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THE DIGITAL REVOLUTION is here, and no industry is immune from its impact. The good news: all companies – big or small – can benefit. German booksellers have grasped their opportunity against a seemingly unassailable opponent.

For 550 years, everything was fine: Ever since Johannes Gutenberg founded printing with movable letters in 1450, the retail book industry largely remained unchanged. The print shop produced the books and delivered them to the store; customers visited the store, browsed through the selection, and bought their reading material. With the dawn of the new millennium, however, a new upstart turned all the rules upside down. It wasn’t enough that the online retailer Amazon grew to become the largest bookseller around the world; with its Kindle device, it introduced a reader for electronic books that quickly became popular.

Pure fear gripped booksellers and the management of big bookstore chains throughout the world. They were faced with a disruptive technology and revolutionary change that was upending the old business model. Digitization had reached their industry, and if they weren’t to be ejected from the market like photography specialist Kodak years earlier, or like mail-order catalog retailers, as well as several travel agencies and newspapers, then something had to be done. Large bookstore chains like Borders in the United States and Waterstones in England had already fallen victim to the Amazon infiltration: they ignored the threat for too long, and then reacted too slowly and halfheartedly.

But it was a crisis with a happy ending for German booksellers. Faced with the pressure of rapid change, the bookstore chains Thalia with Michael Busch, Hugendubel with Maximilian Hugendubel, and Weltbild with Carel Halff, as well as the book clubs of media giant Bertelsmann with Niklas Darijtschuk, had a meeting. According to coinitiator Michael Busch, CEO of Thalia: “We needed to establish strong marketing power in the German-speaking area.” And since Thalia as well as Hugendubel and Weltbild had been unable to successfully market their own electronic readers in previous attempts, the book retailers now sought the services of Deutsche Telekom as a technology partner. “We wanted to build a value chain in which all partners were playing at Champions League level,” according to Busch. Together, they developed the Tolino e-reader as a rival to Amazon’s Kindle, created a Tolino app for mobile devices, and invested in an Internet campaign to market the electronic offering.

WHY, WHAT, AND HOW? THE KEY QUESTIONS BEFORE ANY DIGITAL TRANSFORMATION

The book retailers and Deutsche Telekom followed a strict strategy based on the overriding sense of urgency that the retailers needed to understand precisely why they needed to act. That is, if they didn’t tackle the challenge of digitization, their core business would be threatened. “Fear spurs you on,” as Michael Busch puts it.

So what was to be done? The partners needed a concept to conquer the e-reader and e-book market with the ambitious aim of becoming market leaders. And since customers in the digital world wanted stable and above all, simple processes, Tolino needed to offer a customer experience similar to Apple: that is, intuitive to grasp and with an animated and captivating customer journey across all contact points from first contact to purchase.

How could Tolino meet these ambitious targets? The way not to do it quickly became clear: with existing corporate structures, large committees, and elaborate meeting agendas. Instead, a small core team was given extensive authority and decision-making powers. The most important developments were started at the same time and were based on a two-speed information technology (IT) architecture. A traditional IT structure ensured the stability of all the usual processes and the integrity of important data, while another group was organized in the manner of a start-up company, allowing fast and flexible processing of the many tests, learning steps, and corrections that digital product innovations inevitably entail. Deutsche Telekom, meanwhile, designed the hardware, the actual e-reader. At the market launch in 2013, an advertising campaign ran across all digital channels, focusing on television and social media.

Who would have bet on the success of Tolino? In one corner, a group of traditional medium-sized companies and a former state-owned company, and in the other corner, one of the leading global success stories of the digital age. Everything pointed to Amazon. However, the smart approach of the latecomers paid off. In 2015, Tolino pulled level with Amazon in Germany with a market share of between 40 and 45 percent, depending on the counting method.

The key to its success was a specific advantage that traditional retailers have: bricks and mortar. They were able to combine their high-street stores and their online business into an omnichannel concept with 60 million people in Germany visiting a bookstore each year. And since the Tolino partners consistently aligned their marketing mix across all channels, they secured a structural competitive advantage over Amazon: the Americans still had no physical presence in Germany. The Tolino campaign also brought new customers into the brick-and-mortar stores. “Naturally, we sold most of our e-readers in our bookstores,” says Michael Busch. This was a major success, but not grounds for relaxing. The battle for superiority is far from decided: market and customer needs are still developing, placing high demands on agility and innovation.

At the beginning of 2017, Deutsche Telekom sold its share in Tolino to the Japanese-Canadian group Kobo, the third-largest online retailer in the world after Amazon and Alibaba. The move further strengthens the Tolino alliance because Kobo has its own generation of e-readers and e-books. Unlike Deutsche Telekom, Kobo, a subsidiary of Rakuten, has global reach, and is therefore an ideal partner for the Tolino alliance in its rivalry with Amazon’s Kindle.

TOLINO IS NOW PRESENT IN MORE THAN 1,800 GERMAN BOOKSTORES

The success has not helped all Tolino partners. Weltbild applied for insolvency, and Bertelsmann ended its book clubs in late 2015. However, the media group is still on board with Tolino Media, the wholesaler for e-books, and new partners have joined. For example, the wholesaler Libri brought with it 1,300 bookstores, and with two strong regional groups, a further 70. Today, the Tolino can be bought in more than 1,800 out of a total of 6,000 German bookstores, and the open system has even expanded to Belgium, Italy, Holland, Austria, and Switzerland.

Furthermore, the success of Tolino and the associated prospects for booksellers is likely to have contributed to Thalia being sold for a nine-figure sum in 2016. One of the new owners is CEO Michael Busch. He expects further double-digit growth in e-book commerce with nine million Germans using e-readers by 2020. The Thalia boss sees them as good customers. If they like an e-book, they often also buy the print copy because they still want to flip through an actual book.

The Tolino adventure has taught Busch something: “It doesn’t matter where you come from or how big or small your company is. If you have enough imagination and strong willpower, you can achieve just as much with digitization as the giants in Silicon Valley.”

The Tolino success can therefore serve as a blueprint for all those companies whose business models are threatened by digitization. The answers to three questions provide a model for digital transformations – including for your company:

1. Why does a company need to change in light of the digital challenge, and how critical is the topic of digital for the company’s business?

2. What precisely needs to change – from the overall business model and the central elements of value creation such as product development, marketing, and the supply chain, through to basic functions such as technology, organization, and corporate culture?

3. How will the company organize the digital transformation and change structures, processes, IT, and management instruments?

This book provides concrete answers to these questions, and includes numerous success stories, putting you and your business on the path to a successful digital future.