Better World Books Case Study
Better World Books (BWB) was founded in 2002 as a B corporation, meaning it targets successful performance in three fundamental areas: financial, social, and environmental endeavors. BWB has grown successfully since its creation as a small, socially motivated firm to one of the larger, more successful corporations of its kind. Despite the impressive and inspiring performance and growth through creative expansions, BWB acknowledges the changing conditions of the used book marketplace and is pleased to outline a brief review of current strategy and recommendations for supporting operations moving forward.
BWB Current Vision: Better World Books collects and sells books online to fund literacy initiatives worldwide. BWB is a self-sustaining, triple-bottom-line company that creates social, economic, and environmental value for all our stakeholders (www. betterworldbooks. com). Criticisms of the current vision statement have been expressed as follows: BWB relies on the generosity of donors for its primary product, which seems to contradict the concept of “self-sustaining. ” Either additional clarification about what “self-sustaining” means to BWB or a different descriptor should be included in the vision statement.
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The nature of BWB’s work demands a vision that is motivating, forward-looking, and broad enough to incorporate contributions from its employees and business partners. BWB Current Mission Statement: Better World Books is a global bookstore that harnesses the power of capitalism to bring literacy and opportunity to people around the world (www. betterworldbooks. com). Criticisms of the current mission statement have been expressed as follows: The term ‘bookstore’ is associated with the sale of new books, often in terms of today’s major book retailers, such as Amazon or Barnes & Noble.
It is suggested that BWB put more emphasis on its reuse and recycle format, specifically including their mission of re-selling used books. BWB should incorporate into its mission statement the focus on the reduction of waste by recycling books that are no longer desired by the current owner. With the commitment to its triple bottom line, BWB should make all three pillars integral to its mission. BWB Current Core Values: A complete list of BWB’s Core Values are shown in Appendix A (www. betterworldbooks. com).
Core Values should be descriptive of the organization, serving as a guide to employee behavior and reflective of how the organization operates. Criticisms of the current core values include the number of values, and the overlapping on several of the values. Flippant terms like “flabbergast” and “quicktastic” may unintentionally send a casual, unprofessional message about the organization. In support of BWB’s values, the company has set forth ideals that help employees, partners, and investors understand how it will go about meeting its vision.
Vision, Mission, & Values: Forming Strategic Intent “Aggressively adhering to one’s values can also help a company make strategic decisions,” which is certainly key for BWB (Lencioni, 2012, p. 116). BWB’s values are solid and quite applicable to the company at the moment. Using the refined vision, mission, and value statements will help BWB stay on course to be a premiere social company, rather than allowing the focus to drift or become diluted by multiple unrelated endeavors. BWB Triple Bottom Line: Methods and Sustainability
The BWB triple bottom line is comprised of its financial, social, and environmental performance. One of the guidelines of BWB being set up as a “B corporation” is to create transparency of its company financials. Currently, financial performance for BWB shares revenues, but omits detailed information regarding profit and how that profit is split between the company and the charities it supports. It would be beneficial for BWB to set standards for donations and define what a “reasonable retained profit” target should be for the company.
As BWB is truly interested in the social aspect, the financial reporting structure should also describe how the profits will be used to enhance the company and the social organizations that receive donations. Investors would have increased confidence in BWB if they were to learn that BWB retains profits to ensure the company’s viability, rather than profits to support corporate officers earning large wages and bonuses. Next we’ll explore the three dimension of the triple bottom line. Economic Profitability
BWB made the decision to become a for-profit organization rather than a pure charity as it felt it would help sustain long term success and financial stability (Rothaermel, Arthaud-Day, & Grigoriou, 2013, p. C22). BWB currently divides revenue generated by the organization into three categories: 1. Fixed percentage of net revenue paid to the book donor, based on the type of donor/book. For example, libraries receive 15 percent of the net selling price of the books donated.
2. Five percent of net revenues go to a literacy charity (selected by the donor), regardless of BWB’s profitability. . Seven to eight percent profit margin on each textbook sold is reinvested in the company. BWB views this financial structure as a viable way to promote long term growth, while providing the commitment to society promised in its mission statement. Social Commitment BWB’s link with libraries and nonprofit literacy partners mentioned above in the economic structure of the organization results in millions of dollars being directly connected to community outreach such as $2 million toward colleges and $9 million for literacy programs.
With the exception of the five percent of net revenue extended to BWB’s major literacy partners, the social commitment is tied directly as a percentage of revenue, so there is built-in safety net that the organization will not over extend itself in its charitable donations. This model keeps the long-term commitment towards social causes in the BWB forefront, provided the revenue stream remains in place. Environmental Commitment BWB has such a strong commitment to environmental responsibility, it has on staff a full time sustainability manager (Rothaermel, Arthaud-Day, & Grigoriou, 2013, p. C23).
The organizational concept of providing an avenue to connect book donor with a book consumer has a natural advantage by avoiding raw materials in the production process. BWB’s main environmental footprint is a result of all of the shipping required to connect donors with their operational warehouses, and their warehouses with a buyer. To offset these carbon emissions, the organization funds third party activities to reduce their footprint. BWB also chooses business partners who employ environmentally sustainable business practices and those with track records of less energy consumption and waste.
Sustainability Revenue has increased 80 times in five years leading to the fundamental question at this point. Are the current methods sustainable in the long term? In reviewing the organizational structure of BWB, their success at the triple bottom line is primarily based on the revenue stream coming into the organization. All of their business activities generate a minimal amount of social commitment within the organization (employee benefits, wages, training).
The organization makes their mark through third party connections with non-profit organizations. In addition, BWB’s environmental commitment is based on offsetting the pollution caused by their main service – shipping books. It is great the way the organization strives to be carbon neutral, but once again it is byproduct of the revenue generated from operations. The long term success of this triple bottom line will be to maintain the growth and revenue stream required to fuel the efforts of the non-profit organizations they partner with.
There will be shrinkage in the overall market with the continual emergence of e-books, but there are other potential revenue opportunities with middle school and high school textbooks that BWB can obtain. BWB’ Challenges BWB faces a variety of challenges. We will focus on the most salient: 1 Increasing popularity of e-books 2 Lacking a strategy to achieve growth objectives 3 Critics demanding transparency The rise of e-books threatens the short and long term viability of BWB’s business model because sales of e-books are increasing while the use of paper books is decreasing.
The reduction f print books in circulation will place downward pressure on BWB’s supply of donated books. The Pew Internet Project (2012) reports 21% of Americans read an e-book in 2011, and 88% of the e-book readers also read print books (p. 3). People prefer e-books when travelling, but print books for sharing and reading to children. Print readership is still dominant (84%), but trended down from 95% to 84% from June 2010 to December 2011 (Rainie, et. al, 2012). Additionally, e-book readership is growing, jumping from 4% to 15% during the same period.
The e-reader market is dominated by Amazon’s Kindle at 62% and the Barnes & Noble Nook at 22%, based on February 2012 data (Rainie, et. al, 2012). Neither device currently allow cross platform e-books. The tablet market is dominated by the iPad at 61% and Kindle Fire at 14%, based on February 2012 data (Rainie, et. al, 2012). Multiple e-book formats can be used with iPads, but not with the Kindle Fire. Figure 2 of the Appendix shows the growth of tablet and e-reader ownership for U. S. consumers.
Rothaermel (2013) defines a competitive advantage as “superior performance relative to other competitors in the same industry or to the industry average” (p. 5). To obtain a competitive advantage, BWB must either create more value for customers while keeping cost comparable, or it must provide equal value but at a lower cost (Rothaermel, 2013). How can BWB continue to create value for the customers? One tactic for BWB to fulfill their mission and improve their competitive advantage is to increase the supply of books. One way to accomplish this is by partnering with middle and high schools.
This expansion would not only increase the supply of books for BWB, but also expose the message of literacy and environmental responsibility to the next generation. Because it is too costly and too time consuming to personally organize collections with schools of all sizes, BWB could consider expanding the campus book drive concept. Putting together an easy-to-follow, mailable kit for advertising the collection of and shipping of used books would allow BWB to partner with smaller or more rural organizations without committing staff to each collection.
Although the amount of books collected at these types of locations may not be large, if many locations participated in this manner, the cumulative donations could be significant. BWB. com currently makes this option available for individuals through the creation of a pre-paid shipping label. Expanding this service, and in particular, growing the awareness of BWB as the “go-to” option for donating used books will create a foundation for incremental donation growth. Making it easy for donors to dispose of their unwanted books will greatly contribute to the likelihood of sustained donations.
Another challenge for BWB is the price at which it sells its books, which is often higher than similar web-based companies. Presumably, the higher pricing is a result of the revenue sharing and shipping costs BWB covers during the collection of its used books. The reality of the situation may be that BWB will have to lower the percentage of revenue it shares with libraries and other donation partners. As e-Readers become more and more popular, the “value” of a book to a library may decrease and donation partners could be willing to accept a smaller share of revenue.
In addition to increasing the supply of books, BWB may need to embrace the eReader movement. As touched upon earlier, the market is seeing explosive growth in tablets and e-readers, especially in the ages 18-29 and 30-49 demographics (Appendix, Figure 2. ). One company utilizing a similar concept as BWB, but with e-books, is Free e-Books. Free e-Books allows individuals to upload their old e-books, cleans them, and repurposes the digital space for new e-books. The digital downloads would provide better margins and allow the company to be more competitive on price due to the elimination of shipping costs.
With these savings, BWB can still donate proceeds to literacy programs around the world. To further position itself in the e-book market, BWB should develop an e-reader app. The app will be a vehicle to sell e-books and read e-books on the donor or customer’s device. To get donors or customers started, BWB could offer a coupon for a free (or reduced price) e-book from the BWB used bookstore. BWB might consider aggressively pursuing a partnership with a global tablet producer such as Apple or Samsung to get the BWB app preloaded on the table company’s products.
On the operations side, BWB should leverage current resources in an effort to grow the business. A simple way to start is with buying and reselling video games, DVDs, and CDs in the online store. Basically, imitate the Half. com model, but also allow donations. This would be a simple modification of the current business model, but would add new revenue streams and deliver on the triple bottom line. One area that must be dealt with is how to control shipping costs. The current free shipping model must be modified. Possible alternatives include: – A minimum dollar threshold in the $15-25 range in order to qualify for free super saver shipping. An annual membership fee that would offer reduced prices and free shipping.
– Develop an awareness/environmental tagline: Help us save the environment by bundling your books to reduce our carbon footprint. The notion of branching out to the global collection of books (beyond its current capacity in the UK) should be considered, but on a selective basis. Collecting, keeping inventory, donating or selling books of all the world’s languages could be more complicated to manage, although products are currently available from BWB in a number of languages.
The global collection of used book donations might allow a continued stream of products coming in from areas that are lower adopters of the eReader technology while buying time for BWB to determine how best to compete in the eReader format. Finally, sustained growth will only be possible if BWB is able to become more transparent in its financial reporting. BWB should turn the pundits into believers by opening their books and highlighting the progress in each of the areas of the triple bottom line.
If the company embraces this type of movement, it could bring to light how much better they are at achieving a triple bottom line than their competitors (even non-profits), and generate trust, reliability, and confidence for future partnerships and investment. Strategy How can BWB get to $100 million and beyond in revenue? A new strategy is needed. The current differentiation strategy offers great customer service and social entrepreneurship. With new entrants on the social front, the only area where BWB can differentiate itself is customer service. Will that be enough?
Online customers place the high value on customer service when something goes wrong. Most customers want low prices and fast delivery. Therefore customer service by itself is not a strong differentiation strategy. The other option is to use a low cost leader strategy. Donated books are a great low cost input. If BWB reduces the contribution percentage to libraries and charities, or is able to significantly reduce the operating expenses associated with collecting and selling books, they will be postured to compete with the top three online sellers on price. Conclusion
The challenges facing BWB reflect the nature of today’s global economy. New technologies disrupt tried and true methods at an increasing rate. A gradual–but purposeful–shift from the print book to e-book market is needed for BWB’s continued growth. Following the recommendations of this report will increase BWB’s sales volume and expand the potential product donation base. The total amount of social contributions will continue grow if the total revenue stream and profits grow, which will allow BWB to fulfill its mission of bringing literacy and opportunity to people around the world.
Appendix Figure 1. Better World Books Core Values Customer Focus We are driven to provide customers with a highly-valued experience, and one that allows them to align their actions with their values. We want to be their favorite marketplace and their favorite partner, so we incorporate their input into everything we do. People Matter We seek out talented people who work hard and invest in them. We respect each individual, reward achievement, and celebrate team success. Do The Right Thing We strive to do the right thing at all times, with all people and all issues.
Foster Innovation We look for new ideas and bold moves while we embrace and create change. Passion for Literacy We are committed to the cause of literacy. Every person should have the chance to achieve their potential and participate fully in society. People, Planet, Profit We’re more than just a business. We equally consider our shareholders, our customers, our employees, our community, our planet, and the lives changed by our common cause. Through our business we strive to enable people to make sustainable positive changes in this world. Thanks to you, we’re well on our way.