The book by Brad Stone is possibly the best competitive profile I have seen on a given company. When I was a consultant, I conducted many benchmarks and industry analyses. I would have loved to get insight in that type of format: deeply researched, storylined, and well written.
It is hard to judge whether everything reported about Amazon between 2010 and 2020 is accurate. Who knows? Though, Brad sounds well informed, maintains a balanced position, and the stories are believable. Obviously, reality is always multi-faceted. But while we may not get the truth, we can definitely get insight. This is good enough.
For anyone in ecommerce, competing with Amazon or not, the author provides a detailed account of the peripeties Amazon went through across the decade. A lot can be learnt as parallel situations tend to create similar debates. Whatever decision one will eventually take, looking at what Amazon did does shed some light.
Chapters are well organized and all cover one interesting topic at a time. Here are some insights I decided to keep. Voluntarily, they do not follow the book table of content. This can easily be obtained elsewhere. Have a look at that table of content and see if a particular chapter is relevant for you.
Thus, the bullets below should be considered as an alternative table of content rather than advisable business practice. Behind each point, Brad Stone has some valuable paragraphs that offer interesting experience as to how Amazon or Jeff Bezos dealt with this issue. Sometimes they strived, sometimes they struggled. What will you do?
Enjoy the read!
Take a long-term view to innovation
Build everything to be sold externally. Every internal support service should be thought to be marketed to external clients as a service to other companies.
Accept successes come along failures. Alexa Echo was created along with many other ideas that were unsuccessful, including the Kindle Fire but also one cow burger
Accept hard innovation is hard to make happen. Amazon Go took a lot of energy, money, and smart people to release. It actually is a very hard technical feat.
Be willing to invest if you want to go into grocery. It is a local business with different rules. Amazon took many years and attempts to get where it is today.
Be ready to lose money for a long time. Jeff Bezos is reported to be flexible about losing money for up to ten years. He wants profitability after that period, though.
Maintain a great customer experience
Respect individual clients’ choices. Trash is in the eye of the beholder. If people want to buy cheap quality products from abroad, you somehow have to sell this.
Ensure advertising keeps customer experience intact. Enforce tight control on what is displayed on the site and prefer sponsored link over communication.
Launch private labels on simple products. Amazon sold by themselves through Amazon basics everything that was profitable and straightforward to produce.
Be ready for harsh discussions. Amazon’s choice, Amazon’s basics, counterfeits…. Many topics infuriated Amazon partners over the years.
Learn Chinese. In 2016, over 50% of the top 10,000 sellers on Amazon were Chinese. Do what you have to in order to deal with this reality.
Manage counterfeits and stings. Amazon had a hard time enforcing controls on their third-party vendors. It infuriated many brands until they got things better.
Ensure good quality products on the marketplace. Amazon built a quality department after several scandals in 2015. It was hard to get things right.
Manage human resources
Define a strong culture. Amazon is a tough meritocracy including forced rankings and long hours. People fit or don’t fit. [One may or may not like it…]
Keep employees motivated. Rich colleagues are not a blessing. Ensure people don’t stay for the wrong reasons as they are too comfortable.
Externalize what you want outside. Amazon outsourced last mile distribution to tightly managed distribution partners in order to avoid unionized workforce.
Distill management tools
Write down your culture. Amazon has sixteen management principles that are written down and are known by everyone. They help decision making.
Enforce reading of 6 pages storyline memo. They are a good way to ensure information is shared in a short format that should be understandable by most.
Use advanced management techniques. Amazon included a lot of lean management techniques and Toyota principles in their warehouses.
Prefer algorithms when you can
Favor data driven decisions. In purchasing decisions for instance, algorithms avoid human errors and personal bets that may turn out to be bad choices.
Build automated non arguable labels. Amazon’s choice label is based on customer reviews, price, and delivery time. It is supposedly impossible to game.
Play the acquisition and divestment game
Move fast and slow on M&A. Act quick on hot deals when rivals are on the move. Act slow on long term opportunities where being right before time is right is costly.
Have targets want to be acquired by you. Wholefood asked Amazon to acquire them. Build such a reputation for that people celebrate when joining you. It helps.
Take equity in your partners. Amazon asked for shares when they knew the announcement of working together would move the stock price, e.g., ATSG.
Divest from times to times. Amazon exited many activities in 2018 when they suddenly decided to hunt for profitability. Free lunch is not forever.
Hide business unit profitability if you can. In order to delay competitor entry. Amazon revealed AWS profits only when they legally had to.
Ensure retail business is profitable. US Retail profitability declined over 2014-2017 excluding advertising. Jeff Bezos took strong action about this in 2018.
Beware of press stories. They may or may not be true. Amazon drone activity got a lot of attention when it was really a smoke screen: they never went past a few tests.
Ensure the leader sets the tone
Have the leader set the example. Jeff Bezos personally shows the way in terms of presence and energy. [At least until 2018]
Be on a larger mission. Jeff Bezos is on a personal mission to create the future, including making Star Trek style science fiction a reality. [One may like or dislike it…]
Request a high level of quality. Be intolerant with wrong or shaky numbers. Be intransigent on accuracy. Though, manage carrot at the same time as stick.
Celebrate quickly and get to the next level. Jeff Bezos always asks for more and rarely communicates satisfaction, though he does celebrate from times to times.
Take good many decisions or delegate them well
Adapt management rules to the sector. Business principles for newspaper, Hollywood and space exploration differ from e-commerce. Though some are alike.
Take many decisions with intensity. It is doubtful if Jeff Bezos takes better decisions than average. Though, he makes many bets, and some do pay off well.
Look for simplifier lieutenants. Put in charge businesspeople able to take over complex topics and to figure out how to make big businesses out of them.
Manage external stakeholders
Buy a newspaper. Jeff Bezos acquired Washington Post to take part in upholding democracy. [One may or may not think there is a passive lobbying agenda too]
Take advantage of tax deals. Amazon avoided US sales tax until 2017 and organized a large auction for their headquarter location. There are other examples.
Beware of country and legal interventions. Amazon and Walmart significantly impacted the Indian local retail industry, losing billions. India had to pass laws.
Be ready for the spotlight. Amazon was finger pointed a lot as it became a target for press coverage. Leadership position comes with a flip side: you are a scapegoat.