The Tens: Five Reasons Microsoft Should Buy the B&N nook, and Five Reasons Barnes and Noble needs to Keep It

The Case for Microsoft Acquisition
The primary case for the acquisition of the Barnes and Noble Nook by Microsoft would be for Microsoft to get out of its own shorts. Windows 8 and Office 2013/395 present an ever more cloistered ecosystem that runs the risk of cutting off all external stimuli. The already overly Redmond-centric approach to the world translates into Microsoft having an every smaller portion of a growing pie that will ultimately be divided among Apple, Google, Amazon and a handful of other major players, including Microsoft. A move into the Android space with conviction, would force to company to confront its myopic tendencies and recognize the opportunity, for instance, to make Office an even bigger cross-platform force by putting it on Android, and eventually on iOS. But that isn’t the only reason. Here are five more reasons Microsoft would benefit from the acquisition of nook.

1. Innovation. It’s not that the nook is all that innovative, but the infusion of new hardware, a new OS and a new commerce platform that must be integrated, not just analyzed, will force Microsoft engineers to reconsider their assumptions about the world, which will potentially spur innovation across the company.
2. Access to Channels. Microsoft doesn’t really know its end-user customers very well. The nascent Windows Store surely brings in some data, but access to the long relationship history with B&N customers will do nothing but enhance customer insight for app and content developers, not to mention Bing.
3. Improved Retail Access. If Microsoft buys nook, that doesn’t necessarily mean the platform leaves the B&N ecosystem completely. Microsoft could use the B&N retail channel to complement its own company stores.
4. Asymmetric Competition. As mentioned in the opening paragraph, Microsoft has plenty of products that don’t play well with other platforms. By acquiring nook, Microsoft would be able to extend its footprint deep into its competitor’s lairs (mostly Amazon and Google) as a legitimate platform partner.
5. Competitive Knowledge. Not only would Microsoft be able to infiltrate the platforms of its primary competitors, but it would also be able to explore those platforms as a partner, giving it knowledge and insight they already have as developers of Windows applications. Not that some in Microsoft don’t already build Android apps, but owning a platform would move that knowledge from a niche on the Redmond campus to general knowledge.

The Case for Barnes and Noble Retaining Nook
Barnes and Noble needs the nook, without it, it is just a bookstore, and bookstores will have a diminished roll in the future. B&N might not go completely out of business, but its business will be significantly smaller unless it plans on using the cash from a nook sale to wildly and radically rethink the content retail experience. If retail innovation is its goal, then it should sell the nook. But I don’t think the nook has thwarted retail innovation, it just hasn’t been a B&N priority, so I doubt divesting of its digital properties will move the company toward some unreported new strategic objective.

Survival isn’t the only reason for B&N to keep the nook, but it does infuse itself into these five areas of benefit:

1. Innovation. So far the nook has been an also-ran in the tablet market, but innovation in hardware design and user interface could make the nook an attractive alternative to Apple’s iPad and Amazon’s Kindle Fire. Partnering with franchises to bring out customized versions of the nook could put a unique stamp the product. Think about the Star Trek PADD version of nook, or one that looks like something out of Star Wars, complete with blaster burns, or one skinned in leather for those reading a Tale of Two Cities. Apple has forced everyone to think thin, flat and generic and that has pretty much makes every tablet an iPad imitator. B&N should take a page from its authors and try to bring its own style to the competition with radical departures from conventional hardware design.
2. Competitive position. Unlike Microsoft, B&N isn’t trying to take back the lead in the technology world, its just trying to carve out its own niche in retail and keep its nearly 100-year tradition alive. Any niche in online retail today requires and app, and any legitimate destination for content requires a platform. B&N does run apps across multiple devices, but when it comes to Amazon and its Kindle, B&N needs nook as a customizable windows into its unique retail ecosystem.
3. Market Awareness. Without the nook B&N will just be reading about content technology, not living with it or experiencing the pain and joy or innovation, which means they will be on the outside looking in without nook. Keeping nook keeps B&N in the game.
4. Relevance. Being aware isn’t enough, without a product in-market, any software or hardware insights will be jotted on whiteboards without any further destination. With nook in the field, B&N remains a relevant content provider with a product available where it can, at least potentially, turn its insights into actions. The future of the book is far from determined. B&N need nook as its platform for exploring the future of the book, the future of retail and the future of education (especially text books). At some point, a software only solution may be a legitimate play, current B&N needs nook to remain relevant—and being dismissive of current nook users would do nothing but further tarnish B&N’s strategic credibility.
5. Customer intelligence and Engagement. Although its loyalty program does provide some insight, as does its website, interaction with content promises to be a more important source of customer intelligence than buying habits in the future, especially for those selling and producing content. Without nook, B&N completely looses this source of intelligence. The loss of the nook would also mean that B&N would give up its own private channel to its best customers.

As I write this, the rumor mill is discounting this story through the voices of disembodied and unnamed Microsoft sources. That is pretty common practice, right up until the deal is made (or not). And any unmade deal remains a deal that can be made in the future. These ten items offer actions and insights relevant to Microsoft and B&N, regardless of Microsoft’s intent or ultimate action.