Feeling the Impacts of Amazon

Amazon, a 23-year-old company, last year made over 135 Billion dollars in revenue. They boast a 10 million square foot campus, and over 341,000 employees. When they began, they were an online bookstore only. Now you can purchase books, PlayStation game systems, toilet paper, online music, a gigantic host of cloud infrastructure services, and groceries, many of them via their in house brand, all from the push of a button. In 2015, they surpassed retail giant Walmart, as the most valuable retailer in the United States by market capitalization. They are now in a race to hit $500 billion in value, which is roughly the GDP of Switzerland.

How does an online bookstore go from small online venture to producing 135 Billion dollars in yearly revenue? In a word, disruption.

 

The Hallmarks of a Disrupter

Disruption [dis-ruhp-shuh n] – a radical change in an industry, business strategy, etc., especially involving the introduction of a new product or service that creates a new market.

Based on meticulous research, Jeff Bezos, founder of Amazon, knew they needed to be an online company. He settled on an online bookstore, because it could carry several times more offerings than a normal bookstore, since it would have a practically unlimited (not actual) warehouse. This was the first disruption and led to the eventual closing of the international bookstore chain Borders, and a large decline of Barnes and Nobles.

From 1998-2004 while the Tech Bubble crash was happening, Amazon was busy expanding its services beyond books. To continue the disruption model, while other tech companies were hunkering down, Amazon began offering new services, and expanding into a host of online products. They also carried their disruption model into other traditional retailers, with the offering of new features, such as Free Super Savers Shipping. This caught traditional retailers on their heels, and has forced virtually all of them to launch online storefronts in a bid to catch up.

In 2005, Amazon moved to cloud computing, eventually becoming a dominate player in the marketspace. This further disrupted both online and offline retailers, allowing them to offer more advanced services, for less cost. Many believe that this was simply a cost cutting measure on Amazon’s part. This is an incorrect observation, as the cloud computing move allowed Amazon to begin pursuing artificial intelligence along with Google and the then fledgling Facebook. Which brings us to the next important question, how did Amazon know which moves to make to disrupt so many industry leaders? Companies which had exponentially more resources than the newly created Amazon? The key lies in their research.

Disruption without Insight is Just Noise

A common error businesses make is assuming that being a disrupter in their industry is to simply do something no one else does and do it loudly (read marketing). While it’s true that disruption does entail breaking new ground and creating brand awareness, that in and of itself is not the recipe for becoming an industry leader. The secret to Amazon’s success lies in its ability to understand its customer base, determine need, and product fit. Amazon AWS (cloud computing branch) matched with Amazon Mechanical Turk (crowdsourcing area) and Alexa have created a powerful base that Amazon uses to drive its AI research. As a customer visits the site, views products, looks at music, or videos, powerful AI tools are examining the customer’s intent and level of engagement. The site then presents products, suggestions, and other content that match the intent of the customer.

These insights identify opportunities that allow Amazon to foster a truly disruptive environment that has allowed them to become the leader of multiple industries. Becoming an industry leader and a true disruptor starts with examining your customer base, modelling their behavior, and identifying the core problems and desires that your core and expanded base has. These insights form the solid foundation for the expansion of your business. It is also important to recognize that these insights are not a one and done experience. Your market space, customer base, and customer needs are constantly changing. In order to stay relevant, your business must have its proverbial finger on the pulse of your market space and be constantly looking for new threats and opportunities.

7 Summit Solutions is dedicated to bringing customer insights downstream allowing small and medium businesses to become disrupters in their own market space as well as become more competitive with the industry giants.