Amazon founder Jeff Bezos was recently asked about what Amazon might look ten years from now given all the changes sweeping through the world thanks to technology.
His response was that, instead of looking at what would change in the next decade, Amazon preferred to look at what would not change. So, there may be big shifts in the devices customers use to shop, for example, but customers will always favor low prices. A focus on things that will not change helps anchor Amazon to its objectives.
News websites and blogs called described this line as “Jeff Bezos’ advice to entrepreneurs.”
I think of it as advice for life. As we think about our lives in the coming years and decades, it should be clear that a lot of what we think will happen will not actually take place and that there will be more change in the way we do things than you and I can probably imagine. Instead of focusing on that, we’re better off focusing on what won’t change – our values and principles. It is worth thinking intentionally about these values and principles as we adapt to all that happens around us.
Despite its focus to lower prices and deliver a customer-centric experience, Amazon does make the odd misstep. We will, too. Change demands a relentless focus on what really matters.
It won’t be easy… but, boy, will it be worth it.
Here’s this week’s 200 word idea from The Everything Store by Brad Stone.
Amazon Web Services (AWS) allows entrepreneurs to plug into Amazons Servers and use it’s computing infrastructure. The AWS team wanted to price it with a traditional monthly/yearly rental system.
But, CEO Jeff Bezos shifted the focus completely –
1. He decided to create an electric grid model where you pay 10c/hour of use. This was ridiculously cheap but he knew companies like Microsoft and Google wouldn’t want to play this game as it would constrict their generally high profit margins
2. He thus played to Amazon’s greatest strength – building large scale low margin businesses that attracted customers. He actively avoided what he considered Steve Jobs’ biggest mistake – making the iPhone so fantastically profitable that it attracted so much competition that ended up eating its market share. He believed high margins attracted competition while low margins attracted customers.
When moving into a new territory/project, let’s channel Bezos and remember to play to our strengths.
PS: The graph below illustrates this beautifully. Despite increasing revenues, Amazon.com has almost never made a profit – intentionally.
(If you look very closely, you can see that in 2010 the company accidentally made a profit. )
Source and thanks to: Benedict Evans’ blog
‘One thing is easy to agree on, though: competing directly with a company like this is very hard. ‘ | Benedict Evans on Amazon’s profit graph