The Amazon Management System . Ram Charan
of enterprises in the digital age.
Here’s another fascinating example of Amazon enabling and anticipating customer needs despite traditional views of competition. As this book was going to press, Amazon announced on September 24, 2019 that it was joining 30 different companies in the “Voice Interoperability Initiative” to ensure as many devices as possible will work with digital assistants from different companies. Amazon is pulling together with its competitors to create an industry standard for voice assistant software and hardware. Notably, Google, Apple, and Samsung are so far sitting out the initiative.
“As much as people would like the headline that there’s going to be one voice assistant that rules them all, we don’t agree,” says Amazon’s SVP of devices and services Dave Limp in The Verge. “This isn’t a sporting event. There’s not going to be one winner.”
“The initiative is built around a shared belief that voice services should work seamlessly alongside one another on a single device, and that voice-enabled products should be designed to support multiple simultaneous wake words,” Amazon reported in its press release. “More than 30 companies are supporting the effort, including global brands like Amazon, Baidu, BMW, Bose, Cerence, ecobee, Harman, Logitech, Microsoft, Salesforce, Sonos, Sound United, Sony Audio Group, Spotify and Tencent; telecommunications operators like Free, Orange, SFR and Verizon; hardware solutions providers like Amlogic, InnoMedia, Intel, MediaTek, NXP Semiconductors, Qualcomm Technologies, Inc., SGW Global and Tonly; and systems integrators like CommScope, DiscVision, Libre, Linkplay, MyBox, Sagemcom, StreamUnlimited and Sugr.
‘Multiple simultaneous wake words provide the best option for customers,’ said Jeff Bezos, Amazon founder and CEO. “Utterance by utterance, customers can choose which voice service will best support a particular interaction. It’s exciting to see these companies come together in pursuit of that vision.’”
This is another way that throughout twenty-five years of continuous evolution, Amazon has not only grown dramatically in size, but also evolved from simple models and services to far more extensive and dynamic offerings. It has transformed itself from a consumer-facing online bookstore into a consumer-facing platform, both online and offline, both first-party and third-party, for almost everything needed in people’s lives—we have yet to see Amazon launch a dating app, but your never know what’s coming up!—and into an enterprise-facing enabling infrastructure provider, for logistics and technical services for now, and there is definitely more to come. Amazon’s sky is limitless along its multi-dimensional growth trajectory — now and even more so in the future.
Now you see that Amazon has indeed successfully conceived and constructed a continuously expanding business model, built on novel concepts of platform, ecosystem, and infrastructure in the digital age.
What’s Amazon’s central idea?
By 2019 Amazon has become a digital giant beyond most people’s wildest imagination. In a recent interview with CNBC, Charlie Munger, Warren Buffet’s right-hand man and decades-long partner, described Amazon as “a phenomenon of nature.”
The central idea of Amazon is to imagine a new customer experience that could become a very large market space and an enormous economic opportunity, and imagine a new way to provide and personalize this end-to-end experience through the use of a digital platform and construction of digital infrastructure that processes data via algorithms and orchestrates physical distribution by partners within the ecosystem.
Customer obsession
Bezos has rarely finished a speech or an interview about Amazon without talking about customer obsession or customer centricity. The first principle that he stated in his famous nine-point management and decision-making approach published in his first Shareholder Letter in 1997 said, “We will continue to focus relentlessly on our customers.” Among all 14 Leadership Principles, Customer Obsession, again, ranked number 1, and has remained at the top ever since.
Why has Bezos been so obsessed with the customers?
As noted earlier, he has always regarded customers as Amazon’s most valuable asset. Customers are the central piece in Amazon’s flywheel and in the entire Amazon platform. Why is Amazon able to aggressively and successfully expand into more and more categories? Because they have customers who would like to buy more. Why are third-party sellers be attracted to the Amazon platform? One of the most obvious reasons is that there are hundreds of millions of customers and, by leveraging Amazon platform, they can scale up much faster.
Despite booming business and growing customer franchise worldwide, Bezos has always remained constantly in awe of customers.
“There is no rest for the weary. I constantly remind our employees to be afraid, to wake up every morning terrified. Not of our competition, but of our customers. Our customers have made our business what it is, they are the ones with whom we have a relationship, and they are the ones to whom we owe a great obligation. And we consider them to be loyal to us – right up until the second that someone else offers them a better service.” 10
Customers’ trust is an earned privilege, not a long-term benefit to be taken for granted. Trust takes years to build, seconds to break, and forever to repair. That’s probably why Bezos emphasized, “Our pricing objective is to earn customer trust, not to optimize short-term profit dollars.”11
As one of the most (most likely the most) customer-obsessed companies on the planet, Amazon beat out Google and Apple for the top on World’s 500 Most Influential Brands list released by World Brand Lab in 2018.
Invent for the customers
As Bezos put it, “One thing I love about customers is that they are divinely discontent. Their expectations are never static – they go up. It’s human nature.”12
How do we not just meet but stay ahead of the customers’ ever-rising expectations? The only way to do this is through continuous innovation and relentless invention. In this way, the divinely discontent customers became the sources of continuous inspiration for Amazon’s invention machine.
Many traditional companies also pay serious attention to innovation and improvement, but they normally do so because of competitive or performance pressure. They may seek marginal iterations around the edges, trying to tweak here and there, especially the packaging, but rarely make systematic overhauls for completely new ideas.
What Amazon aspires to is way beyond such minor innovation. At Amazon, the relentless drive to invent dramatic new ways to delight customers never stops. They focus on very big, potentially global consumer needs by visualizing the ultimate inevitability of customer needs, things that will not change in the next ten years (price, selection, and convenience).
Unlike traditional companies that primarily use technology for cost reduction, Amazon focuses on using technology to totally transform the existing customer existing experience, and to imagine an experience that does not exist today, and invent on behalf of the customers, such as Amazon Go.
Take Kindle as another example. It was never meant to out-book the book; it was designed instead to have new capabilities impossible with the traditional book, such as having millions of titles on sale, finding a book and having it in 60 seconds, being able to underline passages and create notes and saving them in the cloud.
In the spirit of relentless drive to invent, Amazon single-handedly created entirely new markets with huge global potential, such as cloud services (AWS) and smart speakers (Echo). As Bezos pointed out:
“No one asked for AWS. No one. Turns out the world was in fact ready and hungry for an offering like AWS but didn’t know it. We had a hunch, followed our curiosity, took the necessary financial risks, and began building – reworking, experimenting, and iterating countless times as we proceeded.”13