How Amazon Thrives On Being Misunderstood
What are the biggest innovations from Amazon? Drones? Cloud computing? Echo and Alexa? These are impressive; Some are even revolutionary. However, I believe that Amazon's greatest innovations are those that have changed the fundamentals of competition so far that they now sound banal.
My top list of the biggest Amazon innovations includes free daily shipping, Prime Loyalty and Item Authority. The article authority is deceptively simple and has committed several sellers of the same article to improve article selection, availability and price competition. It was the “killer feature” that led Amazon to overtake eBay in the mid-2000s as a target website for third parties.
What are the common characteristics of each of these innovations, except that they come from Amazon? On the one hand, these are all customer experiences and business model innovations. They're not really that technical. They also have in common the fact that established companies and industry experts have deeply underestimated their impact on the industry and the bottom line. These innovations were implemented when Amazon was still young, small and was neither respected nor feared by the industry. Here are just a few examples:
- "Amazon is pulling everyone into the gutter to play this game (free shipping)." ~ Bob Schwartz, former President of Magento and founder of Nordstrom.com
- "There are many times when a voice assistant is really useful, but that doesn't mean you never want a screen. The idea that (Amazon Echo) doesn't have a screen doesn't fit many situations in my opinion." ~ Philip Schiller, senior vice president of global marketing at Apple
- “While recent reports and reports about a new company that competes with the three major airlines in the United States are making headlines, in reality it would be a daunting task to need tens of billions of dollars in capital and years to be of sufficient size and density for replication to build up existing networks like FedEx. "~ Mike Glenn, FedEx Executive Vice President
- “We don't believe that our vendors who sell products directly from Amazon pose an immediate threat. There is no indication that any of our vendors intends to sell premium sports products, over $ 100 sneakers that we offer, directly through this type of distribution channel. Richard Johnson, CEO and Chairman of Foot Locker
- "When you think of the online or offline experience, we don't need AI in our stores. We have" I. "We have living, breathing, 4,500 style advisors in our stores." ~ Marc Metrick, President of Saks Fifth Avenue
- "What the hell is cloud computing? . . . I mean, it's really just gibberish. "~ Larry Ellison, Executive Chair and Chief Technology Officer of Oracle
- "I don't worry so much about (AWS) to be very open with you. We have to worry. We are in a great position." ~ Mark Hurd, CEO of Oracle
All of these public statements from established industry leaders remind me of the classic quote from Thomas Watson, chairman of IBM, who said in 1943, "I think there is a global market for maybe five computers."
The most effective and underestimated aspect of innovation is questioning general and long-term assumptions about how things work. If you create an alternative to these assumptions, you can expect many doubters.
Being misunderstood: the best sign of disorder
Over the years, when Amazon messed up the status quo and disrupted the cozy business tradition after the cozy business tradition with innovation, the company fought back with ridicule and layoffs. In Jeff Bezos' head, this is "misunderstood". If you want to be innovative, you not only have to be ready to be misunderstood, but also have thick skin. Amazon makes no sense to many of its competitors. "It's the most confusing, illogical, and, for a growing sea of competitors, the most terrifying company in the world." If you don't upset someone, you probably won't bother much:
“One thing I learned in the first few years after starting a business was that inventing and pioneering involved being willing to be misunderstood for long periods of time. One of the first examples of this is customer reviews. Someone wrote to me and said, "You don't understand your business. You make money when you sell things. Why do you allow these negative customer reviews?" And when I read this letter I thought we didn't make money when we sold things. We make money by helping customers make buying decisions. ”~ Jeff Bezos
Consider the Look Inside the Book feature. In 2001, Amazon launched this program based on a simple concept – the idea of emulating the bookstore experience by showing the pages in a book to Amazon surfers before buying. Of course, this required Amazon to put book content online on the website, which raises some questions as to whether this would expose book content to piracy. The publishers were concerned and skeptical. The program would also be very expensive. Every book would have to be digitally scanned and indexed, a major logistical challenge.
Jeff gave the go-ahead for a large-scale launch and realized that this was the only way to see if this would happen to Amazon's 43 million active customer accounts at the time. The feature debuted with an astonishing over 120,000 books. The database took up 20 terabytes, which was about 20 times larger than the largest database that existed when Amazon was founded.
David Risher was Amazon's first vice president of product and business development, responsible for increasing the company's revenue from $ 16 million to over $ 4 billion. He described the strategy behind the introduction of Look Inside the Book as follows: “If we had tried it out on a small number of books, for example 1,000 or 2,000, it would not have affected PR or customer perception. There is an X factor: what will it look like on a scale? It is a big investment and a huge opportunity cost. There is a leap in faith. Jeff is ready to play these games of chance. “Ultimately, publishers used the Look Inside the Book program as a sales asset.
The value of critics
Every time you do something big that is distracting – Kindle, AWS – there will be critics. And there will be at least two types of critics. There will be well-meaning critics who really misunderstand what you are doing or really disagree. And there will be self-interested critics who have a vested interest in not liking what you do, and they will have misunderstandings. And you have to be ready to ignore both types of critics. You listen to them because you want to see, always test, is it possible that they are right? But if you hold back and say, "No, we believe in this vision", just stay with your head bowed, stay focused and expand your vision.
A current example of Amazon's willingness to be "misunderstood" is its general health strategy. By partnering with Berkshire Hathaway and JP Morgan Chase, how will Amazon strive to change the healthcare and insurance for its employees by founding the as yet undisclosed healthcare company led by Atul Gawande? Is your strategy to sell supplies to hospitals? Should the PillPack acquisition be integrated into a prime advantage and should customers be able to get cheaper prescription deliveries (together with a new book)? Or should the general customer experience in healthcare and health insurance be changed and the cost structure changed, which is an enormous burden for both companies and employees? Or is it something else? I doubt that Amazon will clarify this in the short term, and I actually expect the portfolio to add more healthcare investments.
There are two sides to "being misunderstood". The first is that you should be concerned if your goal is a big innovation that is changing customer experience and business model dramatically. When established stakeholders are not naysayers. The second side is to plan and prepare your stakeholders like investors and partners for the negative reactions. Amazon's annual letter to shareholders consistently reminds investors that Amazon will look for long-term business results and not sacrifice long-term value for short-term results, and that this is often misunderstood. Are you ready to be misunderstood
Questions to consider
1. When was the last time you did something that benefited customers but messed up business traditions?
2. What aspects of your customer experience would be different if you started over?
3. Which business model innovations could be applied to your industry?
Contribution to the Branding Strategy Insider by: John Rossman. Extract from his book Think Like Amazon, 50 1/2 ideas to become a digital market leader (McGraw-Hill)
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