Barnes & Noble: A Cautionary Tale for Healthcare in Thinking the Unthinkable

This morning, I went to Barnes & Noble to use a gift card I got for Christmas. Before going to the store, I visited the website to make sure they had three copies of a book that is assigned summer reading for my children (yes, I'm a triplet dad!). They did. A few hour later, my wife, three children and I walked into the store and asked the nice salesperson for the books. As she was ringing us up, I noticed that the price was $10 higher than what I saw while checking availability online. I asked her why, and she explained that the store price is higher than the website price, and that they don't match their own website pricing! She said, however, that I can use my phone to log onto the site, order the books online for store pickup and get the lower price!! After a few minutes of annoyed tapping on my cell phone, she handed me the three books for the website price. Before leaving, we stopped at the store's Starbucks where we spent just as much as we spent on the books for cookies and beverages. I'm not sure what the business arrangement between B&N and Starbucks is, but I'm sure that the profit on this transaction was significantly higher than the book purchase (even if I paid the "store" price).

Barnes & Noble's struggles have been well covered, so no need to rehash them here. But today, as a consumer, my main impression was that B&N lives in a WORLD THAT NO LONGER EXISTS. B&N knew nothing about me when I walked into the store today. But they should have! I used to be in a B&N store almost weekly for many years. I had a B&N loyalty card that should have allowed them to know every purchase I ever made and to know that I pretty much stopped at the Starbucks every time I was there since I swiped my loyalty card every time. They should have know that over the years, B&N made orders of magnitude more money on me in the cafe than in the bookstore. I expected them to know that!! And here is why.

When I log into my Amazon account under Orders, I can still see my first order above that I placed on May 29. 1999! And I can see every order I've placed since. Amazon uses artificial intelligence to analyze every one of those orders. They know me probably better than I know myself. And I feel it every time I go on their website. And I like it because it saves me a lot of time and energy! They show me products that I am interested in and usually end up buying. They know where to mail them and how to charge me for them. When I haven't logged on in a while, they know just the email to send me to get me back. Barnes & Noble had no clue who I was, when was the last time I was there or what they needed to do to take this opportunity to bring back to their stores and especially to their cafes! All they were interested in was making an extra $10 on my book purchase. They wasted my time and annoyed me by having me jump through hoops. B&N is not going out of business because Amazon is selling me books at a cheaper price, it's because they have failed the transition into a 21st century business: CRM, big data, AI, behavioral economics, ... They are bringing bows and swords to a fight with tanks and fighter jets! B&N still wants to sell me books, Amazon wants to be my physical goods logistics supplier. And if books happen to be a physical good that I'm interested in, they are more than happy to have their AI Recommendation Engine notify me every time a book is published that they KNOW I would be interested in. And I can pick physical, digital or audio format for immediate delivery. And a great discount if I buy all three! And I have no doubt that pretty soon I'll be able to pick it up at the Whole Foods Store Cafe with a complementary cup of herbal tea (because they'll know I don't drink coffee!)

The best explanation of B&N's self-defeating behavior was masterfully detailed in a blog post written years ago by Clay Shirky about the Newspaper Industry and their reaction to the rise of digital publishing on the Internet. It was titled Newspapers and Thinking the Unthinkable.

Healthcare is in the early stages of their NEWSPAPERS or B&N-MOMENT! Clay Shirky's blog post linked above is a MUST READ for healthcare executives, in my opinion!! The drivers of the coming disruption to the healthcare industry are going to be the same drivers that disrupted newspaper publishing and book selling: mobile, digital, social, big data, AI, and new competition. The new competition is coming from healthcare incumbents getting into each other's business, e.g. pharmacies getting into care delivery and health insurance (CVS). New competition is also coming from non-healthcare companies getting into healthcare such as Amazon getting into the pharmacy business, and whichever other parts of the healthcare industry Atul Gawande decides to target with their disruption machine. If healthcare organizations don't start preparing for the unthinkable (e.g. patients might no longer want to go to hospitals and instead prefer to be treated at home, an AI might be better at diagnosing diseases than doctors, or reading imaging studies, ...), they might find themselves joining newspapers and booksellers living in a world that no longer exists!

What do you think? Is healthcare making the right moves to prepare for the inevitable disruptive transformation?

P.S. Thoughts and opinions published on this platform are mine only and do not represent current or past employers or consulting clients.