Responding to business model innovation: organizational unlearning and firm failure

PurposeThis paper aims to examine Borders response to business model innovation (BMI) by Amazon in the bookselling industry. The case illuminates potential causes for protracted periods of organizational unlearning, explaining why organizational unlearning, although beneficial in many documented cases, can also be insufficient to prevent failure.Design/methodology/approachArchival data are used to study Borders’s historical evolution from 1995 to its 2011 bankruptcy. Theoretical inferences are drawn from this case to shed light on the process of organizational unlearning.FindingsBorders failed because its top managers were unable to adjust its traditionalist superstore identity to respond in an adequate manner to the changes in their environment. Instead, the company went through protracted phases of weathering the storm, denial and unlearning, resulting in bankruptcy. This extreme case of failure explains why sometimes, organizational unlearning might be insufficient, resulting in organizational demise rather than renewal.Research limitations/implicationsA longitudinal study of an extreme case allows the author to build links between the research on organizational unlearning and the scholarship on organizational identity.Practical implicationsOrganizations may survive longer if their top managers engage in the process of organizational identity change in response to BMI in their industry. The article proposes a few actions that organizations might usefully take to react to BMI before it is too late.Social implicationsBetter understanding of failure may enable preventive behavior.Originality/valueThis article explains how organizational identity prevents learning the right things and augments the dangers organizations face during unlearning.