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MISSION:INTANGIBLE, the blog of the Intangible Asset Finance Society, offers critical comments on intangible asset, corporate reputation, and finance; supplemented by quantitative reputation metrics. Intangible assets include business processes, patents, trademarks; reputations for ethics and integrity; quality, safety, sustainability, security, and resilience; and comprise 70% of the average company's value. MISSION:INTANGIBLE is a registered trademark of the Intangible Asset Finance Society.

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Borders: No business model

C. HUYGENS - Sunday, July 24, 2011
As a specialty retailer today, you need a strategy to compete with Walmart’s low prices and Amazon’s near-universal tax-free inventory. Borders didn’t. Its business model made it competitive with a public library.

The Winston Salem Journal (Sexton, 24 July) phrased it this way: Maybe the part of the Borders business plan that allowed and encouraged mingling and browsing was part of its demise. The unlimited perusing (and full-on reading) of magazines and books perhaps wasn't the best way to encourage sales.

The tangible parts of the business were undifferentiated from Walmart or Amazon. A book is, well, a book. What about the intangibles, those non-balance sheet assets on which not one single investor on this planet was willing to place a bid last week?

The intellectual capital checklist of intangibles comprising human, structural and relationship capital is blank. Their employees brought no specialized knowledge, their systems were outsourced to Amazon for years, and they had no unique relationships with customers or vendors other than Seattle’s Best, but not necessarily America’s best, coffee.

The reputation checklist of intangibles produces no better results. There was no monetizable reputational driver at Borders in terms of ethics, quality, innovation, safety, sustainability, or security. Most public libraries, after all, now serve coffee too.

In March 2008, Jonathan Salem Baskin, an international marketing strategist who also moderates the Mission: Intangible Monthly Briefings, helpfully suggested a number of strategies: a book club, a home for user-created content, or a mass customized retailer stocking goods for local buyers and specific communities. The writing was on the wall already and bold action was indicated.

"Skip the expected branding nonsense, and start asking different questions, like why couldn't the business be recast as a social medium?” queried Baskin. “No, not just some chatting experiment prompted by a twentysomething in the marketing department. Skip creating inane video or other viral contagion. And turn off the dumb TV monitors they recently announced would be added to the stores. It's clear the marketers at Borders haven't been allowed to market their way out of a paperback.”

To blame Borders’ demise on the death of specialty retail as a business sector is both glib and not supported by the numbers. The economic returns of the median company within the 75-member Specialty retail sector is comparable to the S&P500 index returns, and the median reputation ranking for the sector is near the 50th percentile and its trend is level. Even the reputational variance is within the lower limits of what is typically seen.

Chalk this one up to a combination of strategic, managerial, and Board oversight failure. The leaders knew not where to go, and so they didn’t. Nor did their customers.

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