Amazon as a Cautionary Tale

Amazon announced on Wednesday that it is closing all 68 of its physical bookstores and popups. Launched in 2017, the bookstore locations always seemed an odd appendage to the company’s core online business model. At least one writer calls the Amazon bricks-and-mortar foray “slapdash,” and in retrospect, that seems to be an understatement. 

While we are sure that the whole narrative around the failed shift to stores is more nuanced than it seems, it does suggest two lessons for any enterprise, including those in the education sector. First, while moving into adjacencies is usually a good strategy, care must be taken to ensure that the move is not totally sideways to one’s core business model. Amazon’s purchase of Whole Foods makes sense because it was already a thriving business with its own successful model to adopt. Starting physical bookstores from scratch was an orthogonal move for Amazon, requiring strategy and capabilities within the company that had to be created and not just adopted.

We see this with schools that consider creating an online version of themselves as a digital alternative or a satellite campus in Asia. Building and running a successful online school or a new campus a dozen time zones away is not impossible. Still, either is a substantial strategic and operational leap away from the core business at home. Our experience is that, perhaps like Amazon, many school leaders underestimate the challenge and distraction of such ventures.

A second lesson is that starting something and taking it to scale as a successful business are two very different things. Starting a middle school might seem attractive, even strategically desirable for an elementary school. The start-up costs can seem minimal if one has the space, but growing a new division to full enrollment can be a long, hard slog if for no other reason than that parents are reticent to enroll their students for an unproven program.

The Amazon case may seem remote from anything in education, but we think it a cautionary tale for all of us.