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Amazon is undoubtedly a very successful and smart company, but this is just an overwhelming fluff piece. Just one example: Take AWS for instance. The business

by Elepsis 15y ago

Amazon is undoubtedly a very successful and smart company, but this is just an overwhelming fluff piece. Just one example: Take AWS for instance. The business had no right to succeed. It violated all sorts of textbook rules about brand elasticity, market positioning, core competency management and so forth. But it was the right game for Amazon. What in the world is this based on? How about the successful example of LSG Sky Chefs, created from Lufthansa's need to supply food for its airplanes and now the largest provider of airline food worldwide? Or Sodexho, which started out as Marriott's food supplier/catering service? This is business strategy 101: are we good at something? Can we use that to make money from other companies that need the same thing? Throughout the article the author ascribes brilliant strategic thinking to Amazon while dismissing successes from its competitors as strokes of luck. Sadly, he doesn't bother to provide any evidence of either the presence of strategic thinking at Amazon or the absence of it elsewhere. Not even the achilles heel he claims he "discovered" is special to Amazon; it has been demonstrated amply by every other company he mentioned: see Apple's simultaneous supply deals and lawsuits with Samsung as just one example of the friends today, foes tomorrow state of business today.

timr 15y ago
"This is business strategy 101: are we good at something? Can we use that to make money from other companies that need the same thing?" Uh huh. Problem is, the advice gets kind of fuzzy past the business 101 course: * Pick up a book on marketing, and it'll tell you not to overextend your brand (like, say, from selling books to selling everything to website hosting to online video to making freaking computers). * Pick up a book on finance, and it'll tell you to avoid investing heavily in depreciating assets (investors were calling for Bezos' head when they were building a massive distribution infrastructure in the late 90s; now Amazon is doubling down on server infrastructure, while most other players are selling it off). * Open the finance book to another chapter, and it'll tell you to outsource things that aren't your core business competency (Amazon manages distribution centers, writes software, designs and builds computer hardware, builds datacenters, publishes books, delivers online video to your television...it even does its own packaging design!) * Pick up a book on sales, and it'll most likely tell you not to cannibalize existing product lines by launching products in unproven new categories (like, say, manufacturing and selling e-book readers at a loss, when your primary business is the sale of physical books). Amazon's moves only look obvious in hindsight. They've made a huge number of excellent strategic decisions that were roundly criticized by investors and business analysts when they were first announced.
- GFischer 15y ago
  I'm taking business classes right now, so I can comment on some of your points, in particular this one: "Pick up a book on sales, and it'll most likely tell you not to cannibalize existing product lines " Current books explicitly advice to be willing to cannibalize, for example Jakki Mohr's (I took classes with her): http://books.google.com.uy/books?id=8LJwaPuuQagC&lpg=PA87&dq=cannibalize&pg=PA87#v=onepage&q=cannibalize&f=false http://books.google.com.uy/books?id=8LJwaPuuQagC&lpg=PA8... based on this paper: http://www.jstor.org/pss/3152166 http://www.jstor.org/pss/3152166 I also took a course on Strategy, and it did endorse Amazon's strategy, by focusing on the shift from the traditional "choose a generic strategy" (as in Porter's framework) to developing capabilities (such as Amazon's logistics) and then entering sectors where you have said competitive advantages. We also talked about umbrella brands, its pros and cons, it's by no means a given that extending is bad. Some of your points are indeed presented that way (for example it's still common to recommend outsourcing), but others are now taught differently.
  - timr 15y ago
    Yes, I was a little careful in how I phrased that one, precisely because some people are beginning to teach something different. But the exceptions prove the rule -- Amazon was one of those revolutionary companies that did things contrary to the conventional business-school wisdom, and in the process re-invented what was taught.
    - GFischer 15y ago
      Good point :) and nicely phrased. And indeed, Amazon was one of the examples taught in class, so I agree that they helped re-invent what is taught.

by Elepsis 15y ago

timr 15y ago

"This is business strategy 101: are we good at something? Can we use that to make money from other companies that need the same thing?" Uh huh. Problem is, the advice gets kind of fuzzy past the business 101 course: * Pick up a book on marketing, and it'll tell you not to overextend your brand (like, say, from selling books to selling everything to website hosting to online video to making freaking computers). * Pick up a book on finance, and it'll tell you to avoid investing heavily in depreciating assets (investors were calling for Bezos' head when they were building a massive distribution infrastructure in the late 90s; now Amazon is doubling down on server infrastructure, while most other players are selling it off). * Open the finance book to another chapter, and it'll tell you to outsource things that aren't your core business competency (Amazon manages distribution centers, writes software, designs and builds computer hardware, builds datacenters, publishes books, delivers online video to your television...it even does its own packaging design!) * Pick up a book on sales, and it'll most likely tell you not to cannibalize existing product lines by launching products in unproven new categories (like, say, manufacturing and selling e-book readers at a loss, when your primary business is the sale of physical books). Amazon's moves only look obvious in hindsight. They've made a huge number of excellent strategic decisions that were roundly criticized by investors and business analysts when they were first announced.

GFischer 15y ago
I'm taking business classes right now, so I can comment on some of your points, in particular this one: "Pick up a book on sales, and it'll most likely tell you not to cannibalize existing product lines " Current books explicitly advice to be willing to cannibalize, for example Jakki Mohr's (I took classes with her): http://books.google.com.uy/books?id=8LJwaPuuQagC&lpg=PA87&dq=cannibalize&pg=PA87#v=onepage&q=cannibalize&f=false http://books.google.com.uy/books?id=8LJwaPuuQagC&lpg=PA8... based on this paper: http://www.jstor.org/pss/3152166 http://www.jstor.org/pss/3152166 I also took a course on Strategy, and it did endorse Amazon's strategy, by focusing on the shift from the traditional "choose a generic strategy" (as in Porter's framework) to developing capabilities (such as Amazon's logistics) and then entering sectors where you have said competitive advantages. We also talked about umbrella brands, its pros and cons, it's by no means a given that extending is bad. Some of your points are indeed presented that way (for example it's still common to recommend outsourcing), but others are now taught differently.
- timr 15y ago
  Yes, I was a little careful in how I phrased that one, precisely because some people are beginning to teach something different. But the exceptions prove the rule -- Amazon was one of those revolutionary companies that did things contrary to the conventional business-school wisdom, and in the process re-invented what was taught.
  - GFischer 15y ago
    Good point :) and nicely phrased. And indeed, Amazon was one of the examples taught in class, so I agree that they helped re-invent what is taught.