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Turning Around Barnes and Noble 

The Wall Street Journal had another great piece about the new CEO who is going to turn around Barnes and Noble. There are two big insights from the article: You have to break with conventional wisdom, and you have to localize.

Bookstores are set up a lot like the earlier example about music stores. The publisher has certain high-profile authors they want to promote with certain high-profile deals. A lot of the deals that bookstores and publishers make revolve around massive promotional campaigns. The CEO of Barnes and Noble has said they’re not going to do that anymore. He has decentralized authority so that purchasing will be done centrally, but the decision about what to purchase will be made by the person running that local Barnes and Noble store.

Barnes and Noble has made many other changes like displaying books on round tables versus rectangular tables. They’ve also moved away from pushing electronics and toys and have returned to promoting books.

Challenging conventional wisdom is a big thing, and it comes down to confidence. No matter where you are in the world—whether you are an analyst, a manager or a CEO—it’s easy to make a recommendation, plan, strategy and say, “Nine out of the ten leading companies do this, so I’m going to do it too. The most influential and successful partner at the most influential and successful firm says I should do this.” Do you have the confidence to say something different that breaks the traditional business model in an industry?

Notice, I didn’t say, “Do you have the analytic firepower to support you?” Many people think that if they have the analysis, everyone is going to agree with them. That almost never happens. In the real world, it doesn’t matter what your analytic firepower is because no one cares about logic. Salaries and bonuses are determined based on the incumbent business model. When you tell them to change a business model, they’re not thinking about what is best—they’re thinking about the bonus they’ll get and how much work they’ll have to do to succeed in the new business model to retain their bonus. They’re always going to push back, and it’s your job to have the confidence to see it through.

If you want to see how to challenge an unbelievably entrenched business model, look at the US Market Entry Strategy (available to FC Insiders) where we help a Latin American bank consider whether to open a retail branch network in the United States and offer funding to low-income entrepreneurs and families of entrepreneurs. When that study was done, just about everyone told us that we would make a lot of money in microfinance. But as you’ll see through the course of the analysis, that’s certainly not the case. Insiders with access to our Advanced Knowledge Management System can have access to the editable slides in that study. And Turquoise Eyes book, which is available at a special price on Amazon in Kindle format, is related to that study.

This is an excerpt from Monday Morning 8 a.m. newsletter, issue #8.