Seven IT Lessons From The Failure of Borders

Is there anything left for IT people to learn from the collapse of Borders? Sadly, yes. Sure, we've all heard -- endlessly -- that Borders went bankrupt because it farmed out its Web store to in 2001, failed to develop its own Kindle knockoff and was late to jump into e-books. But that's just technology. What are the IT lessons?

Lesson 1: Lose your IT-savvy management, lose your way. Tom and Louis Borders didn't just start a bookstore in 1971. They also developed a sophisticated inventory management system that used a mainframe punch card in each book to track and adjust inventory on a near-real-time basis. That system, called Expert, was the main reason Kmart bought Borders in 1992 -- Kmart wanted to use Expert to manage its huge Waldenbooks chain. But almost as soon as the sale closed, the brothers Borders cashed out and left. Borders never had truly IT-savvy management again.

Lesson 2: Sometimes even the best technology doesn't scale. In 1992, the Borders Expert System worked really well for 22 Borders stores. It never really did the job for 1,100 Waldenbooks stores -- and as Borders grew, Expert couldn't scale for it, either. Still, for a decade, no one in IT was able to convince management to reinvent Expert.

Lesson 3: The best isn't good enough. Did you know that overtook in 2000 as the best online bookseller? That's how Forrester scored it. But in the midst of the dot-com collapse, stopped getting better. The site got sluggish and unreliable. And Amazon kept improving.

Lesson 4: Steal from the best -- and keep stealing. didn't crib good Web ideas from Amazon the way Barnes & Noble did. It should have. Sure, Amazon sued Barnes & Noble over 1-Click ordering, which was patented. A lot of other good Amazon ideas weren't. Borders missed its chance to, um, emulate them.

Lesson 5: Sometimes even Gartner is wrong. You know who loved that catastrophic, what-were-they-thinking 2001 Amazon-Borders deal? Gartner, which called it "a step in the right direction for both companies" and said, "Almost immediately, Borders can improve its online presence [and] has an opportunity to get its feet planted in the physical world."

Well, no. Borders effectively lost its online presence, and Amazon wasn't interested in a brick-and-mortar foothold. Relying on the prescience of analysts can be disastrous.

Lesson 6: Failure begets failure. After the Amazon deal, Borders tried to replace Expert -- not once but twice. Both projects failed, and the second one reportedly hurt Waldenbooks badly. Instead of new thinking, IT offered the same-old same-old.

Lesson 7: Off-the-shelf can't give you a competitive advantage. What about e-books? Amazon created the Kindle. Barnes & Noble cooked up the Nook. Borders? It sold e-book readers from Sony and Kobo and Velocity. Without one e-reader to call its own, Borders couldn't tightly integrate e-books with its Web site and brick-and-mortar stores.

Sure, you can save a little money by using exactly the same technology that anyone can buy. But you only get a real business advantage from IT when you're different.

And if you think a little money is better than a real business advantage, consider this: Right now, "a little money" is all Borders has left.

Frank Hayes has been covering the intersection of business and IT for three decades. Contact him at

Copyright © 2011 IDG Communications, Inc.

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