born during the wired era, have outplayed their older and less-agile competitors by more aggressively exploiting the advantages of networked technology. This has been especially true in the case of brands operating in well-defined niche markets, such as video rentals. Netflix simply beat Blockbuster’s time—soundly. The ease of selection, delivery, and return—coupled with a recommendation system that, though not perfect, is better than the advice offered by the average in-store sales associate—provided a cheaper and more convenient way to access a wider selection of films.

The internet in particular and digital technology in general are key in this game. Because of Netflix’s willingness and ability to harness technology, customers no longer needed to drive or walk to a physical store to browse aisles of limited-selection stock arrayed in broad categories in search of a movie for a quiet evening at home, or to experience disappointment that a movie is not on the shelf because another customer got there first or was late returning the item. Further, Netflix’s customers are not forced to worry about pesky little matters like overdue dates and late fees.

Convenience above all

Early on in the wired era, Blockbuster seemed to have all the advantages—a strong brand, a great customer base, an experienced workforce, a large inventory, and market saturation via thousands of physical stores deployed across the country. It would have seemed a simple matter to build an effective e-commerce business on top of all this expertise and success in the traditional retail marketplace—“clicks and mortar,” many observers thought, the best of both worlds. But this did not happen; in the end, none of the company’s advantages mattered, and some of them turned out to be millstones.

Surowiecki attributes Blockbuster’s failure to two factors. The first he terms the “internal constituency” problem: “The company was full of people who had been there when bricks-and-mortar stores were hugely profitable, and who couldn’t believe that those days were gone for good. Blockbuster treated its thousands of stores as if they were a protective moat, when in fact they were the business equivalent of the Maginot Line.” The second problem exacerbated the first: the “sunk-cost fallacy,” which stipulates that “once decision-makers invest in a project, they’re likely to keep doing so, because of the money already at stake. Rather than dramatically shrinking both the size and the number of its stores, Blockbuster just kept throwing good money after bad.”

Blockbuster made an attempt to manage this change, but its past success acted as an anchor rather than a sail because it was not willing to jettison outmoded cargo. Thus, even if the company had moved more aggressively to develop the clicks-and-mortar model, it probably would not have fared any better. The success of Netflix suggests that in the video-rental and similar markets, if products are available conveniently enough and cheaply enough online, customers don’t care about or need a physical store and all the accouterments that go with it. They can stock and make their own popcorn at home, after all. Customers cared most about getting the film they wanted as cheaply and conveniently as possible.

There are many interesting parallels for libraries.

We have a strong brand, a loyal customer base, hundreds of millions of items in our collective inventory, loads of expertise and talent, and decades, if not centuries, of investment in bricks-and-mortar structures. We have also seen the rise of many online competitors in recent years, most prominently Google. Like Blockbuster, our internal constituency has not been blind to the advantages of networked technology but perhaps has focused too much on past strengths. We have thus invested heavily in a clicks-and-mortar solution. We’ve spent the last couple of decades sinking more resources into sunk costs by largely overlaying or augmenting legacy collections, services, skill sets, and buildings with electronic equivalents and tools.

Leave your baggage behind

Are we throwing good money after bad? Should we have been building the electronic library instead of—rather than on top of—the traditional library? For Blockbuster, the clicks-and-mortar approach meant spending lots of “money and time integrating an entirely new information-technology system into the one its stores already had,” a circumstance that will sound wearily familiar to many librarians. (Ask anyone who has attempted to integrate an enterprise resource management module or a new discovery tool into an existing integrated library system.)

In the meantime, Netflix’s focus was on “making its distribution system bigger and more efficient.” Of course, it had the advantage of a clean slate, which meant that it could more easily imagine and build a system unconstrained by a previous model. Netflix was not burdened by the need to support and retain a lot of practices, services, and structures that had once worked well. It had the freedom to focus exclusively on the needs and wants of consumers. In this process, technology itself was secondary, a means to an end. Customers were the point.

But Netflix does not have time to rest on its laurels either. The distribution model it has used so effectively is changing, evolving from a mail-order system where networked computers facilitate discovery and ordering to a fully automated system where streaming and downloadable video close the circle to form a fully net-enabled process. In these circumstances, an efficient snail-mail order operation will not suffice. The key to remaining competitive in the next round of this game would seem to be accurately anticipating what networked devices most people will watch videos on in the next few years, and then quickly building the pipelines necessary to feed product to those devices.

But guessing correctly, while important, is not really the key. What matters is responding to customer wants and needs in a timely and efficient manner, even at the expense of letting go of past practices and tools no matter how cherished or successful. A baggage-free focus on customers is what gave Netflix its original competitive advantage.

Innovating past the graveyard

It would behoove libraries to adopt a similar focus. A very simple formula is at work in determining satisfaction for most library users. If a patron comes to the library or logs in and finds what she wants, or a close approximation to it, she is happy. To the extent that she does not, she isn’t. Period. Impressive buildings, glitzy web pages, fat acquisitions budgets, high volume counts (whether electronic, print, or both) are fine, but they are not the most important thing—which is simply whether or not the patron is able to locate the answer, fact, statistic, idea, or data set she needs—and the quicker and easier, the better.

Libraries used to score highly on this metric by owning a lot of things and keeping them close at hand. Now, more and more, they ring the user-satisfaction bell by connecting to a lot of things, regardless of where the items are, who owns them, what time of day it is, or where the patron is. The old, ownership-based system is akin to the just-in-case business model, where companies keep lots of stock on hand just in case someone needs a particular widget or gizmo. The new library should be based on the just-in-time model, where access and delivery networks are more important than vast quantities of nearby inventory.

Another lesson for libraries is that once content is delivered in a new medium, the old medium does not matter—except for the purposes of preservation and historical scholarship. Game over for those who insist on blindly holding onto the old format in needlessly redundant storage facilities, especially if that facility is located on prime real estate. This is not to say that the old format does not need to be preserved. But not everyone needs to do so—far from it. There may have been a time when every Blockbuster store needed 12 VHS or DVD copies of Top Gun. No more. Similarly, we no longer need print runs of The Most Important Journal in the Field of XYZ Studies on every shelf of every library in the country. A few for preservation purposes are quite enough. Our customers want the content in the most convenient and efficient form possible.

Space matters

Of course libraries have other things to offer—spaces, for one, to which the same formula for satisfaction applies. If a patron comes to the library in search of a quiet study area, a room for group research, an environment conducive to intellectually stimulating social exchange, or space for inspiration and the freedom to think big thoughts and finds it, she is happy. If not, then not so much.

The extent to which we think of our libraries exclusively as warehouses for the protection and storage of physical objects is probably also the extent to which we also miss the mark in this regard. If we are to retain a meaningful bricks-and-mortar component to our services, we must deploy our spaces with the aim of delivering to our patrons the room they need when they need it, instead of vast storage areas, or—when we are able to escape the warehouse paradigm—inflexible, single-purpose areas that lie fallow for large periods of time. Our emphasis must be on flexible, multipurpose space that is available 24/7, or as close to that as possible. On this point we differ from Blockbuster, whose physical presence has become beside the point. We have spaces that our users want and need, and that can be useful to our overall mission if deployed effectively and efficiently: what patrons want, when they want it.

Increasingly, libraries are engaging in additional activities, such as open-access initiatives and other publishing ventures to help counter the rising cost of commercial publications, and building learning commons and other forms of technology-rich spaces where users can capture and manipulate information into new products and forms of knowledge. However, the focus of our networked collections, spaces, and services should be to meet the needs and wants of users rather than maintaining the systems and structures we previously constructed to serve them. The computers and networks that link items and collections, the buildings that we inhabit, and the tools we offer are not primary to our purpose. Primary are the people who need and want these things. If we are going to sink costs somewhere, that is where we should sink them. If our focus shifts from serving individuals to tools, systems, and structures, the graveyard of obsolescence will beckon.

STEVEN ESCAR SMITH is dean of libraries at the University of Tennessee in Knoxville, and CARMELITA PICKETT is head of collection development and acquisitions services for Texas A&M University Libraries in College Station.