Earlier today Brian Walker from Forrester Research wrote a very interesting summary post on a research document on Amazon.com, called Amazon.com: Friend or Foe? I have great respect for both Brian Walker and co-author Suchurita Mulpuru and would love to see the research piece. As much as I respect them both, Amazon.com is a complex Rubiks cube that is both secretive and dominant in how they are perceived. All the news that they want the world to see is either given to the press or released via press release.
I think we need to set a couple of things straight:
We are talking about Amazon.com, not any other ecommerce company. Since Jeff Bezos started it, it has gained momentum and scaled at speed not seen in online retail. Amazon is one of the few companies in this world that has the potential like Walmart to close businesses and industries down. Retailers (hello Borders) have gone into bankruptcy and ecommerce rivals have either gone out of business or gone into other verticals.
Secondly, I think Amazon has changed from being an pure ecommerce company (with all the bells and whistles) to something of a hybrid technology company. Amazon Webservices, A9, Lab126 are all examples of how far Amazon has moved. AWS is in my opinion the biggest threat that Amazon has to its long term success but also its biggest opportunity. The ecommerce success will be there as long Amazon keeps being customer orientated. The margins will be smaller but the ability to make money via technology such as AWS will be a huge win. AWS is technology and the credibility issues that constant outages has for Amazon ensures the potential for reputation damage that cannot be undone. How many more outages until a rival like Rackspace or even Google ups the ante?
Thirdly, Lab126, yes the company that is surrounded in mystery. IDEO and the like are all independent from their clients yet Lab126 has the potential to suck a whole lot of cash out of Amazon without showing any product. There lies one of the biggest unknowns for me, what are they working on? Are the similar in result to Sir Jonny Ive and his team at Apple. The point is Research and Development is expensive, crack it and the money is made to cover the cost. If it fails it becomes a chronic balance sheet nightmare.
If there is one thing that differentiates Amazon from all ecommerce companies that I have studied, is that their mergers and acquisitions division make very little mistakes. Being able to stay relevant to all the hordes of different users (developers, ecommerce shoppers, ecommerce business owners) is difficult, acquiring the right companies for your company is even more complicated.
Have a look at this infographic with regards to M&A activity that Amazon has done from 1998 – 2006:
(click to enlarge)
That is a lot of money and time. Yet, the results of the companies are largely kept behind closed doors. I know that the graphic is outdated, moving the Amazon rubiks cube to the right end is difficult.
Amazon.com is a means to an end for most of their partners. Marketplaces, Fulfillment by Amazon are all ways that Amazon ensures that added money is made in their already strong ecosystem. However, not all of the Amazon products are successful, Amazon payments for example is not widely adopted like rival PayPal.
I think we all forget what is at the core of Amazon’s offering: Content and in particular publishing. Amazon does a superb job in pairing books together for users, owns a few publishers but one of their assets has the potential to be a disruptor that will potentially end an entire industry. (Oh, yes Amazon has a knack for entering and then closing an Industry. CreateSpace (an acquisition) is at the moment one item not seen in many blogposts, yet the impact is pretty frightening. I believe very strongly that the future will have books but not in the current format. Physical publishing is slowly grinding to a crawl. Publishing as a whole has seen a whole lot of mergers and acquisitions over the last 10 years. However, the book publishing system is unfunctional and inefficient. Discovery of new talent is very inefficient, the printers are at war with the focus on the enviroment. Enter CreateSpace, on demand printing. Ebooks are the future and in my opinion will be the way how we read books. If you want the ebook published, the bookstore will have a machine that has access to all the ebooks to print the book for you. (I own several first editions yet I don’t see publishing surviving technology. Sony started it, Amazon will finish it.)
Brian Walker mentions in his last bullet point (“Just getting too big”). I kinda agree with that, but I think there is a bigger issue not mentioned. Bezos has single handedly driven Amazon from day one. His key staff are not really well known, yet I cannot think of a likely successor for Bezos. At least no one has been seen as a likely successor. Jobs drove Apple and had the foresight to ensure that Tim Cook would be in charge with his game plan for the future.
If there is one thing I have seen first hand is that people is what drives digital businesses and not the technology. The fact that no up and coming leaders are ever mentioned is a concern for me. The candidate I thought that would most likely follow Bezos long term is Tony Hsieh from Zappos. However, Hsieh no longer in my mind is focussed purely on ecommerce, he wants to revive down town Las Vegas.
OK, the above is just some things that needs to be kept in mind. Why is Amazon neither friend nor foe? Markeplace users can switch of their feeds at any time. Secondly, I believe strongly that Amazon does not do partnerships in the traditional way. It is either 60:40 to Amazon or a 100% acquisition. Bezos wants to dictate and not be dictated to. Foe? If Amazon is so evil, then you can list your products some where else.
What is the difference between this issue with Amazon competing with their partners on product level to what Google is doing to ensure that their products are listed in the search results? In both cases, we the user have the power. You don’t have to open a window and type Amazon into the Google search engine? We should all keep one thought in mind. In life the bigger the risk, the bigger reward. Amazon has just executed better than everyone else, ensured that they have remained true to their core values :
Leaders start with the customer and work backwards. They work vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over customers.
Leaders are owners. They think long term and don’t sacrifice long-term value for short-term results. They act on behalf of the entire company, beyond just their own team. They never say “that’s not my job”.
Invent and Simplify
Leaders expect and require innovation and invention from their teams and always find ways to simplify. They are externally aware, look for new ideas from everywhere, and are not limited by “not invented here”. As we do new things, we accept that we may be misunderstood for long periods of time.
Are Right, A Lot
Leaders are right a lot. They have strong business judgment and good instincts.
Hire and Develop the Best
Leaders raise the performance bar with every hire and promotion. They recognize exceptional talent, and willingly move them throughout the organization. Leaders develop leaders and take seriously their role in coaching others.
Insist on the Highest Standards
Leaders have relentlessly high standards – many people may think these standards are unreasonably high. Leaders are continually raising the bar and drive their teams to deliver high quality products, services and processes. Leaders ensure that defects do not get sent down the line and that problems are fixed so they stay fixed.
Thinking small is a self-fulfilling prophecy. Leaders create and communicate a bold direction that inspires results. They think differently and look around corners for ways to serve customers.
Bias for Action
Speed matters in business. Many decisions and actions are reversible and do not need extensive study. We value calculated risk taking.
We try not to spend money on things that don’t matter to customers. Frugality breeds resourcefulness, self-sufficiency and invention. There are no extra points for headcount, budget size or fixed expense.
Vocally Self Critical
Leaders do not believe their or their team’s body odor smells of perfume. Leaders come forward with problems or information, even when doing so is awkward or embarrassing. Leaders benchmark themselves and their teams against the best.
Earn Trust of Others
Leaders are sincerely open-minded, genuinely listen, and are willing to examine their strongest convictions with humility.
Dive Deep Leaders operate at all levels, stay connected to the details and audit frequently. No task is beneath them.
Have Backbone; Disagree and Commit
Leaders are obligated to respectfully challenge decisions when they disagree, even when doing so is uncomfortable or exhausting. Leaders have conviction and are tenacious. They do not compromise for the sake of social cohesion. Once a decision is determined, they commit wholly.
Leaders focus on the key inputs for their business and deliver them with the right quality and in a timely fashion. Despite setbacks, they rise to the occasion and never settle.
One last thought: Look at the structure that Tencent and Alibaba has, ever wondered where that was first done: Amazon. Every digital commerce business that has moved forward has taken some ideas from how Amazon operates and then made it their own. The truth is Amazon.com is neither friend or foe, as they lead. They lead and shape a lot of the ecommerce strategy seen worldwide, they are a global ecommerce threat to all other ecommerce businesses and control 20% of global ecommerce traffic (if that has not increased by now).
Keep your eyes open, focus on your business, make your users happy and don’t focus on Amazon.com. The joy of the ecommerce vertical is that it changes and provides the ability to any startup to challenge a market-leader. A Rubiks cube is solved though patience and practice…