"How did we ever get along without Amazon?";. That was last week's happy hour casual comment that kicked off a fun conversation.
Just to be clear. This isn’t a stamp of approval on Amazon’s labor practices or their crushing of small businesses. No matter how you feel about Amazon as a company, their laser focus on innovation provides insights that every growth-minded business leader can use.
How Does Amazon Continue to Experiment and Innovate Year After Year?
1. Amazon creates every product and service around the customer.
When I read Jeff Bezos' quote – "Customer obsession is not just listening to customers. Customer obsession is also inventing on their behalf" – it didn't strike me as particularly unique. Doesn’t every company say they care about their customers?
It's when you take a closer look at the obsessive focus that goes into each product and service that this quote takes on a more nuanced meaning. Amazon continually, deeply examines customer behaviors to find the missing pieces.
Bezos said "Customers are always dissatisfied, even when they don't know it. Even when they think they're happy, they actually do want a better way, and they just don't know yet what that should be.” It’s this thinking that every business leader can spread throughout their company --- even if it’s a company of only you – to sharpen their long term strategy.
Consider your annual Amazon Prime membership.
It’s pretty unlikely that in 2005 anyone said, “I want to pay a small annual fee for free shipping, exclusive deals, and access to streaming content.” And yet Amazon saw the potential. According to Statista, in 2022 163.5 million people think it makes sense too.
You have more valuable customer data than you probably realize. It’s one thing to know what your customers are buying from you, but what about those things they aren’t buying?
Where are the gaps in your offerings?
2. Amazon adopted a system, a series of repeatable processes, that guides their innovation decision-making.
Jeff Bezos is an avid reader, learner, lover of sci-fi, and idea generator. It would be easy for a company as large and financially comfortable as Amazon to race toward the next great idea.
In 2004 Bezos said no to the usual slide decks and instead introduced the 6-page narrative memo method. This document, written from the customer’s perspective, serves as the roadmap his team uses to evaluate each potential innovation. Working backwards from the outcome, the management team dissects the idea thoroughly.
Writing in complete sentences forces clarity and careful thinking. A Power Point slide with a handful of bullet points simply doesn’t deliver the information needed to make thoughtful, responsible decisions.
A clear, written narrative told from the customer’s viewpoint is a smart first step.
Create a document template that you will use every time. Tailor it for your company and customers.
Having a reusable working document eliminates the blank piece of paper problem, supports methodical decision-making, and aligns each new initiative with your long term strategy.
3. Every idea isn't a winner.
Amazon has invested substantially in some products that were duds. Think Amazon Fire Phone and Haven, the joint health venture of Amazon, JPMorgan, and Berkshire Hathaway.
In spite of their diligent analysis, even the smartest companies get it wrong sometimes. A system for innovation includes not only how to launch successfully but also how to confidently say stop.
While Bezos' criteria for each of these flops is to accept responsibility, to preface the what-went-wrong postmortem with "we f**ked up", there is one valuable takeaway. Bezos encourages his team to look ahead to the next experiment.
Be clear about your expected outcomes before you commit to any product or service no matter the scope. Include in your plans when you will stop. This gives everyone the confidence to start, the discipline to diligently measure, and the reassurance that the possibility of failure is understood.
4. There is tremendous financial value in Amazon's unseen technology framework.
I remember more than a dozen years ago searching online for a replacement to a piece of software we had developed.
One of our applications automatically generated and sent emails. We were replacing our own mail servers and decided to explore third-party APIs. APIs are standalone services that software developers integrate into their applications to perform specific low-level tasks.
I landed on an Amazon Web Services (AWS) page and just stared.
There was a stunning collection of tools and software pieces that Amazon used to drive its own vast server backend. And they were available to us. It was truly a software developer’s happy place. Making each of these small technology solutions available to developers for a small usage-based or recurring fee was genius.
Apparently other companies have felt the same way since AWS's 2006 introduction. Amazon’s first quarter 2022 revenue for AWS alone was $18 billion.
Great ideas don't have to be flashy to be financial winners for both you and your customers. What tools are you using every day that your customers would gladly pay for?
As Amazon has shown, sharing the tools and technologies they use doesn’t weaken their competitive advantage.
5. Amazon's technology framework is continually aligned with their strategy.
As new products and services are developed, the technology required to deliver the right customer experience is an active component of their decision-making.
For example, their backend databases have been replaced several times over the years to meet their changing data demands. As with all things AWS, these Amazon-built database technologies are available to their development customers as well. Both Amazon and its customers continually benefit from their infrastructure innovations.
Every company relies on technology to deliver their best products and services. Your technology framework needs to be a part of every strategy decision you make. Never assume that what works now will continue to support you in the future. Don’t let your existing technology framework limit or define your innovation strategy.
6. Amazon continually delivers something new.
Many of Amazon's big innovations take years to launch. Because Amazon has dedicated development teams for each product, they have the resources to also keep their existing customers coming back.
Small, incremental offerings are introduced regularly, often weekly. Bezos knows that customers will continue to be loyal until someone else delivers the same product or service better. For Amazon, better means faster or cheaper.
Your customers have their own definition of better. Whatever it means to them, continually delivering more value that exceeds better is critical.
Make small, incremental deliverables part of your business strategy. Commit to a plan that is openly adopted by everyone in your company.
7. Amazon acquires the skills it needs.
When Alexa was in the early development stages, it was obvious that speech recognition and machine learning expertise were needed to make it a viable product. Amazon looked outside the company and acquired the small companies that would provide these specialized skills.
For most companies, a less complicated solution is available. Building the right collaborative IT partnership
is a cost-effective solution to rounding out the skills you need to deliver a valuable product or service.
For Curious Readers
If you're interested in learning more about Amazon's innovation mindset and systems, you'll enjoy these two books. (Affiliate links
The Everything Store
by Brad Stone (Amazon in 2013)
by Brad Stone (Amazon in 2021)
One Last Thing
When you’re ready, here are just 5
of the ways we work together:
Create your step-by-step infrastructure roadmap (How?)
Implement peace of mind cybersecurity protection (How?)
Evaluate new technologies before you buy (How?)
Discover new financial wins for both you and your customers. (How?)
Expand your technology team your way ~New ~ (How?)
Don't forget to add these actionable ideas
to your OneNote or other favorite note taking app.