Amazon’s Customer Obsessed Strategy
Recently read Harvard Business Review interview of Amazon’s Jeff Bezos. The interview presents some interesting insights into strategic foundations of one the most successful Internet businesses of all time.
Jeff shares his thoughts about customer focus, experimentation, processes and execution, growth of a leader, projects prioritisation, among other things.
I have summarized the key strategic principles discussed in the 9-pages long interview as a “strategy dependency graph”.
Vision (customer obsession) drives flexible execution (emphasis on providing a great service). Projects are aligned based on stable customer needs. Emphasis on the “Why Not” culture for projects and features selection.
Disciplined processes to achieve operational excellence. As organization grows, leadership focus moves from - How do we do this? to, What needs to be done? to, Who is best suited to do this? - changes happening at a suitable rate determined by business growth.
I think the core driving principle of Amazon’s strategy is - “Be stubborn on vision (customer obsession), flexible in execution (user-centric feature experiments)”.
This is very evident in the revenue-product roadmap graph illustrated in the interview. While enjoying exponential revenue growth, the break-even point comes more than 6 years from start of operations (since 1995). Despite this, Amazon continued its investment in customer-focused “execution experiments” like Amazon Associates, sales rankings, friends & favourites, personalized recommendations, Amazon auctions, wish-lists, and many more.
Most of the present-day innovations including Amazon Web Services were launched or developed during the pre-profitability years. All this while continuing to drive down the price-point for its customers. Amazing resolve!
On the execution front, Jeff mentions about importance of disciplined processes and makes reference to Lean and Six Sigma process management methods.
I noted an interesting phrase while reading the interview - “Information Perfection”. As I understand, this means changing the process of “information exchange with customer” from being marketing oriented to production focused. I think that this does not mean keeping production under wraps and not shouting about it.
Involving customers at early stages of production via blogs, workshops, and early access programs is a great way to reach your market through “word-of-mouth” publicity. This is also in line with one of the best practices emphasized by Lean strategy - customer value “pulls” or aligns production processes.
What Others are Saying
- Comparison of Amazon and iTunes on Music distribution strategy
- Another example of Amazon’s customer-friendly focus: Low priced DRM-free music
- Timeline of acquisitions and investments made by Amazon since 1998: Shows a dip in 2002-03 and the buying spree has restarted more cautiously since then. Recent acquisitions are in online music (Amie Street, Brilliance Audio) and social networking (Shelfari).
- Amazon earnings report (Q207) analysis: Increasing focus on advertising, digital music and video. Revenues up 35% to $2.89 billion.
- Conversation with Amazon’s CTO on lessons learnt from Amazon’s architecture. Interesting insights on the production side of Amazon. Re-emphasizes some of the points mentioned in the HBR interview.
Related posts
Tags: Amazon, Customer Management, Internet Services, Jeff Bezos, Strategic Vision, Strategies
