4 employees, few computers and computer servers, a garage to act as your office, determination, and a bit of optimism. This is all you need to start the next Amazon.
Started as online bookstore, amazon is now everywhere. From marketplace, music, movies, games, to cloud servers and scientific research, amazon develops and sells everything.
Business lessons to learn from Amazon.
Amazon is so big that if you’re planning to start a company in any niche, there might be a chance that your competitor company may be owned by amazon.
There are many business lessons to be learnt from Amazon.
Long Term Vision
Maximise profit dollars, not margins.
Jeff Bezos started Amazon because he saw a potential and long term growth in an e-commerce store. It was started in the mid nineties when e-commerce business wasn’t much established and prevalent.Though started off as an online bookstore, Bezos always wanted Amazon to be an online store with unlimited products. This led to amazon spreading its hands in other domains just after few years of operation.
Amazon went public in 1997, the time when it was still making losses, but by 1999 its stock had rocketed up 5600%. Everyone knew the importance of long term vision of Jeff Bezos which resulted in Amazon’s first profit in the fourth quarter of 2001.
Amazon always kept its motto – “Growth over Profits” and as a result is now one of the biggest companies of the world.
In the words of Jeff Bezos –
Any company that wants to focus on customers and put customers first, any company that wants to invent on behalf of customers has to be willing to think long term and it’s actually much rarer than you might think. I find most of the initiatives, we undertake, may take five to seven years before they pay any dividends for the company. They may start paying dividends for customers right away but they often take a long time to pan out for shareholders in the company.
Thinking long term helps a company stay in the market for long. Short term pressures like want of instant benefits, shareholders pressure, etc. do arise, but, according to Jeff Bezos, if you think you’re going in right direction, don’t stop moving ahead. Thinking long term give a huge competitive benefit to the Brand and help them to serve customers much better.
Jeff Bezos believes in innovation. He believes in inventing products which fit in all the ‘either or’ options.
This has resulted in Amazon owning many unique products and services like Kindle (which use electowetting technology), one click buying (Amazon owns its patent), Goodreads, etc.
Associate or Affiliate program was started in amazon from 1996 itself which allowed individuals with their own web sites to choose books of interest and place ads for them on their own sites, allowing visitors to purchase those books.
Experiment and Learn from Failure.
Jeff Bezos is a firm believer of the theory – experiments and failures leads to success. Amazon was seen experimenting right from the start when they launched auction service in 1999. A lot of effort and resources were directed to make customers accept this business model. However the consumers were not pleased with the functionality and the Amazon Auctions turned out to be a failure.
But this didn’t stop Jeff Bezos to take company to success. Auctions was transformed into zShops and then to Amazon Marketplace where third party seller business is conducted and which currently accounts for 40% of the total units sold on Amazon.com.
Amazon also wanted to separate itself from Google and Apple products and released its Fire range of products. These consisted of phones, OS and tablets which again failed miserably. But this gave amazon an idea to build partnerships with smartphone makers to facilitate its goal. This partnership involve pre-installed amazon applications in those smartphones. Applications not only include amazon marketplace but also other amazon services like Firefly scanner.
There were innumerable experiments done by amazon, many of which backfired too. But this hasn’t stopped it to become one of the biggest companies in the world.
Fun Fact: Amazon, during its early days had a software bug where customers could order a negative quantity of books and amazon credited their credit card with the price of the book.
Buy the Competition.
Just like Facebook, Amazon has a habit of buying its competitors. Amazon is a giant and it wants to be one.
Amazon is apparently (leader) in every industry. One of the most successful strategies adopted by amazon is – crush the competition by buying it. It has brought almost 30 companies in twenty years.
Acquisitions by amazon include
- Double Helix Games
- Zappos, and many more.
Obsess over Customers
“We’re not competitor obsessed, we’re customer obsessed. We start with what the customer needs and we work backwards.”
Amazon has been doing this since the very beginning. They believe that focusing on customers is more important than focusing over competitors.
Jeff Bezos is the person behind this ideology. He believes that a company should deliver 100% consumer satisfaction and fulfillment of customer needs should be the main motive of a brand. This can be seen in the case of Kindle Tablet which came into existence purely defined by customers’ desires rather than engineers’ preferences and personal preferences.
Divide (the work) and rule
Amazon isn’t just a marketplace. It also deals in book publishing, cloud servers, movie and book reviews (IMDB and GoodReads), games development, video social network (Twitch.tv), and other domains. Many people don’t know about this as amazon companies function independently. Yet they are interconnected. Data is shared with the partner (amazon) companies to enable amazon deliver better services.
This is the reason many of amazon companies operate for free. These websites are used to generate user data for other operations.
Don’t forget your roots
Everyone knows about amazon’s history. How it started as an online bookstore and still is world’s biggest bookstore. Audible, Amazon publishing, goodreads, comixology, bookfinder.com, Kindle, etc; books are still a priority for amazon (even though revenue from books is less than 10% of total revenue)
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