7 Surprising Things to Know About the Amazon Business Model

That’s the Bezos quote and philosophy we really need to learn from. It’s the philosophy that has made Amazon so successful. It is the one philosophy that makes the Amazon business model really stand out. And the one that more American corporations need to embrace and understand.

 

Take a long-term view, and the interests of customers and shareholders align.

Jeff Bezos

 

Most of us are familiar with Amazon and Jeff Bezos, their CEO. Amazon is an e-commerce company in everything they do. They have developed all their expertise in full support of e-commerce. In fact they now do e-commerce for many other businesses.

Related post: 14 Ways to be Creative on Technology Projects

 

Amazon has existed in the ecommerce technology world since their inception. They think like a technology company and agile innovators, only innovative in everything they do, not just technology. They are not afraid to try new things and they can get things done quickly, thanks to the culture their CEO Bezos has instilled. (For more, see our article on Amazon and its business strategy.)

 

Bezos’ vision

For years, I’ve been fascinated by Jeff Bezos’ vision. We write a lot about him and Amazon. They are a great company to follow because of the Bezos vision. And his ability to make good bets on his vision. While everything may seem rosy at Amazon these days, for years, it was amazing to see just how much criticism there was towards some of Bezos’ decisions.

 

For years — quite by design — the company focused on growth and expansion over profitability, earning complaints from investors. They are still focused on the future more than the present and that is why they are such good innovators. More recently, it’s done things that left many scratching their heads, such as the whole Amazon Web Services (AWS) effort, and even the Kindle effort — and yet both have proven to be quite successful.

 

Size and breath of enterprise

Consider the size and breadth of the Amazon enterprise in three ways, what they are building, what they are buying, and how they are partnering with others. Amazon is going great guns in all three areas. Let’s consider some examples to illustrate:

 

Building

Amazon is building its own unique brands and has 4 to date:

Amazon Basics – which represents its own electronics products. The Kindle and Kindle Fire are good examples

Amazon Fresh – which sells and delivers groceries.

Amazon Studios – an online social movie studio.

Amazon Warehouse Deals – a discount warehouse on refurbished products.

 

Buying

Amazon has brought almost 30 companies in thirty years. One of their most recent buys, ComiXology. ComiXology offers a well-designed app for buying and reading comic books from more than 75 publishers. It makes it easy to see new comics, which sell for the same price as in store, and it’s easy to buy back issues, too. There are also always comics on sale, including collections for a great price.
Did you know that Amazon owns Zappos, Pets.com, and Diapers.com? All purchased to become part of the Amazon enterprise.

 

Partnering

They partner to offer their e-commerce services to make other companies better at on-line business. Sometimes it’s just providing the service, other times it is to combine products, like they have done with Toys Are Us.

 

rapid growth
Be prepared for rapid growth.

Rapid growth

Amazon’s growth is a relative measure. Here are several comparisons that will surprise you. In the first 5 years of their existence, these are revenue comparisons:

EBay         .4B

Google    1.5B

Amazon   2.8B

 

Information technology is a core competency

Amazon is very aware that information technology is at the heart of their most important core competencies. Here are several that they use and also source to other businesses:

 

Cloud computing

Unless you work in technology or corporate logistics, you might not have known that Amazon was ahead of Google in the cloud business. Most consumers will have encountered the cloud in the form of services where Google is strong—email (Gmail), document storage (Google Drive), and the like. But Amazon Web Services has for years been the front-runner in the business of renting computer power to companies.

 

To understand the scale of the war brewing between them, it helps to understand that what Amazon and Google are really contesting is who gets to eat a bigger portion of the total corporate information-technology pie. All the warehouses of servers that run the whole of the internet, all the software used by companies the world over, and all the other IT services companies hire others to provide, or which they provide internally, will be worth some $1.4 trillion in 2014, according to Gartner Research—some six times Google and Amazon’s combined annual revenue last year. Not surprisingly, both companies have said at one point or another that this new revenue stream has the potential to be larger than all their current sources of income.

 

Amazon Web Services

Amazon Web Services (AWS) is a collection of remote computing services that together make up a cloud computing platform, offered over the Internet. The most central and well-known of these services are the simple storage service (S3) and the elastic compute cloud (EC2). In 2010, Amazon launched 61 new services and features. In 2011, that number was 82. In 2012, it was 159. In 2013: 280. They are also expanding their geographic footprint, with 10 current AWS regions around the world, including the East Coast of the U.S., two on the West Coast, Europe, Singapore, Tokyo, Sydney, Brazil, China, and a government-only region called GovCloud. The development teams work directly with customers and are empowered to design, build, and launch based on what they learn.

 

Prime Instant Video

Prime Instant Video was launched in 2011 to provide customers streaming video on demand, analogous to books. In 2011 with 5,000 titles, they’ve grown selection to more than 40,000 movies and TV episodes. The Amazon Studios team continues to invest heavily in original content and will compete in the new TV market of the future.

 

 Fire TV

Recently, the Amazon team launched Fire TV. Not only is Fire TV the best way to watch Amazon’s video offerings, it also embraces non-Amazon content services like Netflix, Hulu Plus, VEVO, WatchESPN, and many more.  In addition to Prime Instant Video, Fire TV gives you instant access to over 200,000 movies and TV episodes available a la carte. As a bonus, Fire TV also lets you play high-quality, inexpensive games on your living room TV.

  

most innovative company
Is Amazon the most innovative company?

Amazon business model … most innovative company

Amazon, we believe, is the most innovative company in America in an industry built around constant innovation and change. Why, you may ask?

 

We believe there several good reasons. First, as one of the creators of the e-commerce industry, they well know the industry is in its infancy and is built on a foundation of new technology and constant introduction of new ways of doing things.

 

Second, they know their future is based on those trends. They also know to do new things well; they must be good at trying new ideas in many areas as experiments. These experiments, they realize, will not all work as planned, and some percentage will fail. They know and accept this without worry.

 

Innovative vision. We are always fascinated by this skill. It is one of the best business skills to have in our view. Does it mean you see everything? Certainly not. It does mean you have the ability to see what many cannot. And then act on these items. That is what makes for the most innovative company, in our minds. Lots of experiments and exploring. Innovation doesn’t work well without experimentation and lots of action. And Amazon is the best of the best, in our opinion.  (See our article on why the Wal-Mart e-commerce strategy won’t beat Amazon.)

 

Keys to business strategy

Priority 1

Focus on on-line business … it has far fewer limits than the brick and mortar space.

Priority 2

Control customer accounts, to own the cash register, and to build customer trust and confidence.

Priority 3

Establish an ecosystem around Kindle and Kindle Fire products. Their goal is to achieve digital supremacy on the order of Apple and Google.

 

As an example, they view Kindle as a service and not a device. They view the Kindle Fire not as a low cost iPad, but a high quality digital device dedicated to the digital content experience (music, apps, videos, and of course, books). Interesting perspective, isn’t it?

Related post: Game Changing Capabilities for In-Store Retail Business

 

The future?

Thinking about these areas above, it is not too hard to imagine the following future business goals for the Amazon enterprise:

 

Expand Kindle and Kindle Fire Ecosystem

Both of these have enormous growth in services and future applications yet to be discovered.

 

Same day delivery

Win the logistics war on delivery to make the on-line business bigger than brick and mortar.

 

Create Amazon supply

Their goal is to supply small to medium size businesses. Look out FedEx and UPS.

 

More digital product focus

They want to be on the leading edge with all digital products, especially so in products with the most business potential, like the new TV technology.

 

 

Amazon business model

 

 

Need some help in finding ways to grow your customers?  Such as creative ideas to help the differentiation with potential customers? Or perhaps finding ways to work with other businesses?

 

Call today for a FREE consultation or a FREE quote. Learn about some options to scope your job.

Call Mike at 607-725-8240.

 

So what’s the conclusion? The conclusion is there is no conclusion. There is only the next step. And that next step is completely up to you. But believe in the effectiveness of collaborative innovation. And put it to good use in adapting to changes in your business environment.

 

It’s up to you to keep improving your learning and experience with innovation and creativity efforts. Lessons are all around you. In this case, your competitor may be providing the ideas and or inspiration. But the key is in knowing that it is within you already.

 

All you get is what you bring to the fight. And that fight gets better every day you learn and apply new lessons.

 

When things go wrong, what’s most important is your next step.

 

Try. Learn. Improve. Repeat.

 

 

 

When things are not what you want them to be, what’s most important is your next step. Call today.

 

Are you devoting enough energy to improving your continuous learning for yourself and your team?

 

Mike Schoultz is the founder of Digital Spark Marketing, a digital marketing and customer service agency. With 40 years of business experience, he blogs on topics that relate to improving the performance of your business. Find them on G+Twitter, and LinkedIn.  

 

Digital Spark Marketing will stretch your thinking and your ability to adapt to change.  We also provide some fun and inspiration along the way. Call us for a free quote today. You will be amazed how reasonable we will be.

 

Check out these additional articles on business and its performance from our library:

 

More reading on business technology from Digital Spark Marketing’s Library:

Web SEO … 6 Ways to Improve Your Local Ranking

15 Remarkable Beacon Technology Ideas to Share

11 Ways Information Services Growth is Leading Dramatic Change

 

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7 Surprising Things to Know About the Amazon Business Model

2 thoughts on “7 Surprising Things to Know About the Amazon Business Model

  • November 7, 2016 at 11:32 am
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    I am writing my final Strategic Thinking exam in 2 days time. This post not only gave me insight into growing a business in the ecommerce space but also boosted my confidence ahead of the exam. When I pass this exam and go into the industry as a strategist, I will always remember “It’s up to you to keep improving your business strategy adaptation. Lessons are all around you. In many situations, your competitor may be providing the ideas and or inspiration. But the key is in knowing that it is within you already.” Thank you.

    • November 8, 2016 at 8:52 am
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      You are welcome. Thanks for your feedback.

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