We believe that every organisation, large or small, has much to learn from Amazon. If you're in any kind of commerce or logistics, you absolutely must pay attention to Amazon.
In The Amazon Case we'll explain you why they are winning and how they are doing it.
2. In all of our research and trendwatching,
Amazon is one of the most fascinating
organisations we have ever seen.
It employs unique strategies according
to highly regarded philosophies, which
has lead it to unprecedented success.
We believe every organisation, large or
small, has much to learn from Amazon.
In The Amazon Case, we’ll give you
insights in how Amazon works
and why it is so successful.
CASE BROUGHT TO YOU BY:
Dado Van Peteghem
dado.vanpeteghem@duvalunion.com
@dadovanpeteghem
Sam Wouters
sam.wouters@duvalunion.com
@sdwouters
Jo Caudron
jo.caudron@duvalunion.com
@jcaudron
10. “Because of our emphasis on the long term,
we may make decisions and weigh tradeoffs
differently than some companies.”
~Jeff Bezos in his 1997 letter
to Amazon's shareholders
Read the full letter
11. Amazon has been investing ALL of
its profits in expansion for decades
12. Jeff Bezos on running a
350K-employee company
with a start-up mindset
13. ~Jeff Bezos, CEO of Amazon
#1 Set the bar high in hiring
This has been, and will continue to be, the single
most important element of Amazon.com's success.
You can work long, hard, or smart, but at
Amazon you can’t choose two out of three.
14. #2 True customer obsession
Staying a startup requires you to experiment patiently, accept
failures, plant seeds, protect saplings, and double down when
you see customer delight. A customer-obsessed culture best
creates the conditions where all of that can happen.
~Jeff Bezos, CEO of Amazon
15. #3 Proactivity to create trust
When we’re at our best, we don’t wait for external pressures.
We are internally driven to improve our services, adding
benefits and features, before we have to. We lower prices,
increase value for customers and invent before we have to.
~Jeff Bezos, CEO of Amazon
16. #4 Resist proxies
As companies get larger and more complex, they focus
on doing the processes right instead of the outcomes.
The process is not the thing. It’s always worth asking,
do we own the process or does the process own us?
~Jeff Bezos, CEO of Amazon
17. #5 Embrace external trends
If you fight trends, you’re probably fighting the future.
If you embrace them, you will have a tailwind.
We’re in the middle of an obvious one right now:
machine learning and artificial intelligence.
~Jeff Bezos, CEO of Amazon
18. #6 High-velocity decision-making
The team at Amazon keeps its decision-making velocity high.
Speed matters in business – plus its a more fun environment.
1. Never use a one-size-fits-all decision-making process.
2. Make most decisions with ~70% of the info you wish you had.
3. Quickly recognise and correct bad decisions.
4. “Disagree and commit” if you trust the people but not the idea.
5. Recognise true misalignment early and escalate it immediately.
~Jeff Bezos, CEO of Amazon
19. "You need to be making big, noticeable failures.
The great thing is that, when you take this
approach, a small number of winners pay for
dozens, hundreds of failures, and so every
single important thing we've done has taken a lot
of risk, risk-taking, perseverance, guts, and some
have worked out. Most of them have not. That has
to happen at every scale level all the way down."
High-velocity decision-making
comes with failure
~Jeff Bezos, CEO of Amazon
26. To keep performance high and
innovation in a continuous loop,
Amazon is deploying an
Externalisation Strategy
27. Services this strategy is used on
Artificial IntelligenceIT Infrastructure
Freight logistics Video Conferencing
3rd party marketplace
Data security
marketplace
29. Amazon has been pushing its
internal services to the edge of
the organisation for 15 years.
We identified 9 strategic
reasons to do this.
Amazon’s Externalisation Strategy
INTERNAL
EXTERNAL
AMAZON
Internal
Services
31. Most obvious
to everyone
Amazon’s Externalisation Strategy
INTERNAL
EXTERNAL
AMAZON
#2 Expansion:
To different markets,
using the same strategy.
#1 Additional revenue:
Creating additional
revenue streams.
Internal
Services
32. Pressure from
both internal &
external clients
Amazon’s Externalisation Strategy
INTERNAL
EXTERNAL
AMAZON
#3 Increased accountability:
Revenue targets result in no
dormant internal services.
Internal
Services
39. Amazon’s Externalisation Strategy
EXTERNAL
INTERNAL
AMAZON#1 Additional revenue:
Creating additional
revenue streams.
#2 Expansion:
To different markets,
using the same strategy.
#3 Increased accountability:
Revenue targets result in no
dormant internal services.
#4 Benchmarking:
If the market doesn’t want our service,
we aren’t using the best tools internally.
#5 Innovation:
Insights from the market on
how to improve the service.
#7 Leverage with partners:
Higher volumes lead to
better deals with partners.
#8 Challenging competition:
Incumbents are forced to
keep innovating.
#6 Capacity optimisation:
Optimally using excess
capacity left by internal use.
#9 Removing growth barriers:
Even if the competition innovates, it may
not be enough and slow down growth.
Internal
Services
40. Let’s look at one service in detail
marketplace
What happened when Amazon pushed its own
sales-platform to the edge of the organisation?
41. Amazon began to offer fulfillment services,
which completely unburdened 3rd parties.
How Amazon won over 3rd parties
42. In 2005, Amazon introduced its $99 / year Prime membership,
with free 2-day shipping for millions of (3rd party) items.
How Amazon won over customers
43. Strategy applied to its 3rd party marketplace
#1 Additional revenue
#2 Expansion
#3 Increased accountability
#4 Benchmarking
#5 Innovation
#7 Leverage with partners
#8 Challenging competition
#6 Capacity optimisation
#9 Removing growth barriers
Additional revenue stream by taking a cut from
3rd party sales, regardless of their profitability.
Amazon can offer goods in markets it doesn’t sell itself
through millions of sellers, benefitting prime members.
3rd parties began using the platform,
increasing volume and the need.
If 3rd parties stick with other marketplaces,
Amazon needs to up its game.
More users on the platform leads to
more data and feedback to improve it.
Amazon gets to use the excess capacity
that isn’t filled up by its own sales.
Higher shipping volumes lead to more leverage
and better deals with logistics partners.
Incumbent logistic partners are forced
to innovate to remain relevant for Amazon.
Competing marketplaces and logistic partners can be
barriers in Amazon’s growth, so it needs back-up plan.
44. Third-party sales on the marketplace
0%
20%
40%
60%
80%
100%
Category Axis
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
50%50%
46%
42%
40%40%
38%
35%
30%30%
26%
30%30%
28%
Now good for $23B ~17% of Amazon’s revenue
46. The strategy applied to AWS
Amazon wants to be
the biggest shop
Builds the best
online infrastructure
“invents” the
commercial cloud
Disrupts the entire storage
and server industry
> > >
47. Imagine they apply this
to Amazon Food Services?
Amazon
starts selling
Fresh Food
Builds the best
distribution
infrastructure
“Invents” the
commercial
“fresh cloud”
Disrupts the entire
distribution and
food retail
> > >
48. So Amazon is winning
in the front…
Channel & Destination
49. and like a Trojan Horse
in the back…
(Infrastructure & Distribution)
50. No other organisation can do this
right now, because Amazon is the
only one with the full value chain.
This is Why Amazon Always Wins.
51. Amazon is a digital-first company,
which does not mean digital-only.
It needs to be present in the physical
world too, for sales and distribution.
64. Delivery from flying warehouses?
Dropped by parachute?
Delivery by self-
driving pods?
patents
65. What will you do with
all this knowledge?
That’s just what we found,
Amazon is doing way more.
The big question is,
66. 1. Work out your long term “North Star” strategy instead of just focusing on the short term.
2. Think about the steps you can take to become a digital-first organisation.
3. Set a high standard in hiring, you transform your organisation through people, not technology.
4. Externalise your internal strengths and services for any of the 9 reasons Amazon does.
5. Don’t wait for external pressure to improve, start innovating proactively.
6. Embrace external trends, don’t waste your energy fighting the inevitable.
7. Engage in high-velocity decision-making at all levels. You will fail a lot, but learn more.
8. Don’t try to fully copy Amazon or you will be a cook, not a chef. Create your own path.
8 Takeaways
And above all, start today!
68. CASE BROUGHT TO YOU BY:
Dado Van Peteghem
dado.vanpeteghem@duvalunion.com
@dadovanpeteghem
Sam Wouters
sam.wouters@duvalunion.com
@sdwouters
Jo is a founding partner at DUC with over 20 years of
experience in the digital world. He helped many large
organisations transform through our methodologies,
described in the Digital Transformation book.
Sam is a consultant and speaker on Blockchains & AI.
He helped write the Digital Transformation Book.
Dado is a founding partner at DUC. He has helped
dozens of large organisations transform through his
pragmatic approach. He is co-author of the Digital
Transformation book and an entrepreneur.
Jo Caudron
jo.caudron@duvalunion.com
@jcaudron
69. Duval Union Consulting
We help organisations transform and become future-proof.
duvalunionconsulting.com