case study 2 the amazon of innovation

Roger Swannell

Case study on Amazon’s approach to innovation and competition in the knowledge economy

Admin on 13/03/2020

Introduction

Amazon is generally regarded as one of the most innovative companies in the world (Reed, 2017). In considering how Amazon approaches innovation within the knowledge economy we’ll frame the analysis of new technologies by looking at McKinsey’s research on disruptive technologies that have potential for economic impact, how Amazon has approached innovation in each of these new technologies, and consider how innovation has impacted Amazon’s revenue growth.

Amazon’s approach to innovation

Since beginning in 1995 as an online bookstore Amazon has expanded into ecommerce marketplace, digital advertising, cloud computing, groceries and apparel, and artificial intelligence industries. Amazon’s investment strategy for innovation is to act like a growth investor, spreading it’s investments across a diverse range of sectors and industries. This is a markedly different strategy to other tech giants who choose to focus the majority of their innovation efforts within their core competencies e.g. Facebook with social networks and Apple with consumer electronic devices (Bowman, 2017).

Jeff Bezo, CEO of Amazon, explains, “Because of our emphasis on the long-term, we may make decisions and weigh tradeoffs differently than some companies… We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations” (Bezos, 1997). It is through this approach to innovation that Amazon seeks to develop monopolies in all of the sectors that it enters.

McKinsey Global Institute’s report (Fig. 1) on disruptive technologies identifies “12 technologies that could drive truly massive economic transformations and disruptions in the coming years” (Manyika et al, 2013). Amazon is publicly investing in at least eight of the twelve technologies, through investing in companies that are working on new technologies, utilising the new technology to build organisational capacity and improve productivity, and through commercialising the new technologies in ways that enable Amazon’s business customers to implement within their companies.

Amazon is known for its secrecy around innovation, necessarily so in order to protect its trade secrets, but by looking at how Amazon approaches the six most impactful disruptive technologies we can gain an understanding of how Amazon approaches innovation.

Mobile Internet

“Increasingly inexpensive and capable mobile computing devices and Internet connectivity”

Amazon’s Kindle eReader, which launched in 2007, wasn’t the first eReader on the market but with it’s innovative WiFi hardware and Kindle Direct Publishing, the self-publishing platform, it enabled customers to have thousands of books available within seconds and authors to publish their writing without relying on the publishing industry (Fox Rubin, 2017). Whilst the design of the device was very similar to other eReaders, it was Amazon’s move to create its own ebook format and the Kindle Direct Publishing Network to allow ebooks to be published in its own format that fits with Amazon’s approach to innovation.

Whilst the majority of manufacturers were focused on developing eReader devices that could support .epub as the main format for ebooks, Amazon was instead establishing a core competency around its own format and publishing network. Developing the device was a complementary competency for Amazon, although one important enough for Amazon to ensure it controlled the device as part of the value chain for ebooks.

The digitization of books was a technological breakthrough which following Anderson and Tuishman’s evolutionary model of technological change, resulted in lots of technical variation in the formats available. Over the first decade the variations in formats reduced until the current situation of having two formats, epub and Amazon KIndle format, available. The ebook market hasn’t yet arrived at a single dominant design (Anderson & Tushman, 1990. Suárez & Utterback, 1995) however as Amazon currently dominates the eReader market with 60% of worldwide device sales in 2017 (Fox Rubin, 2017), only time will tell if the Amazon format for ebooks becomes the dominant design.

Automation of knowledge work

“Intelligent software systems that can perform knowledge-work tasks”

In 2018 Amazon “reorganised around Artificial Intelligence” (Morgan, 2018). This reorganisation focused other teams and departments at Amazon to utilise AI in their products and services, including warehouse management, recommendations on Amazon Music, Prime Video and on the ecommerce marketplace, Alexa and the Amazon Go store (Levy, 2018). This demonstrates Amazon’s approach to automating knowledge work. AI isn’t considered a single product that remains within a single team, it is a technology and capability that Amazon clearly regards as a core competency that should be utilised in as many ways as possible in order to give Amazon a competitive advantage in all of the sectors it operates in.

This is an example of what Tushman and Anderson explain when they say, “Technological innovation affects not only a given population, but also those populations within technologically interdependent communities” (Tushman & Anderson, 1986). Amazon leveraged the technological innovation of AI to gain benefits across all areas of its business, however it remains unclear whether this new technology was a competence-destroying because it required completely different skills and knowledge to operate or competence-enhancing because it built “on existing know how yet did not render skills obsolete” (Tushman and Anderson 1986).

Having realised the benefits Amazon went on to commercialise it’s AI by creating AutoGluon, a service that enables developers to build applications involving machine learning on top of AWS (Hepburn, 2020). “Commercial AI has enjoyed what we at Amazon call the flywheel effect: customer interactions with AI systems generate data; with more data, machine learning algorithms perform better, which leads to better customer experiences; better customer experiences drive more usage and engagement, which in turn generate more data.” (Sarikaya, 2019).

Internet of Things

“Networks of low-cost sensors and actuators for data collection, monitoring, decision making, and process optimisation”

The Amazon Dash, an internet-enabled button for making repeat purchases, was Amazon’s move into Internet of Things devices. On sale for less than four years the device fell foul of consumer protection laws in Germany, Amazon’s second biggest market at the time, where a court ruled that Amazon Dash didn’t provide customers with enough information to make informed purchases (Jagannathan, 2019). Although a regulatory and revenue-generating failure, the device may have been more of a success in establishing Amazon’s first-mover advantage into the market of consumer IoT devices and in collecting data on buying behaviour (Newman, 2016) to inform the next generation of devices.

Echo and Dot, the home speakers with the Alexa voice technology, soon replaced the Dash as a means of making purchases easier for consumers and as a means of collecting data on buying behaviour, data which could also be used to train the machine learning algorithms that powered Alexa. Voice-powered machine learning algorithms are intangible assets that require investment but have different economic characteristics to tangible assets (Haskell & Westlake, 2017):

• Sunk costs – represent an investment that is unlikely to deliver a return in the way a tangible asset would if resold as intangible assets are difficult to sell as they are often bespoke to the company developing them, as in the case of Alexa algorithms.
• Spillovers – are benefits competitors may gain from appropriating intangible assets such as the design of a device which is easy to reverse engineer. Amazon’s defense is to focus more on things that are difficult to copy such as bespoke algorithms.
• Scalability – a characteristic of an intangible asset that can be leveraged in ways that tangible assets cannot without increased investment, such as the Alexa algorithm which works on all Alexa powered devices, but also the ‘brand’ of Alexa as a likeable, humanised, ‘part of the family’ voice assistant in comparison to Google choice to call its voice assistant Google.
• Synergies – occur when intangible assets become more valuable together than in isolation. Alexa has more value because it connects to Amazon’s ecommerce systems and allows customers to make purchases, and because Amazon allows developers to build other services on top of the Amazon ecosystem that enables customers to control the heating and lighting in their homes.

Amazon’s approach to investing more in its intangible assets, such as algorithms, than in the physical devices seems to suggest that they recognise the competitive advantage intangible assets can give them a over other companies, but also that they recognise the risks Haskell and Westlake point out can be associated with this kind of investment (Haskell & Westlake, 2017). The economic value of intangible assets in the case of Alexa comes from strategic choices about how they are leveraged to drive purchasing behaviour in customers.

“Use of computer hardware and software resources to deliver services of the Internet ”

Amazon Web Services is a leading (Gartner, 2018) infrastructure-as-a-service provider. Gartner calls out AWS’ “prioritisation of being first to market” along with being the “most mature enterprise-ready provider, with the strongest track record of customer success” as key aspects of being a leading cloud provider (Bala, et al, 2018). AWS started from the needs of Amazon’s ecommerce business, which required reliable, scalable technology to power its growth in the early 2000’s. By 2003, providing infrastructure services and reliable, scalable data-centers was considered a core competency by Bezos and Amazon senior executives. When Amazon launched AWS in 2006 they were “first to market with a modern cloud infrastructure” (Miller, 2016). AWS holds 40% of the market share in cloud computing (Carey, 2019), a position it gained by building on core competencies it owned in other areas of its business and being years ahead of competitors (Miller, 2016).

Teece talks about the ‘perplexing’ problem of how many companies who are first to market with an innovation are not the ones to commercialise and profit from it. With AWS, Amazon demonstrated that it’s approach to innovation can deliver on significant commercial success. Teece’s framework for determining which company will win from introducing innovation involves understanding the appropriability; the environmental factors that affect the ability to capture profits from an innovation, the design phase; whether a dominant design has emerged, and the competencies necessary for the commercialisation of the innovation.

In the early 2000s, cloud infrastructure services had what Teece describes as a “tight appropriability regime” (Teece, 1986). The environments in which the technology for providing infrastructure services over the internet existed was easy to protect simply because competitors were not yet building their core competencies in cloud. Having a “tight appropriability regime” for cloud services gave AWS the time it needed to launch its products and services before the regime weakened and other entrants could imitate the technology.

At the time of launching AWS, cloud infrastructure services were pre-paradigmatic, the majority of infrastructure providers weren’t even considering cloud, so there was no dominant design. Teece says that, “when imitation is possible and occurs coupled with design modification before the emergence of a dominant design, followers have a good chance of having their modified product anointed as the industry standard, often to the great disadvantage of the innovator.” (Teece, 1986), but this did not happen to Amazon.

Amazon already owned the complementary assets required to commercialise AWS successfully (procurement, marketing, sales, etc.) which removed any bargaining power issues that may have arisen from contracting assets, and put AWS in a good position to quickly establish the dominant design for cloud infrastructure services and so leverage its position as a first-to-market pre-paradigmatic innovator and as a paradigmatic market leader.

Advanced robotics

“Increasingly capable robots with enhanced sensors, dexterity, and intelligence; used to automate many tasks”

In 2012, Amazon acquired Kiva Systems, a small robotics company for $775 million providing Amazon with mobile robots and the technical expertise to begin automating its warehouses and sorting facilities. (Del Rey, 2019). This automation of the work of pickers and packers enabled Amazon to increase efficiency in its warehouse operations by reducing the time taken to pick items for delivery to its customers (Simon, 2019), and so driving the success of its ecommerce business. In 2019 Amazon introduced machines to automate putting customer orders into boxes ready for delivery, a job that was previously performed by thousands of workers. It “would amount to more than 1,300 cuts across 55 U.S. fulfillment centers for standard-sized inventory. Amazon would expect to recover the costs in under two years, at $1 million per machine plus operational expenses.”, reported Reuters (Dastin, 2019). Amazon currently has more than 200,000 mobile robots working inside its warehouse network, alongside hundreds of thousands of human workers.

Amazon, as a low margin business, seeks to organise its supply chain more effectively than its competitors to maximise profits (Teece, 1986). Automation increasingly allows for this in Amazon’s fulfilment business as it replaces the routine work (Autor, Levy & Murnane, 2003) of pickers and packers. In making capital investments in technologies to replace workers with robots Amazon could be said to be taking a skills-biased approach; that is, that it favours more highly skilled workers such as programmers, engineers and mechanics at the cost of lower skilled workers and assumes thats increased productivity for the company comes from fewer highly skilled workers over more lower skilled workers. Ordinarily we would expect that companies would make decisions about how much to invest in automation technologies by considering economic factors such as the cost of labour in a particular geographic market however, from what we’ve seen of Amazon’s investment strategy in innovation it seems more likely that Amazon is playing the long game with automation and betting on machines being capable of performing non-routine cognitive and manual tasks in the future (Frey & Osborne 2013) and so replacing lower skilled workers completely.

The adoption of automation in warehouses and fulfilment centres has been congruent with Amazon’s approach to innovation involving massive investment in technology that provides increased internal capabilities enabling Amazon to become a market leader and then selling that capability to businesses to deliver long term revenue gains. The question of whether robots will replace workers, at least in Amazon warehouses, seems to have an inevitable answer.

Autonomous or near-autonomous vehicles

“Vehicles that can navigate and operate autonomously or semi autonomously in many situations”

Amazon has invested $700 million in Rivian, the electric vehicle manufacturer and $530 million in Aurora, an autonomous driving startup. “For Amazon, this small investment is a good way to enlarge their bet on the E.V. [electric vehicle] market without having to tool up a plant to find out if it will fly. Over time, the Rivian investment could give Amazon a starting point to own and operate an in-house package delivery business.” (Mitchell, 2019).

Amazon has been developing delivery drones “that can fly up to 15 miles and deliver packages under five pounds to customers in less than 30 minutes.” (Vincent, 2019). Developing delivery drones and getting FAA approval might be considered a big enough innovation for most companies, but Amazon goes a huge step further by developing its own Air Traffic Control System for drones. “The system also gives aviation authorities, like the FAA, the ability to track the drones in the airspace to ensure safety and create “no fly zones” in times of emergency. The traffic management system is easy to use for various operators in the same airspace because it will connect via the internet” (Amazon, 2019). In a similar strategic play to the Kindle, Amazon realises that controlling the platform that controls the devices creates considerable more competitive advantage than simply developing the best drones.

Developing drones and autonomous electric vehicles will reduce Amazon’s reliance on third-party delivery partners and own the supply chain (Prosser, 2019), and conceivably it could commercialise the service to compete with FedEx, UPS, etc., and thus drive increased revenue for the company, but in order to do so it needs to protect the design of the drones and vehicles from competitors. Archibugi & Pianta explain that, “technological change impinges on codified and tacit knowledge… innovations can either be embodied in capital goods and products or disembodied, i.e. the know-how included in patents” (Archibugi & Pianta, 1996). As it is almost impossible to protect designs for publicly available machines like drones through trade secrets in the way Amazon does for its software and algorithms, Amazon needs to file patents to protect its disembodied codified knowledge in order to continue to be innovative.

In 2019 Amazon filed over two thousand patents (Capriel, 2019) many for drones and autonomous vehicles, and since 2010 Amazon has grown its patent portfolio from less than 1,000 active patents in 2010 to nearly 10,000 in 2019 (Columbus, 2019), a ten-fold increase in less than a decade (Fig. 2).

Patents can be used strategically by companies in a number of ways; to protect inventions with the intention of commercialising them, or simply to prevent competitors from entering the space. This makes the number of patents filed a poor indicator of innovation, and so it seems that the number of patents Amazon has filed has increased over time because they have become involved in more sectors and industries rather than because they have become more innovative.

Amazon’s sources of competitive advantage

These six examples demonstrate Amazon’s superior ability over its competitors and how they employ the same approach towards innovation; not constrained to sectors or industries that they have previously operated in, investing huge amounts to own the sector they move into, building core competencies in their value chain to protect their own competitiveness, and making new technologies available outside their own ecosystem to allow their customers to leverage the technology in ways that support and scale Amazon’s business model, in many cases the customer becoming reliant on Amazon in their value chain, for example Netflix using AWS (Uenlue, 2018).

Amazon’s economic growth from innovation

Amazon’s approach to innovating across multiple sectors and industries has given them significant competitive advantage and commercial success, growing from $6.92 billion in 2004 to $280.52 bn in 2019 (Clement, 2020), an almost 4000% increase.

The breakdown of Amazon’s commercial performance by it’s main areas of business in 2018 shows it’s longstanding ecommerce business as the main revenue producing business (Day & Gu, 2019):

• Ecommerce: $234.61 bn sales
• Cloud computing: $25.6 bn in revenue
• Groceries: $25.4 bn in sales
• Online apparel: $24.61 bn in sales
• Consumables: $23.6 bn in sales
• Digital advertising: $7.4 bn in revenue

Of the six disruptive innovations discussed above, only cloud computing, where Amazon is the market leader, generates significant income. This reflects Amazon’s approach to innovation involving long-term investment to establish commercial success.

Amazon has earned its reputation as one of the most innovative companies in the world. Amazon’s approach innovation can be broadly summed up in three parts:

• Large investments and acquisitions in software and hardware startups spread across multiple sectors and industries. This puts Amazon in control of the value chain and reduces the risk of suppliers holding strong bargaining positions.
• Use the technology that is produced to develop efficiency and productivity gains in products and services in a diverse range of sectors and ensure competitive advantage over the long term.
• Commercialise those products and services, allowing other companies to leverage them, generating revenue and creating lock-in network effects (Katz & Shapiro, 1994) for those companies and Amazon’s customers.

This approach to innovation has enabled Amazon to develop significantly successful businesses in ecommerce, cloud computing, digital advertising and retail, and is likely to contribute to Amazon’s continued success into the future.

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The Integration of Digital Business Models: The Amazon Case Study

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• Carlo Bagnoli 10 ,
• Andrea Albarelli 11 ,
• Stefano Biazzo   ORCID: orcid.org/0000-0003-3373-2964 12 ,
• Gianluca Biotto 13 ,
• Giuseppe Roberto Marseglia 14 ,
• Maurizio Massaro   ORCID: orcid.org/0000-0001-6461-2709 15 ,
• Matilde Messina 13 ,
• Antonella Muraro 16 &
• Luca Troiano 17  

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The final chapter involves the description of the Amazon case study. The intention is to reconnect the various categorizations illustrated in the previous chapter to a real-world example for the purpose of presenting a successful case of business disruption as Amazon is known to have disrupted retail. The analysis aims at highlighting the fact that Amazon combines all the business model frameworks described in the preceding chapters as well as investigating their coexistence within a single organization.

The present chapter also explains a few methodologies which have been developed in order to guide companies through the process of disrupting their existing business models and facilitating the shift towards an innovative framework. Digital technologies can ease the above-mentioned transition as firms are required to select the technological advancements enabling them to accomplish particular organizational goals.

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Exploring the focus that Amazon inc. has on innovation as a business strategy, setting clarity around the company's present situation with the use of an in-depth PESTLE analysis to set the scene.

A company such as Amazon has a dedication to innovation using it as a tool to realize the growth of current markets, while strategically positioning itself in future markets. This case study will analyze Amazon's current situation using the PESTLE form of analysis, briefly linking the outcomes with innovations that have been released by the company to date. By Isolde Kanikani Date: 15-07-2021

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Learn From Amazon’s Approach To Innovation

Dan Bieler , Principal Analyst

Photo: Amazon

For years, Amazon has been the lighthouse for customer obsession because of its unique approach to sustainable and continuous experimentation and innovation. As organizations are looking to become more adaptive , creative, and resilient, tech executives should explore the best practices Amazon deploys to build differentiation and drive growth.

Culture sets the tone for organizational structures, types of technology, management techniques, and processes. And diversity and inclusion are key enablers of innovation success because they help drive new perspectives and fresh ideas. Amazon’s approach to innovation relies on a set of methodologies, concepts, and tools that stretch from culture to process to technology:

• A customer-obsessed culture sits at the core of Amazon’s approach to innovation. Corporate culture matters as it defines how an organization reflects on itself and how it tackles the challenges of permanent change. Corporate culture must be open and flexible enough to adjust to continuously changing customer expectations, market landscapes, and technology innovation. At Amazon, customer obsession, long-term thinking, eagerness to invent, and the drive for operational excellence form the cornerstones of its culture.
• Amazon approaches innovation with a global framework of principles. Amazon’s Leadership Principles set the framework for Amazon’s innovation environment. These leadership principles are not only part of every process at Amazon, but they frame its underlying corporate DNA. A major task is to balance innovation creativity with process development. However, Jeff Bezos also points to the risk that “the process becomes the proxy for the result you want. You stop looking at outcomes and just make sure you’re doing the process right.” Hence, principles — and processes — are continuously evolving.
• Amazon has a toolbox of concepts to support its innovation process. The most important concepts are about “working backwards,” which drives any process change through the lens of the customer. Defining who and how users will benefit before settling on what needs to change is the starting point. Then writing narratives, building single-threaded teams, focusing on input — not output — metrics, and distinguishing between two-way versus one-way door decisions are the next steps. Finally, hiring creative builders via the “bar raiser solution” and keeping “day one thinking” alive helps to make that innovation sustainable.

Of course, not every firm can be like Amazon. For many organizations, Amazon’s approach contravenes much of what counts as consensus for how business is traditionally done. And still: Tech executives should investigate the concepts that guide Amazon’s approach to innovation. There will be elements of great relevance for your organization. You can learn from and embrace these elements to fundamentally rethink your own approach to innovation. Read my report Learn From Amazon’s Approach To Innovation And Experimentation to learn more.

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• customer experience
• customer experience management
• Customer Experience Strategy
• customer obsession
• Data Insights
• digital business
• digital disruption
• experience design (XD)
• operationalizing innovation
• organizational design
• personalization
• technology-driven innovation

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Amazon Innovation Culture Relies on These 5 Rules

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After all, Amazon Prime delivers 13.7 million items around the world every day, with a total of over 5 billion packages each year. That’s a lot of cardboard on a lot of doorsteps! 

No other company is changing modern commerce quite like Amazon. Since its founding in a humble Bellevue garage in 1994, the company has grown into a trillion-dollar e-commerce titan, with over 310 million active customers around the world.

The secret to this incredible growth? The Amazon innovation mindset.

In this innovation case study, we’re going to break down five techniques Amazon uses to redefine modern commerce from the ground up, from founder Jeff Bezos’s “Day 1” innovation philosophy through to the company’s famous “two-pizza meeting” rule. 

Garage to global superpower: Amazon’s innovation evolution

A far cry from today’s “deliver anything you want” model, the Amazon of 1994 was conceived with a more modest goal: to change the way people bought books. 

Focusing on this one area, the company built an extensive logistics network, with great delivery and freight capability. When its IPO rolled around in 1997, this network had become the jewel in Amazon’s crown, helping catapult the company into wider ecommerce.

Over the next two decades, Amazon grew and diversified. The website that once just sold books now sells pretty much anything, and delivers almost anywhere around the world. Even better, it enables anyone to set up their own online storefront. 

So, instead of competing with other online retailers, Amazon offers a cloud platform to help other retailers offer their goods and services to buyers - for a price. 

It’s all part of Amazon Web Services (AWS), a $25.7 billion division of the company that grew out of Amazon’s own infrastructure needs. 

In fact, even other online giants like Netflix rely on AWS, meaning a significant amount of Netflix’s subscription revenue goes to Amazon for using its servers. Where other companies might steer clear of supporting a direct competitor, for Amazon, it all adds up to more revenue.

AWS’s democratization of e-commerce has transformed the modern online environment, making it easy for anyone to start their own online store. Now, there are over 5 million marketplace sellers across Amazon, with over a million new sellers added each year. 

This radical innovation explains why independent businesses not relying on AWS rank competition from Amazon as the single largest threat to their ongoing survival. People want convenience, choice, and great deals, and it’s hard to compete with the Amazon marketplace. 

Trillion-dollar titan: Amazon’s incredible performance

In late 2018, Amazon’s total value passed the $1 trillion dollar mark , making the company the second in American history (after Apple) to cross that mythical line. 

Now, in 2019, Amazon captures 49 cents of every e-commerce dollar spent in the United States. Just let that sink in for a second. That’s just under half of all e-commerce revenue, all going directly to one company. 

All those sales have helped to create a lot of work opportunities, both in the United States and around the world. Now, Amazon employs almost 650,000 people , and generated an enormous $233 billion in annual revenue for 2018. 

Much of this profitability is due to the company’s rapacious appetite for acquiring new businesses , including ebooks outfit Audible in 2008, shoe retailer Zappos in 2009, robotics firm Kiva Systems in 2012, the Washington Post in 2013, and Whole Foods in 2017. 

Another reason for Amazon’s incredible growth? The company’s ‘Day 1’ strategy for innovation. 

#1) Amazon’s ‘Day 1’ innovation strategy

Founder Jeff Bezos’s innovation strategy is a key reason why Amazon remains on top, and is often named as the world’s most innovative company . 

But what does this strategy mean in practice?

In short, the ‘Day 1’ strategy involves keeping the sense of dynamism and adventure that defines new enterprises, and avoiding the lack of responsiveness that can set in within established systems and business models over time. 

Bezos’s philosophy focuses on maintaining excitement and vitality in business, and staying nimble and ready to make quick decisions with the goal of serving customers.

For Amazon, the strategy is still as important now as it was in 1994. “It’s been Day 1 for a couple of decades,” says Bezos . “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. That’s why it is always Day 1.” 

So, ‘Day 1’ companies are about constant reinvention, and always looking for new ways to satisfy customer demand - even if they might seem like a strange fit at first. 

A great example is Amazon Studios. Built on a crowdsourcing platform introduced in 2010, Amazon Studios offers a responsive platform for aspiring screenwriters to get projects funded and in production, going from idea to final product faster than traditional production studios.

This platform embodies Amazon’s innovative spirit, and has helped drive the company’s strong performance in online streaming and content production.

#2) Start with the customer and work backwards

Another feature at the heart of Amazon’s innovation strategy is its relentless focus on finding out what the customer needs, and providing something to hit that sweet spot. 

Amazon starts with an overall picture of the customer experience, then looks for ways to improve this, aiming for optimal speed, security, and dependability. This focus is one of the reasons Amazon eclipsed 100 million Prime customers in April 2018. 

As Jeff Bezos says , “Our job is to invest new options that nobody’s ever thought of before, and see if customers like them.”

And as Bezos acknowledges, companies are always on a knife-edge when it comes to customer satisfaction. “Our customers are loyal to us right up until the second somebody offers them a better service,” he says . “And I love that. It’s super motivating for us.”

A great example of this culture of innovation is Amazon Go , a grocery store in Seattle with a potentially revolutionary feature: no checkout lines. Instead, the store allows customers to simply walk out with the products they desire, and have their Amazon accounts charged later.

The initiative is based on that fact that the worst part of every shopping experience is waiting in line at the cashier. So Amazon simply asked, “what if there were no cashiers?”

#3) Innovation in a six-page memo

It’s no secret that Jeff Bezos loves to write . 

From his highly-anticipated annual letters to shareholders through to his press release-style product development memos , the CEO has a passion for clear and convincing written communication. 

Driven by this passion, Amazon practices a technique that might seem old-fashioned: design by writing . Instead of relying on Powerpoint presentations or slide decks, new initiatives for innovative services or products must be summarized in a six-page memo first . 

And not only that: Amazon executives must read the memos together , side by side, at the start of product meetings. “If we don’t do this,” says Bezos , “the executives, like high school kids, will try to bluff their way through a meeting. The memo creates the context for a good discussion.”

These practices force analysts, engineers, and managers to be on the ball from step one. Whatever new idea they have, they have to develop it in a way that is convincing and logical, and makes a strong case for innovation .

For those in product development, the six-page memo is a great way to weed out weak ideas . As one ex-Amazon analyst says , “If it was hard to write a memo or understand why a product or service would add value to customers, the product or service wasn’t worth the effort.”

The commitment to the six-page memo format also reflects the company’s data-driven approach to innovation , providing an excellent incentive for clear and crisp communication. 

#4) Never stand still

Amazon recognizes that no single strategy for innovation will work for every company in every market . Instead, the company is committed to the constant evolution of its business model , and to never standing still. 

We can see this restless, future-focused culture of innovation in Amazon’s willingness to invest in new technologies and capabilities, and to fail fast with new initiatives. 

Like other industry heavyweights Google, Tesla, and Facebook, Amazon has a strong track record of backing emerging technologies, even when there’s a higher likelihood of failure. 

In fact, Jeff Bezos demonstrates what many have called an ‘extreme tolerance for failure’, and is even willing to joke about his missteps. “I’ve made billions of dollars of failures,” he said at a conference in 2014. “Listing them would be like a root canal without anesthesia.” 

For example, there was the Amazon Fire phone in 2014, which was such a flop the company had to cut its price to only 99 cents . For any other company, this would have been a humiliation. For Amazon, it’s just another in a series of valuable lessons on its way to the top. 

Combine this with the company’s willingness to bet big on new initiatives with broad applications like the Amazon Echo , and you have a recipe for success in innovation. 

#5) The two pizza rule - how to hack office meetings

Amazon recognizes another crucial truth about innovation: it always takes more time than you think. 

Combine this with Jeff Bezos’s well-known hatred of pointless meetings , and you have his great rule: never host a meeting where two pizzas aren’t enough to feed everyone. 

This way, says Bezos, meetings stay focused and contained, and don’t become so much of a drain on employees’ valuable time and effort. For those of us sick of interminably long meetings, this is music to our ears.

This commitment to small teams and group discussion is also a great way to keep employees focused, and avoids the potential for groupthink. 

What does the future hold for Amazon?

That’s our rundown of five great techniques Amazon is using to drive innovation. 

But what does the future hold for this incredible company? 

After all, Amazon’s ascension to the top of the e-commerce pile has attracted some criticism. There’s the concern about the risks for delivery drivers , accusations of exploiting the postal service , and a lot of resentment about the company perhaps not paying its fair share of tax . 

However, the bulk of this criticism doesn’t seem to be sticking. People love a good deal, and the convenience and accessibility of Amazon’s services are only pushing its numbers up over time. 

‍In response to these issues, however, the company has pledged to create over 100,000 new positions to help alleviate pressure on Amazon employees. It’s also diversifying its freight and delivery methods to reduce driver strain, including expanding its Prime Air fleet.

Conclusion: There’s a lot to learn from Amazon

When it comes to innovation culture, it’s best to learn from the market leaders. And who better to watch than Amazon? 

Whether it’s the company’s nimble attitude to adopting emerging technology, or it’s relentless focus on improving the customer experience, Amazon’s innovation techniques leave it well-positioned to continue to shape the e-commerce industry in the coming decades.

So, why not think about how you could apply some of these strategies and techniques within your business? 

Thanks for reading! 

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Amazon’s Digital Transformation

Posted by Nora Osman | Oct 19, 2023 | Analysis , Digital Readiness , Technology | 0

Disrupting Industries Through Customer-Centric Design

Amid the whirlwind of technological advancements shaping our modern world, Amazon stands as a shining example of how a relentless commitment to digital transformation can revolutionize industries and redefine customer expectations. Founded in 1994 as an online bookstore, Amazon has since evolved into a global tech giant, disrupting numerous retail and service industries along the way. Let’s explore Amazon’s journey in digital transformation, focusing on 3 unique examples of this transformation, as well as how customer-centric design was core to their strategy, and ultimately, to their success.

I nnovations Reshaping Industries for a Competitive Advantage

• E-Commerce Reinvented: Amazon Prime

One of Amazon’s most significant digital transformations was the introduction of Amazon Prime in 2005. This subscription service offered customers a bundle of benefits, including free two-day shipping on eligible products, access to a vast library of streaming content, and exclusive discounts. Amazon Prime was a game-changer, as it fundamentally altered the way people shopped online.

Amazon recognized that convenience is paramount for customers, and Prime exemplified this principle. With its two-day shipping guarantee, customers no longer had to wait days or weeks for their orders to arrive. This revolutionized the e-commerce industry, setting new standards for shipping speed and convenience. Competitors were forced to adapt or risk becoming obsolete. Amazon Prime’s customer-centric design created a loyal and engaged customer base, ensuring ongoing success and expansion of the service.

• Cloud Computing Dominance: Amazon Web Services (AWS)

In 2006, Amazon made another bold move by launching Amazon Web Services (AWS), a cloud computing platform. AWS allowed businesses to access scalable and cost-effective cloud infrastructure and services, eliminating the need for expensive on-premises data centers and infrastructure. This digital transformation was groundbreaking, and AWS quickly became a powerhouse in the cloud computing industry.

Amazon’s customer-centric approach played a crucial role in the success of AWS. They listened to the pain points of businesses and addressed them through AWS’s flexible and pay-as-you-go model. This customer-focused design allowed companies of all sizes to scale their operations seamlessly, reducing IT costs and increasing efficiency. AWS’s reliability and security features also made it an attractive choice for businesses, further solidifying Amazon’s position as a technology leader.

• Voice-Activated Revolution: Amazon Alexa

In 2014, Amazon introduced the world to Alexa, its voice-activated virtual assistant. Alexa-powered devices, such as the Amazon Echo, have transformed how people interact with technology in their homes. This innovation marked a significant shift towards the integration of artificial intelligence and voice recognition in everyday life.

Amazon’s customer-centric design philosophy was at the core of Alexa’s success. They focused on making the technology easy to use and tailored to the needs and preferences of individual users. This personalization created a more immersive and convenient experience, from setting timers to controlling smart home devices. Alexa’s extensive ecosystem of third-party skills and integrations further expanded its capabilities, cementing Amazon’s position as a leader in the smart home and voice technology market.

The Power of Customer-Centric Design

Amazon’s disruptive success can be attributed to its unwavering commitment to customer-centric design principles. Here’s how this approach has set them apart from their competitors:

• Obsession with Customer Experience : Amazon has consistently demonstrated its obsession with delivering a seamless and enjoyable shopping experience. They use data and analytics to understand customer behavior, preferences, and pain points, allowing them to continually enhance their services.
• Constant Innovation : Amazon understands that the digital landscape is ever-evolving. By fostering a culture of innovation and experimentation, they remain at the forefront of technology trends. Their willingness to take risks and explore new avenues has led to groundbreaking products and services.
• Customer Feedback-Driven Improvement : Amazon actively encourages customer feedback and uses it to improve its offerings. This iterative approach ensures that their services are continually refined and tailored to customer needs.
• Personalization and Recommendations : Amazon leverages data and machine learning to provide personalized product recommendations, enhancing the customer’s shopping experience. This not only drives sales but also fosters customer loyalty.
• Commitment to Speed and Convenience : From one-click ordering to same-day delivery, Amazon’s focus on speed and convenience has raised the bar for the entire industry. Customers have come to expect rapid and hassle-free service.

Amazon’s journey of digital transformation has been nothing short of extraordinary. Through innovations like Amazon Prime, AWS, and Alexa, they have disrupted retail and service industries, setting new standards and forcing competitors to adapt or fade away. What sets Amazon apart is its unrelenting commitment to customer-centric design. By obsessively focusing on delivering the best possible experience for their customers, they have not only thrived but also reshaped the digital landscape. As we move forward in the digital age, Amazon serves as an inspiring example of how a customer-centric approach can fuel innovation and success in the ever-changing world of technology and commerce.

Tag/s:Automation , Business Transformation , Customer Experience , Digital Enterprise ,

About The Author

Institute Fellow Nora Osman, an IT Service Management executive leader with 25 years of diverse experience, excels in every facet of Service Management, from design to support. A devoted advocate for team diversity and individual empowerment, Nora prioritizes fostering a culture of care and associate development. Her expertise spans IT operations, service level management, infrastructure support and process engineering. Her unwavering commitment lies in enhancing customer service across IT service delivery strategies. Nationally recognized as a thought leader and change agent, Nora shares her wisdom through speaking, coaching, mentoring, authoring, and www.noraosman.com. She co-authored "ITIL and the Information Lifecycle" and published 50+ articles in renowned editorials.  Her innovative mindset, motivational prowess, and strategic acumen have earned her accolades from C-suite leaders and recognition as “The Most Inspirational Woman in Business to watch in 2023."  She earned a "Global CXO Certification" from The Wharton School in 2023 and holds numerous IT certifications. Nora actively contributes to executive training programs and serves on boards while mentoring students.

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Why Amazon is the king of innovation: AWS, a cloud above the rest

It's hard to fully appreciate the value that Amazon's Web Services, the company's cloud services operation, provides to customers until you look at one specific example: Netflix.

Why Amazon is the king of innovation: Kindle's clout

Amazon is far more innovative than Google, Apple - or any other tech company in existence. Here's why.

According to TIME Magazine, Netflix users consume more than a third of all Internet download traffic during peak hours. Amazon, on the other hand, now offers four times as many movies as Netflix . In the area of streaming video services, Amazon and Netflix are clearly direct competitors.

Keep that in mind for this next fact: Netflix has spent the last seven years moving onto (not away from) Amazon's Web Services. Netflix has been migrating as much of its on-premises operations as it can to AWS, even though Amazon is a direct competitor to Netflix' primary income source. Netflix, as far back as 2006, knew Amazon was offering a competing video streaming service, and still undertook the effort to migrate to AWS.

No company, especially one as smart of Netflix, would do that unless the value proposition was huge.

AWS fundamentally changed the way IT operates. I'll give you a personal example. Back in 1997, when I started ZATZ online, we had to buy our own hardware, and run dedicated lines into our building to run our servers. It was hugely expensive.

When traffic grew, we had to make large, chunky capital expenditures to buy more servers to serve more visitors. That wasn't a small project. By the time I retired from the web publishing business, we had served 2.6 billion webpages and sent out 740 million email newsletters.

The infinitely scalable resource that is AWS wasn't available, so we had to overbuild to manage surges. Then that money was spent, and locked into the hardware. There was no way to handle unexpected surges in traffic.

If we thought we might get a surge in traffic the only way to handle it was to predict it well in advance and then spend up to buy additional, permanent capacity. Were we to have had AWS, we would have paid for the traffic for the one day, and not a penny more.

ZATZ was profitable, but had AWS existed in the early 2000s, it would have transformed our cost structure.

What AWS (and, now, other competing infrastructure as a service operations) did was turn IT from a capital expense (CAPEX) to an operational expense (OPEX). Not only did this have a profound impact on cash flow, it also changed everything from expense management to tax structure because CAPEX must be amortized over years, where OPEX can be deducted in the year incurred.

For Amazon, back in the early days , AWS turned the company's excess and underutilized computing resources into a source of income. Essentially, AWS, before it ever became the powerhouse it is now, was a mechanism by which Amazon turned a sunk cost into an additional stream of income.

Today, of course, Google and Microsoft (and, to a lesser extent companies like Rackspace and GoDaddy) offer IaaS capabilities. But as the Statista chart below shows, Amazon still remains the market share leader and the provider that brand names like Spotify and Airbnb -- and even the CIA -- rely upon.

So what are the innovation lessons we can learn from AWS? First, of course, AWS itself has fostered innovation in incredible ways. As the Atlantic's Robinson Meyer stated , "It's not an understatement to say that AWS is the piece of infrastructure that has enabled the current tech boom."

But there are more lessons here. First, Amazon started AWS as a way to gain more utilization out of already sunk costs. It's definitely a good idea to look at your operations and explore where you might find additional streams of income from the assets and resources you already have.

Second, and perhaps more important, AWS heralded a complete shift in how we think about IT. As ZDNet's Editor-in-Chief Larry Dignan put it , "Enterprises don't have to be hamstrung by legacy infrastructure. The cloud can enable you to move fast and absorb innovation."

• Why Amazon is the king of innovation: Advantage, Alexa
• Why Amazon is the king of innovation: Prime power

By the way, I'm doing more updates on Twitter and Facebook than ever before. Be sure to follow me on Twitter at @DavidGewirtz and on Facebook at Facebook.com/DavidGewirtz .

This Samsung phone is the one I recommend to most people (and it's not a flagship)

I gave away my kindle and ipad within hours of testing this tablet, one of the best cheap android phones i've tested is not from motorola or samsung.

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Lessons from Amazon’s Early Growth Strategy

If you’re interested in strategies for scaling start-ups, this episode is for you.

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So much has been written about Amazon’s outsized growth. But Harvard Business School professor Sunil Gupta says it’s the company’s unusual approach to strategy that has captured his scholarly attention. Gupta has spent years studying Amazon’s strategy and its founder and former CEO Jeff Bezos.

In this episode, Gupta shares how Amazon upended traditional corporate strategy by diversifying into multiple products serving many end users, instead of having a narrow focus.

He argues that some of Amazon’s simplest business strategies — like their obsession with customers and insistence on long-term thinking — are approaches that companies, big and small, can emulate.

Key episode topics include: strategy, innovation, leadership, scaling, Jeff Bezos, long-term thinking, customer focus.

HBR On Strategy curates the best case studies and conversations with the world’s top business and management experts, to help you unlock new ways of doing business. New episodes every week.

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HANNAH BATES: Welcome to HBR On Strategy , case studies and conversations with the world’s top business and management experts, hand-selected to help you unlock new ways of doing business.

So much has been written about Amazon’s outsized growth. But Harvard Business School professor Sunil Gupta says it’s the company’s unusual approach to strategy that has captured his scholarly attention.

Gupta has spent years studying Amazon’s strategy and its founder and former CEO, Jeff Bezos.

In this episode, Gupta shares how Amazon upended traditional corporate strategy by diversifying into multiple products serving many end users instead of focusing more narrowly.

And he argues that some of their simplest business strategies – like their obsession with the customer and insistence on long-term thinking – are approaches that companies, big and small, should emulate.

If you’re interested in innovation strategy, this episode is for you. It originally aired on HBR IdeaCast in November 2020. Here it is.

ALISON BEARD:  Welcome to the HBR IdeaCast from Harvard Business Review.  I’m Alison Beard.

If you had to name the most successful business leader alive today, who would you say?  I can’t hear you from my basement podcasting room, but I would bet that for many of you, the answer is Jeff Bezos, CEO of Amazon.  This is a man who over the past 25 years turned his online bookstore startup into a diversified company currently valued at $1.6 trillion.

Amazon is a digital retailing juggernaut, it’s also a web services provider, media producer, and manufacturer of personal technology devices like Kindle and Echo.  Oh, and Bezos also owns the Washington Post and Blue Origin, a space exploration company.  Forbes tells us he is the richest person in the world.

How did he accomplish so much?  How did he change the business landscape?  What mistakes has he made along the way?  A new collection of Bezos’s own writing, which full disclosure, my colleagues at Harvard Business Review Press have published, offer some insights.  Here’s a clip from one speech that’s included.  The book is called Invent and Wander.

And our guest today, who has spent years studying both Amazon and Bezos, is here to talk with me about some of the key themes in it, including the broad drivers of both the company and the CEO’s success.  Sunil Gupta is a professor of business administration at Harvard Business School and cochair of its executive program, and cochair of its executive program on driving digital strategy, which is also the title of his book.  Sunil, thanks so much for being on the show.

SUNIL GUPTA:  Thank you for having me, Alison.

ALISON BEARD:  So Invent and Wander.  I get that Bezos is inventive.  You know, he created a new way for us to buy things – everything.  How is he also a wonderer?

SUNIL GUPTA:  So he’s full of experiments.  His company and his whole style is known for experimentation, and he says that in so many words that if you want big winners, then you have to be willing to have many failures.  And the argument is, one big winner will take care of a thousand failed experiments.  So I think that’s the wandering part.  But also his experiments are not aimless.  There is a certain thought and process behind what experiments to do and why they will connect to the old, old picture of what Amazon is today.

ALISON BEARD:  And your expertise is in digital strategy.  How does he break the traditional rules of strategy?

SUNIL GUPTA:  So for the longest time the way, at least I was taught in my MBA program and the way we teach to our MBA students and executives, is strategy is about focus.  But if you look at Amazon, Amazon certainly doesn’t look like it’s focusing on anything, so obviously Jeff Bezos missed that class, otherwise it’s a very, very different thing.

And then you’d say, why is it that so called lack of focus strategy seems to be working for Amazon?  And I think the fundamental underlying principle that he’s guiding his whole discussion of strategy is, he’s changed the rules of strategy.  So the old rules of strategy were, the way you gained competitive advantage is by being better or cheaper.  So if I am selling you a car, my car is better of cheaper.  But the inherent assumption in that strategy statement is, I’m selling one product to one customer.  And what Amazon is basically arguing is, the digital economy is all about connection.  We have got to connect products and connect customers.  Let me explain why that is so powerful.

So connecting products, here the idea is, I can sell you, this is a classic razor and blade strategy.  I can sell you a razor cheap in order to make money on the blade.  So I can sell you Kindle cheap in order to make money on the ebooks.  Now, at some level you might say, hey, razor and blade have been around forever.  What’s so unique today?  I think unique today is razor could be in one industry and blades could be in completely different industrys.

So for example, if you look at Amazon’s portfolio of businesses, you sort of say, not only Amazon is an e-commerce player, but also is making movies and TV shows, its own studio.  Well, why does it make sense for an e-commerce player, an online retailer to compete with Hollywood.  Well, Walmart doesn’t make movies.  Macy’s doesn’t make movies?  So why does it make sense for Amazon to make movies?

And I think once you dig into it, the answer becomes clear that the purpose of the movies is to keep and gain the Prime customers. Two day free shipping is fine, but if  you ask me to pay $99 or $119 for two day free shipping, I might start doing the math in my head, and say, OK, how many packages do I expect to get next year?  And is the Prime membership worth it or not?

But once you throw in, in addition to the two-day free shipping, you throw in some TV shows and movies that are uniquely found only on Amazon, I can’t do this math.  And why is Prime customers important to Amazon?  Because Prime customers are more loyal.  They buy three or four times more than the non-Prime customers, and they’re also less price sensitive.

And in fact, Jeff Bezos has said publicly that every time we win a Golden Globe Award for one of our shows, we sell more shoes.  So this is, and he said it in your book, Invent and Wander, also, that we might be the only company in the world which has figured out how winning Golden Globe Awards can actually translate into selling more products on the online commerce.

So this is a great example of the razor being in a very different industry and blade being in another industry.  Take another example.  Amazon has a lending business where they give loans to small and medium enterprises. If Amazon decides to compete with banks tomorrow, Amazon can decide to offer loans to the small merchants at such a low price that banks would never be able to compete.  And why would Amazon be able to do that?  Because Amazon can say, hey, I’m not going to make money on loans, as much money on loans, but I’ll make more money when these businesses, small businesses grow and do more transactions on my marketplace platform.  And I get more commissions.  So again, loan can become my razor in order to help the merchants grow and make money on the transaction and the commission that I get from that.  The moment I make somebody else’s, in this case the banks, core business my razor, they will make a very hard time competing.  So I think that’s the key change, the fundamental rules of strategy and competition in that direction.

The second part of connection is connecting customers, and this is the classic network effect.  So marketplace is a great example of network effects.  The more buyers I have, the more sellers I have.  The more sellers I have, the sellers I have, the more buyers I get, because the buyers can find all the items.  And that becomes flywheel effect, and it becomes a situation where it’s very hard for a new player to complete with Amazon.

ALISON BEARD:  In this diversification that Amazon has done, how have they managed to be good at all of those things?  Because they’re not focused.  You know, they’re not concentrated on an area of specific expertise.  So how have they succeeded when other companies might have failed because they lacked that expertise, or they were spreading themselves too thin?

SUNIL GUPTA:  So I think it depends on how you define focus.  Most of us, when we define focus, we sort of define focus by traditional industry boundaries, that I’m an online retailer, therefore going into some other business is lack of focus.  The way Amazon thinks about is focus on capabilities.

So if you look at it from that point of view, I would argue that Amazon had three fundamental core capabilities.  Number one, it’s highly customer focused, not only in its culture, but also in its capability in terms of how it can actually handle data and leverage data to get customer insight.  The second core capability of Amazon is logistics.  So it’s now a world class logistics player.  It uses really frontier technology, whether it’s key word, robotics, computer vision, in its warehouse to make it much more efficient.

And the third part of Amazon’s skill or the capability is its technology.  And a good example of that is Amazon Web Services, or AWS.  And I think if you look at these three core capabilities, customer focus and the data insight that it gets from that, the logistics capability, and the technology, everything that Amazon is doing is some way or the other connected to it.  In that sense, Amazon, and there’s no lack of focus, in my judgment on Amazon.

Now, if he starts doing, starts making cream cheese tomorrow or starts making airplane engines, then I would say, yes, it’s got a lack of focus.  But one of the other things that Jeff Bezos has said again and again is this notion of work backwards and scale forward.  And what that means is, because you’re customer obsessed, you sort of find ways to satisfy customers, and if that means developing new skills that we don’t have because we are working backwards from what the customer needs are, then we’ll build those skills.

So a good example of that is, when Amazon started building Kindle, Amazon was never in the hardware business.  It didn’t know how to build hardware.  But Bezos realized that as the industry moved, people are beginning to read more and more online, rather, or at least on their devices, rather than the physical paper copy of a book.  So as a result, he says, how do we make it easier for consumers to read it on an electronic version?  And they’re spending three years learning about this capability of hardware manufacturing.  And by the way, Kindle came out long before iPad came out.  And of course, that capability now has helped them launch Echo and many other devices.

ALISON BEARD:  Right.  So it’s the focus on the customer, plus a willingness to go outside your comfort zone, the wander part.

SUNIL GUPTA:  Exactly.

ALISON BEARD:  Yeah.  How would you describe Bezos’s leadership style?

SUNIL GUPTA:  So I think there are at least three parts to it.  One is, he said right from day one that he wants to be a long-term focus.  The second thing is being customer obsessed.  And many times he has said that he can imagine, in the meetings he wants people to imagine an empty chair.  That is basically for the customer. And he says, we are not competitor focused.  We are not product focused.  We are not technology focused.  We are customer focused.  And the third is, willingness to experiment.  And fail, and build that culture in the company that it’s OK to fail.

ALISON BEARD:  What about personally, though?  Is he a hard charger?  Is he an active listener?  What’s it like to be in a room with him?

SUNIL GUPTA:  Oh, he’s certainly a hard charger.  I mean, he’s also the kind of guy, when he hires people, he says, you can work long, hard, or smart.  But at Amazon, you can choose two out of three.  And I think this is similar to many other leaders.  If you look at Steve Jobs, he was also a very hard charging guy.  And I think some people find it exhilarating to work with these kind of leaders.  Some find it very tough.

ALISON BEARD:  Do you think that he communicates differently from other successful CEOs?

SUNIL GUPTA:  So the communication style that he has built in the company is the very famous now, there’s no PowerPoints.  So it’s a very thoughtful discussion.  You write six-page memos, which everybody, when their meeting starts, everybody sits down and actually reads the memo.

In fact, this was a very interesting experience that I had.  One of my students, who was in the executive program, works at Amazon in Germany.  And he is, he was at that point in time thinking of moving to another company and becoming a CEO of that company.  So he said, can I talk to you about this change of career path that I’m thinking about?  I said, sure.  So we set up a time, and five minutes before our call, he sends me an email with a six-page memo.  And I said, well, shouldn’t he have sent this to me before, so I could at least look at it?  He says, no, that’s the Amazon style.  We’ll sit in silence and read it together.  And so I read it together, because then you’re completely focused on it.  And then we can have a conversation.  But this discipline of writing a six-page memo, it’s a very, very unique experience, because you actually have to think through all your arguments.

ALISON BEARD:  You also mentioned the long term focus, and that really stood out for me, too, this idea that he is not at all thinking of next year.  He’s thinking five years out, and sometimes even further.  But as a public company, how has Amazon been able to stick to that?  And is it replicable at other companies?

SUNIL GUPTA:  I think it is replicable.  It requires conviction, and it requires a way to articulate the vision to Wall Street that they can rally behind.  And it’s completely replicable.  There are other examples of companies who have followed a similar strategy.  I mean, Netflix is a good example.  Netflix hadn’t made money for a long period of time.  But they sold the vision of what the future will look like, and Wall Street bought that vision.

Mastercard is exactly the same thing.  Ajay Banga is giving three year guidance to Wall Street saying, this is my three-year plan, because things can change quarter to quarter.  I’m still responsible to tell you what we are doing this quarter, but my strategy will not be guided by what happens today.  It will be guided by the three-year plan that we have.

ALISON BEARD:  There are so many companies now that go public without turning any profit, whereas Amazon now is printing money, and thus able to reinvest and have this grand vision.  So at what point was Bezos able to say, right, we’re going to do it my way?

SUNIL GUPTA:  I think he said it right from day one, except that people probably didn’t believe it.  And in fact, one of the great examples of that was, when he was convinced about AWS, the Amazon Web Services, that was back in the early 2000s, when a majority of the Wall Street was not sure what Jeff Bezos was trying to do, because they say, hey, you are an online retailer.  You have no business being in web services.  That’s the business of IBM.  And that’s a B2B business.  You’re in a B2C business.  Why are you going in there?

And Bezos said, well, we have plenty of practice of being misunderstood.  And we will continue with our passion and vision, because we see the path.  And now he’s proven it again and again why his vision is correct, and I think that could give us more faith and conviction to the Wall Street investors.

SUNIL GUPTA:  Oh, absolutely.  And he’s one of the persons who has his opinion, and you always surround yourself with people better than you.

ALISON BEARD:  How has he managed to attract that talent when it is so fiercely competitive between Google, Facebook, all of these U.S. technology leaders?

SUNIL GUPTA:  So a couple of things I would say.  First of all, it’s always good fun to join a winning team.  And all of us want to join a winning team, so this certainly is on a trajectory which is phenomenal.  It’s like a rocket ship that is taking off and has been taking off for the last 25 years.  So I think that’s certainly attractive to many people, and certainly many hard charging people who want to be on a winning team.

And a second thing is, Amazon’s culture of experimentation and innovation.  That is energizing to a lot of people.  It’s not a bureaucracy where you get bogged down by the processes.  So the two type of decisions that we talked about, he gives you enough leeway to try different things, and is willing to invest hundreds of millions of dollars into things that may or may not succeed in the future.  And I think that’s very liberating to people who are willing to take on the ownership and build something.

ALISON BEARD:  But don’t all of the tech companies offer that?

SUNIL GUPTA:  They do, but if you think about many other tech companies, they’re much more narrow in focus.  So Facebook is primarily in social media.  Google is primarily in search advertising.  Yes, you have GoogleX, but that’s still a small part of what Google does.  Whereas if you ask yourself what business is Amazon in, there are much broader expansive areas that Amazon has gone into.  So I think the limits, I mean, Amazon does not have that many limits or boundaries as compared to many other businesses in Silicon Valley.

ALISON BEARD:  So let’s talk a little bit about Bezos’s acquisition strategy.  I think the most prominent is probably Whole Foods, but there are many others.  How does he think about the companies that he wants to bring in as opposed to grow organically?

SUNIL GUPTA:  So some acquisitions are areas where he thinks that he can actually benefit and accelerate the vision that he already has.  So for example, the acquisition of Kiva was to improve the efficiency and effectiveness of the systems that he already put in place in his warehouse.  And logistics and warehouse is a key component or key part of Amazon’s business, and he saw that Kiva already was ahead of the curve in technology that he probably wanted to have that in his own company.  So that was obvious acquisition, because that fits in the existing business.

Whole Foods is kind of a slightly different story, in my judgment, because I some ways, you can argue, why is Amazon, an online player, buying an offline retail store, Whole Foods?  And in fact, they bought it at 27% premium.  So that doesn’t make sense for an online retailer commerce to go to offline channels.  And I think, in fact, part of the reason in my judgment is, it’s not just Whole Foods, but it’s about the food business, per se.  And why is Amazon so interested in food?  In fact, Amazon has been trying this food business, online food delivery for a long period of time without much success.  And Whole Foods was one, another way to try and get access to that particular business.  And why is that so important to Amazon, even though you could argue, food is a low margin business?

And I would say, part of the reason is, food is something, grocery is something that you buy every week, perhaps twice a week.  And if I, as Amazon, can convince you to buy grocery online from Amazon, then I’m creating a habit for you to come onto Amazon every week, perhaps twice a week.  And once you are on Amazon, you will end up buying other products on Amazon.  Whereas if you are buying electronics, you may not come to Amazon every day.

So this is a habit creation activity, and again, it may not be a very high margin activity to sell you food.  But I’ve created a habit, just like Prime.  I’ve created a loyal customer where you think of nothing else but Amazon for your daily needs, and therefore you end up buying other things.

ALISON BEARD:  And Amazon isn’t without controversy.  You know, and we should talk about that, too.  First, there are questions about its treatment of warehouse employees, particularly during COVID.  And Bezos, as you said, has always been relentlessly focused on the customer.  But is Amazon employee centric, too?

SUNIL GUPTA:  So I think there is definitely some areas of concern, and you rightly said there is a significant concern about the, during the COVID, workers were complaining about safety, the right kind of equipment.  But even before COVID, there were a lot of concerns about whether the workers are being pushed too hard.  They barely have any breaks.  And they’re constantly on the go, because speed and efficiency become that much more important to make sure customers always get what they are promised.  And in fact, more than promised.

Clearly Amazon either hasn’t done a good job, or hasn’t at least done the public relations part of it that they have done a good job.  Now, if you ask Jeff Bezos, he will claim that, no, actually, they have done things.  For example, they offer something called carrier choice, where they give 95% tuition to the employees to learn new skills, whether they’re relevant to Amazon or not.  Pretty much like what Starbucks does for its baristas, for college education and other things.  But I think more than just giving money or tuition, it requires a bit of empathy and sense that you care for your employees, and perhaps that needs, that’s something that Amazon needs to work on.

ALISON BEARD:  And another challenge is the criticism that it has decimated mom and pop shops.  Even when someone sells through Amazon, the company will then see that it’s a popular category and create it itself and start selling it itself.  There’s environmental concerns about the fact that packages are being driven from warehouses to front doors all over America.  And boxes and packaging.  So how has Bezos, how has the company dealt with all of that criticism?

SUNIL GUPTA:  They haven’t.  And I think those are absolutely valid concerns on both counts, that the small sellers who grow to become reasonably big are always under the radar, and there are certainly anecdotal evidence there, small sellers have complained that Amazon had decided to sell exactly the same item that they were so successful in selling, and becoming too big is actually not good on Amazon, because Amazon can get into your business and wipe you away.  So that’s certainly a big concern, and I think that’s something that needs to be sorted out, and Amazon needs to clarify what its position on that area is, because it benefits from these small sellers on his platform.

And your second question about environmental issues is also absolutely on the money, because not only emission issues, but there’s so many boxes that pile in, certainly in my basement, from Amazon.  You sort of say, and it’s actually ironical that Millennials who are in love with Amazon are extremely environmentally friendly.  But at the same time, they would not hesitate to order something from Amazon and pile up all these boxes.  So I think Amazon needs to figure out a way to think about both those issues.

ALISON BEARD:  And at what point will it have to?  I mean, it seems to be rolling happily along.

SUNIL GUPTA:  Well, I think those issues are becoming bigger and bigger, and it’s certainly in the eye of the regulators, also, for some of these practices.  And not only because it’s too big, and there might be monopoly concerns, but these issues will become larger, and any time you become a large company, you become the center of attraction for broader issues than just providing shareholder value.

ALISON BEARD:  Yeah.  So those are weaknesses possibly for the company.  What are some of Bezos’s personal weaknesses that you’ve seen in studying him and the company?

SUNIL GUPTA:  So I think one thing that stands out to me, and at least in the public forums, I have not seen any empathy.  And it’s, I mean, we talk about that the leaders have, should have three qualities.  They should be competent.  They should have a good character.  And they should have compassion.  So he’s certainly very competent.  I mean, he’s brilliant in many aspects, right, from the computer vision and AI and machine learning, to the nuances of data analytics, to the Hollywood production, etc.  He also seems to have good character, at least I have not heard any personal scandals, apart from his other issues in his personal life, perhaps.

Those characteristics of competence and character make people respect you.  What makes people love you is when you show compassion, and at least I haven’t seen compassion or empathy that comes out of him.  I mean, he certainly comes across as a very hard charging, driven person, which probably is good for business.  But the question of empathy is perhaps something lacking right now.

ALISON BEARD:  Yeah.  The other issue is his just enormous wealth.  He did invent this colossally valuable company, but should anyone really be that rich?

SUNIL GUPTA:  Well, I guess that’s, you can say that’s the good or the bad thing about capitalism.  But I think, and again, my personal view is there’s nothing wrong in becoming rich, if you have been successful and done it with hard work and ingenuity.  But how you use your wealth is something that perhaps will define Jeff Bezos going forward.  I think Bill Gates is a great example how he actually has used his wealth and his influence and his expertise and his brilliance into some certain thing that actually is great for humanity.

Now, whether Jeff Bezos does that down the road, I don’t know, whether his space exploration provides that sort of outlet which is both his passion as well as good for humanity, I don’t know.  But at some point in time, I think it’s the responsibility of these leaders to sort of say, my goal is not simply to make money and make my shareholders rich, but also help humanity and help society.

ALISON BEARD:  If you’re talking to someone who’s running a startup, or even a manager of a team at a traditional company, what is the key lesson that you would say, this is what you can learn from Jeff Bezos?  This is what you can put to work in your own profession?

SUNIL GUPTA:  So I would say two things that at least I would take away if I were doing a startup.  One is customer obsession.  Now, every company says that, but honestly, not every company does it, because if you go to the management meetings, if you go to the quarterly meetings, you suddenly go focus on financials and competition and product.  But there’s rarely any conversation on customers.  And I think, as I mentioned earlier, that Jeff Bezos always tells his employee to think of the imaginary chair in which a customer is sitting, because that’s the person that we need to focus on.  Howard Shultz does the same thing at Starbucks, and that’s why Starbucks is so customer focused.

So I think that’s the first part.  And the argument that Bezos gives is, customers are never satisfied.  And that pushes us to innovate and move forward, so we need to innovate even before the rest of the world even sees that, because customers are the first ones to see what is missing in the offering that you have.

And the second I would say that I would take away from Jeff Bezos is the conviction and passion with what you do.  And many times that goes against the conventional wisdom.  And the Amazon Web Services is a great example of that.  The whole world, including the Wall Street Journal and the Wall Street analysts were saying, this is none of Amazon’s business to do web services.  But he was convinced that this is the right thing to do, and he went and did that.

And part of that conviction may come from experiments.  Part of that conviction comes from connecting the dots that he could see that many other people didn’t see.  I mean, that’s why he went, left his job, and went to Seattle to do the online bookstore, because he could see the macro trends as to what the Internet is likely to do.  So, I think that’s the vision that he had.  And once you have the conviction, then you follow your passion.

ALISON BEARD: Sunil, thanks so much for coming on the show.

SUNIL GUPTA:  Thank you for having me. Alison.

HANNAH BATES: That was Harvard Business School professor Sunil Gupta, in conversation with Alison Beard on the HBR IdeaCast .

We’ll be back next Wednesday with another hand-picked conversation about business strategy from Harvard Business Review. If you found this episode helpful, share it with your friends and colleagues, and follow our show on Apple Podcasts, Spotify, or wherever you get your podcasts. While you’re there, be sure to leave us a review.

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Amazon Supply Chain Innovation Continues

An Amazon Prime logo appears on the side of semi-trailer attached to a truck on a section of tarmac ... [+] at an Amazon Warehouse location, Thursday, Oct. 1, 2020, in Dedham, Mass., (AP Photo/Steven Senne)

Three years ago, I wrote an article about the  Amazon supply chain where I asked if Amazon AMZN had the most innovative supply chain in the world. It is time to revisit Amazon’s supply chain and see how it has changed and how prepared it is for the future.

Amazon continues to grow. In 2019 the company delivered 2.5 billion packages, an estimated 20 packages per household. And the company’s operations and technology have evolved over the last three years to help them deal with this growth. In particular, the company has expanded their trucking, warehousing, and air capabilities. How do each of these drive the Amazon supply chain?

Amazon Trucking

Over the last few years, Amazon has continued to expand its private fleet of long haul and last mile delivery trucks. The end goal is to reduce or eliminate its reliance on UPS, FedEx FDX , and the USPS to make deliveries, thus becoming more profitable while controlling the customer experience.

While Amazon has rolled out its own  digital freight matching  marketplace named Amazon Freight, the company is always looking at new opportunities in this area. One way is to build its own pool of drivers, and to do this, the company is reportedly building an incubator for startup trucking companies. Essentially Amazon is recruiting hundreds of people to start trucking companies and only drive for Amazon. The incubator will provide business training and loans for entrepreneurs to start their own trucking companies.

According to sources, the incubator is not about tackling the challenges of today’s capacity crunch. Instead, the program is about looking at the future and where that demand will be, and how Amazon can take control of it with an in-house solution.

Amazon is also investing in the future of its trucks by exploring more sustainable fuels. The coronavirus pandemic helped push e-commerce to new levels; but as e-commerce sales soared, so too did heavy duty trucking on the roads to get goods to their final destination. And that increased congestion and pollution. Amazon is looking ahead at reducing carbon emissions in its fleet by upgrading to natural gas class 8 trucks. The company has ordered more than 700 compressed natural gas class 6 and class 8 trucks so far, as it looks to introduce new sustainable solutions for freight transportation. Amazon is working on testing a number of new vehicle types including electric, CNG, and others. The engines, supplied by a joint venture between Cummins Inc CMI and Vancouver-based Westport Fuel Systems Inc, are to be used for Amazon’s heavy-duty trucks that run from warehouses to distribution centers.

Amazon has never shied away from making controversial decisions, and the latest technology the company is developing for its trucks fits squarely in this category. Last month, Amazon announced that it plans to equip its branded delivery vans with cameras powered by artificial intelligence. The cameras, which will always be on, are being promoted as an effort to improve driver safety. However, many workers and privacy advocates are concerned about drivers being continuously subjected to surveillance and data gathering.

The cameras, which run on Netradyne’s Driveri platform, are intended to improve safety for drivers and the community they are making deliveries in. Each camera system has four HD lenses to sense road conditions, driver speed, and collision detection technology. And while the cameras will be rolling at all times, Amazon has said that footage will only be uploaded if the driver triggers one of 16 actions, such as running a stop sign or speeding.

Vehicles sit parked outside an Amazon.com Inc. warehouse in the Staten Island borough of New York, ... [+] U.S., on Tuesday, March 31, 2020. Some employees at Amazon’s Staten Island warehouse walked off the job on Monday, calling for the company to shut the facility for extended cleaning after they say a number of their colleagues were diagnosed with Covid-19. Photographer: Michael Nagle/Bloomberg

Amazon Warehousing

Amazon has spent years cultivating its logistics network to move items around the world as fast and as cost efficiently as possible. When I wrote about Amazon three years ago, the focus was on their large regional ecommerce distribution centers and the Whole Foods distribution centers. But in an effort to improve service, we are hearing about other types of warehouses they manage. These include: sortation centers - used to sort packages for a geographical region; pantry and fresh warehouses - facilities which service dry grocery merchandise or perishables or frozen merchandise; Prime Now - facilities that stock a limited line of products that are in high demand and can be delivered within 1-2 hours of order placement; and delivery stations - last mile facilities where packages are sorted and then dispatched directly to the customer.

Part of speeding up delivery is to make sure that not just large cities have fulfillment centers in place. Amazon’s delivery stations represent an effort to “blanket the suburbs.” The delivery stations are the final link in Amazon’s supply chain that begins with its large regional fulfillment centers. The delivery stations are smaller terminals that will receive Amazon goods and ship them out to end consumers. The company plans to open 1,000 parcel delivery stations in the near future.

This model is not just about speeding up deliveries in the US, however. At the beginning of the year, Amazon announced plans to open five new facilities in Quebec to speed up its delivery process. The company will add two sorting centers and its first three delivery stations in the province. Overall, the new facilities will create about 1,000 new jobs. The sorting centers will be located in Coteau-du-Lac and Longueuil, while the delivery stations will be located in Laval and Lachine.

The Covid pandemic has certainly been a boon to Amazon’s business. However, not all warehouse employees have been happy with the working conditions. This was especially true at the beginning of the pandemic when social distancing guidelines were first put into place. As a result, Amazon launched cameras and software within its warehouses to detect if and when an employee was violating social distancing rules. This type of software is still a work in progress as more people are vaccinated and guidelines are ever changing.

One of the biggest fears of warehouse workers is that full-scale automation will put them out of work. However, as most companies will say, and Amazon is no exception, robots and cobots are there to make things easier for employees. Amazon continues to invest in robots for its facilities, helping to remove menial and time-consuming tasks from workers so they can focus on other tasks. As things stand, Amazon sees fully automated shipping warehouses as a decade or so away. While Amazon will continue to invest in robots, they are also investing in their human counterparts.

Best Travel Insurance Companies

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Amazon Prime Air Boeing 737 aircraft with registration N855DM as seen at Paris Air Show 2019 at Le ... [+] Bourget Airport LBG in France. The aircraft is a converted Boeing 737-800 to Boeing 737-83N(SF), Amazon Air is a cargo airline brand for Amazon freight delivery service based in Seattle, Washington. (Photo by Nicolas Economou/NurPhoto via Getty Images)

Amazon Prime Air

For the last four years, Amazon has been aggressively investing in its air capabilities. What was formerly known as Amazon Prime Air, Amazon Air is a cargo airline operating exclusively to transport Amazon packages. The company has been acquiring jets to build out its fleet as it also awaits the completion of its air hub at Cincinnati/Northern Kentucky International Airport. As of this writing, Amazon’s fleet consisted of 22 Boeing 737-800’s and 55 Boeing 767-300ER’s, with another 9 aircraft on order. Amazon has also spent $131 million to acquire about 13.5 million shares of Air Transport Services Group (ATSG ATSG ).

Cargo planes are not the only piece of Amazon’s aerial plans for the future. Drones are a big part of the future of Amazon, something Jeff Bezos has been touting for the last seven-plus years. In September of last year, Amazon took a big leap forward in its quest to use the autonomous flying vehicles as part of its home delivery strategy. The Federal Aviation Administration (FAA) designated Amazon Prime Air an “air carrier,” which allowed Amazon to begin its first commercial deliveries in the US under a trial program. There are still a number of regulatory hurdles that Amazon must clear before it begins making home deliveries, but this is clearly a step in the right direction for drone usage. Amazon joined Wing, the Alphabet Inc. GOOGL subsidiary, and UPS as companies that have gotten FAA approval to operate under the federal regulations governing charter operators and small airlines.

And Amazon clearly sees drones as a big part of its future, based the amount of research and development it is putting into its drone program, especially in Europe. According to a story published last week, Amazon has doubled the number of staff employed by its Cambridge-based Prime Air team, where the company is developing its drone delivery service. This brings the total number of staff to nearly sixty in Cambridge; Amazon also has research tech hubs in London and Edinburgh. Amazon said last summer it was aiming to begin launching the drone service ‘within months’, announcing that the aircraft could travel up to fifteen miles and deliver packages under five pounds to customers in less than thirty minutes.

Final Thought

The Amazon supply chain continues to be one of, if not the most, innovative in the world. The company is investing in its trucking capabilities to reduce its reliance on other carriers. Amazon is also continuing to expand its warehouse technology and capabilities to make picking, packing, and shipping orders more efficient. And it is heavily investing in taking to the skies, with an emphasis on cargo planes and drones. It will be interesting to see where the Amazon supply chain goes from here.

The primary author of this article was Chris Cunnane.

Case spotlight: Amazon Marketplace: Sustaining Strategic Innovation

Author perspective

Who – the protagonist.

Alex Zimmer, Vice President of new product development at Amazon Marketplace.

Amazon Marketplace is an e-commerce platform owned and operated by Amazon that enables third-party sellers to sell new or used products on a fixed-price online marketplace alongside Amazon's regular offerings.

lex wanted to introduce the Seller Fulfilled Prime (SFP) initiative to the Amazon Marketplace.

SFP would allow qualified sellers to flag their product listings as eligible for Prime’s two-day delivery but send the orders from their own locations and distribution centres instead of from an Amazon facility. At the time, the only sellers’ fulfilment experience with the Prime promise was Fulfilment by Amazon, which required sellers to ship their merchandise to an Amazon warehouse and use Amazon Fulfilment to deliver the product to Amazon customers.

Alex was ready to convince his senior executives and operational managers at the Amazon.com Inc. campus in Seattle, Washington.

It was June 2015 when Alex was attending the three-year planning session.

“Even though it might be challenging in the near term, we know this will help those sellers who can deliver an exceptional customer experience, grow their businesses while providing even more great options for end-customers. ” Sarah Miller, team lead in customer service.

Alex knew he would face rigorous questioning at the session about his proposal. He would have to clearly demonstrate the value of SFP for marketplace sellers and end-customers, the potential for SFP to contribute to Amazon’s growth, and the link between Amazon’s culture and the innovation.

AUTHOR PERSPECTIVE 

High level access

Judith said: “The case is unique because it highlights Amazon’s process of innovation through a multi-disciplinary lens. It was written by a team of faculty with expertise in finance, hospitality business, information systems, management, and supply chain management so it takes on a very strategic perspective.

“It is also unique in that the case writing team visited Amazon’s headquarters in Seattle, interviewed over a dozen high level Amazon leaders with different functional responsibilities, and toured the facilities. This provided the case writing team an in-depth understanding of the innovation culture at Amazon.  Furthermore, it enhanced the cross-functional perspectives of the case.”

Brand familiarity

Judith continued: “Almost everyone has experienced Amazon Marketplace first-hand. Such strong familiarity across domestic and international students definitely generates discussion and debate.

“Furthermore, given the multi-disciplinary nature of the case, there are various angles from which a faculty member can position the case as well as how students perceive different aspects of the case. The cross-disciplinary nature of the case illustrates multiple challenges and trade-offs (i.e. cost-to-cost as well as cost-to-service trade-offs) that managers have to consider when making strategic decisions and implementing innovations. This approach enables rich classroom debate.”

Immersing yourself in the culture

She added: “Identifying the dilemma of the protagonist was quite easy to do given the direct interaction between the case writing team and Amazon’s leaders. 

“This field research approach allowed the team to truly immerse themselves in the company culture and provided a greater depth of understanding of the case scenario. 

“The team was able to have in-depth discussions with the key managers that proposed and implemented the Seller Fulfilled Prime initiative, to understand the challenges and hurdles that had to be overcome to launch this successful initiative. This provided a clear view of the rigorous process that Amazon uses to vet new innovation projects for funding.”

Appeal of strategy cases

Judith concluded: “Students and faculty alike prefer strategic cases because they enable a breadth of discussion that emanates from broader, multi-functional considerations and trade-offs. Every strategic decision involves both risk and reward, and this case is no exception. The tension behind calculated risk-taking in an uncertain situation is what makes strategic cases so intriguing to discuss. 

“In addition, strategic cases provide a ‘big picture’ perspective that students appreciate.  Students are able to combine the various tools, techniques, frameworks, and ideas that they have learned across a variety of classes in order to evaluate the case’s strategic issues.”

The authors

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• Assignment: RC TOM Challenge 2017

Amazon’s rapid supply chain innovation: Battling with consumer’s evolving needs!

In the current tech savvy world, Amazon has been the clear winner against online and offline retailers through disruptive advancements in digitization of its Supply Chain. However, it might be important to realize the implications of rapid innovation and understand where the real war is.

Since couple of decades, Amazon has emerged as the flag-bearer of supply chain advancement, defining an ecosystem for adoption of Supply Chain 4.0. However, Amazon isn’t the only force disrupting retail. Consumer preferences have been evolving rapidly. Today, more and more people want to shop online, want a broad assortment of customized products but at competitive prices with instant and free delivery. [1]

Pathways to Just Digital Future

“The Amazon Effect” [3] on Supply chain

Amazon’s digital marketplace not only disrupted the retail business model but also adopted key elements of Supply Chain 4.0[4] such as integrated planning and execution, logistics visibility, smart warehousing and prescriptive analytics.

Given the extent of these advancements, it is fair to say that other online retailers have had to play catch up in adopting similar digitization elements in their Supply Chain Models.

Building Next Level Customer Experience: Integrating technology

In 2015, Amazon brought the one-click shopping experience to life by creating dash buttons. These small thumb sized devices let consumers buy common household products (such as detergent, toilet paper) by merely clicking a physical button. The goal as per Amazon is to “make shopping disappear” [7] and make buying products as easy as thinking about them. As of April 2017, Amazon received around 5760 orders daily through dash and had more than 300 buttons for different products. [7]

Balancing the future and Long-term play

With Amazon ahead of other eCommerce and conventional retailers in Supply Chain capability, its true competition remains the ever-evolving consumer preferences. Amazon has created a customer convenience innovation cycle and may be guilty of spoiling consumers for service, but it needs to address consumer preferences on a sustainable cost basis. A common trap would be to focus on providing ornamental experiences (such as facial recognition while shopping [10]) while neglecting cost saving interventions in logistics and fulfillment. Ultimately, low prices and broad assortments drove consumers to online retail and futuristic purchase experiences, though aspirational, might not be enough to retain price sensitive consumers. Looking ahead, Amazon should also further invest in integrating logistics capability and unifying its massive supply chain across countries to achieve greater scale and efficiency advantages.

Questions to consider

With massive disruptions, the Amazon effect on supply chain is real but can Amazon continue the pace of effective innovations while not compromising profitability and long-term value? Will the consumers respond favorably to futuristic shopping experiences or are those efforts misdirected? Is Amazon winning this self-created battle?

As the cliché goes, only time (and in this case, consumer) will tell!

Word Count : 794

References:

• Jane Edmondson, “ It’s Not Just Amazon: The Mass Disruption Of Retail”, Seeking Alpha, June 21, 2017, https://seekingalpha.com/article/4083034-just-amazon-mass-disruption-retail?page=2 , accessed November 2017.
• Puneet Sikka, “Amazon Is Expanding Prime Now Service to New Metro Areas”, Market Realist, June 1, 2016, http://marketrealist.com/2016/06/amazon-expanding-prime-now-service-new-metro-areas/ , accessed November 2017.
• Rosemary Coates, “The Amazon Effect and the Global Supply Chain”, Supply Chain Management Review, May 30, 2017, http://www.scmr.com/article/the_amazon_effect_and_the_global_supply_chain , accessed October 2017.
• Knut Alicke, Daniel Rexhausen, and Andreas Seyfert, “Supply Chain 4.0 in consumer goods”, Mckinsey & Company, April 2017, https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/supply-chain-4-0-in-consumer-goods , accessed November 2017.
• Amazon Website, https://www.amazon.com/p/feature/98dnmkwyztuv8ur , accessed November 2017.
• Sam Shead, “Amazon now has 45,000 robots in its warehouses”, Business Insider, Jan 3, 2017, http://www.businessinsider.com/amazons-robot-army-has-grown-by-50-2017-1 , accessed November 2017.
• Leena Rao, “Two Years After Launching, Amazon Dash Shows Promise”, Fortune, April 25, 2017, http://fortune.com/2017/04/25/amazon-dash-button-growth/ , accessed November 2017.
• Richard Howells, “The “Amazon Effect” On The Supply Chain”, Digitalist Magazine, Sep 8, 2017, http://www.digitalistmag.com/digital-supply-networks/2017/09/08/amazon-effect-on-supply-chain-05350754 , accessed November 2017.
• Amazon Website, https://www.amazon.com/Amazon-Prime-Air/b?node=8037720011 , accessed November 2017.
• Leena Rao, “Amazon Is Trying to Patent Paying With a Selfie”, Fortune, March 14, 2016, http://fortune.com/2016/03/14/amazon-patent-selfie/ , accessed November 2017.

Student comments on Amazon’s rapid supply chain innovation: Battling with consumer’s evolving needs!

This was a really insightful article! Amazon has certainly done a great job in making the delivery of its purchased products as quick and as convenient as possible. But the concern that I have is by doing this is Amazon really answering the efficiency issue or customer service issue? I can see how Amazon is leveraging digitalization to enhance the experience its customers but are they making enough increase in revenue to offset the upfront investments?

Amazon’s influence on the adoption of Supply Chain 4.0 has been profound, but their pursuit of nearly instantaneous delivery has been obtained through substantial cost. Operating losses resultant from the infrastructure development and operation of Amazon’s Fulfillment Services (“Prime,” “Now,” and “Fresh”) has been subsidized by the profits derived from Amazon Web Services. Barrier to entry for competitors is enormous, but there are risks associated with the rapid growth Amazon has enjoyed. Antitrust legislation and drone regulations both threaten their ability to execute on future plans, as do competitors’ actions to claw back market share.

Pranjal this was a brilliant piece that is incredibly apropos in this day and age, particularly as Amazon is perceived as an industry leader on the forefront of digitalization and innovation. Your assessment of the importance of picking the right battle vis a vis ambitious projects versus value add is at the core of the debate around Amazon’s near-term profitability and growth prospects.

While I am confident Amazon will continue to innovate along the spectrum of supply chain, logistics, and digitalization, I am skeptical of several factors that were not explicitly addressed in your piece. More specifically, there is growing political concern around the anti-trust and monopolistic threat that Amazon poses as it continues to grow, and I wonder how this may disrupt or stymie future innovation. Clearly, the current administration in the U.S has vocally criticized Amazon, and I wonder how a concrete political agenda against the company may manifest over the coming years. As you say, we may just have to wait and see!

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Incineration innovation: a path to efficient and sustainable municipal solid waste management in kuwait.

1. Introduction

2. health issues related to solid waste, 3. waste-to-energy (wte) technologies, 4. landfill and solid waste management in kuwait, 5. msw composition in kuwait, 6. minimizing landfill impact in kuwait through recycling, 7. minimizing landfill impact in kuwait through incineration, 8. minimizing harmful emissions by incineration, 9. waste management procedures, 9.1. collection and transportation, 9.2. waste sorting and preparation, 9.3. incineration, 9.4. air pollution control, 9.5. residue handling, 9.6. energy recovery, 10. estimation of msw energy using mathematical models.

• Fat = 37.6 MJ/kg;
• Carbohydrates: [Sugar = 8.4 MJ/kg; Regular Carbs = 16.7 MJ/kg; Fiber = 8.4 MJ/kg];
• Protein = 16.7 MJ/kg.

11. Conclusions

Author contributions, data availability statement, conflicts of interest.

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AlMokmesh, S.F.; AlKhulaifi, K.A.; AlMutairi, A.S.; Al-Ajmi, A.S. Incineration Innovation: A Path to Efficient and Sustainable Municipal Solid Waste Management in Kuwait. Processes 2024 , 12 , 1873. https://doi.org/10.3390/pr12091873

AlMokmesh SF, AlKhulaifi KA, AlMutairi AS, Al-Ajmi AS. Incineration Innovation: A Path to Efficient and Sustainable Municipal Solid Waste Management in Kuwait. Processes . 2024; 12(9):1873. https://doi.org/10.3390/pr12091873

AlMokmesh, Saad F., Khalid A. AlKhulaifi, Abdulrahman S. AlMutairi, and Amani S. Al-Ajmi. 2024. "Incineration Innovation: A Path to Efficient and Sustainable Municipal Solid Waste Management in Kuwait" Processes 12, no. 9: 1873. https://doi.org/10.3390/pr12091873

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