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Amazon remains one of the most predictable revolutionary leaders in business. Accelerating growth through innovative ways and leveraging revenue streams that competitors lack. Asymmetric competition has become Amazon’s trademark. How does the company do it?

First, consider its legacy. Amazon started as an online bookstore a bit before the dot-com frenzy and used its own business model to polish up a staid industry. By collecting payments from buyers long before it paid suppliers and by initially refusing to keep inventory on its own, it could lower the prices of popular titles and still make money from the “float” rates it paid on the earned money paid by users for purchases. Brick and mortar chains couldn’t respond. Once Amazon established its own distribution centers, it could become a hub for users’ e-commerce needs by selling and distributing products from competing retailers.

Users became more and more loyal to Amazon, even in the highly competitive world of internet retailing, and competitors could not match the scope of Amazon’s offerings because they lacked the economies of scale from these centers. More recently, the company has used its leadership in selling physical books online to become the dominant e-reader vendor, leaving potential competitors unable to gain much ground. It also began to compete with traditional book publishers, giving leading writers a far better payout on sales for self-publishing under an Amazon masthead. With a business model aimed at providing services to these writers that many don’t really need, old publishers can’t come close to beating Amazon’s terms. Of course, Amazon has a lot more to offer, but that’s enough to get my point across.

Amazon’s formula for asymmetric competition includes these four elements:

1. Know your core: While Amazon’s business is constantly changing, the company’s core benefits are remarkably consistent. Its main asset is a loyal group of customers who rely on the company to understand their needs, provide an intuitive experience, and offer value for money. This is an asset very similar to Apple’s (although Apple has different brand values), but Amazon makes money on this asset in ways that Apple doesn’t. With all the praise Steve Jobs rightly praised, he was more of a product innovator than a business model innovator.

2. Find a new financial formula: Amazon has the retailers’ appreciation for how the price is received by customers. It is constantly finding ways to keep the headline price of a new listing down while making money in less noticeable ways.

3. Customer’s property: Amazon works liberally with all kinds of suppliers, but it’s crystal clear how it’s doing with its customer relationships. By having a direct line to customers, it can quickly introduce new offerings and attract attention to unorthodox concepts (like the original Kindle) that customers may have ignored without a sharp nudge from Amazon. The direct relationship also gives Amazon the flexibility to adapt offers quickly instead of having to rely on a tangle of business partners such as cellular network operators.

4. Keep competitors off balance: Amazon rarely sits on its laurels. In part because it operates at the intersection of internet retail and consumer electronics, the company faces a multitude of competitors who are always on the lookout for its business. It wins by constantly changing the game.

Contribution to Branding Strategy Insider by Steve Wunker, author of JOBS TO BE DONE: A Roadmap for Customer-Centered Innovation

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