Today I want to talk about risk/reward and failure & innovation. These are my take on some thoughts from Jeff Bezos.
If you’re starting out, this aggressive approach likely isn’t for you. If you’re following the trends that work in the Amazon Marketplace, you’re minimizing risk, but one of the problems with this approach is that you’re also going to end up in some really competitive markets. However, if you’ve got excellent pricing on the supply side, that can be okay. More likely though, the better approach is to move as quickly as possible to create unique private label products.
Jeff Bezos says that if you have a 10% chance at 100x returns, you should always take it. You’re still going to fail 9/10 times, but the rewards are well worth it.
Jeff Bezos likes to use the example of baseball. In baseball, if you swing for the fences, you can get up to four runs, but it’s probably a better strategy to take the higher probability approach sometimes and try to hit singles.
I’m not much of a baseball guy, but the analogy works with cricket as well. In cricket, you can get six if you swing for the boundaries, but taking the more conservative approach is likely the better strategy more times than not.
The difference between baseball/cricket and business is that sometimes a home run in business can net you 100x or 1000x on your initial investment! In a scenario like that, it’s the right decision to experiment and be more aggressive. You’ve just got to be willing to accept some failures. Again, this isn’t a strategy for those without the financial resources to strike out a few times. If you’ve got a few successful private label products behind you though, innovation and experimentation might be right for you.
Another thing Jeff Bezos says is that invention is not disruptive! If you invent something that doesn’t catch on in the marketplace, you haven’t changed the landscape. What is disruptive is when that invention or new product catches on.
Say you’re in the flashlight business. The marketplace is saturated with battery-powered models. If you’re the first to come to market with a rechargeable model, you’re going to disrupt that market! In two years everyone will be selling rechargeable models.
It’s great if you can be first to market with a new product or invention, but sometimes, if you go in fast and hard, being second to market can be safer and almost as profitable. Just make sure you’re not selling something that can get you in hot water regarding intellectual property laws. You can’t rely on your suppliers to do their due diligence on your products. It’s up to you to make sure the things you’re selling don’t violate patent or copyright laws.
Not every innovation is valuable to the customer. In our previous example about flashlights, it’s obvious why someone would want to buy a rechargeable product, cost, and convenience. WIth some new products, this is not so easy. Always keep in mind, if you can’t answer the question, “Why is a customer going to adopt this?” then your product or innovation isn’t in good shape!
One of my earliest products was a music stand light. I started with a battery powered model, then quickly realized a rechargeable model would better differentiate my listing from the rest of the ones in the marketplace. This is an excellent approach to selling on Amazon; when you have success double down.
Resourcefulness comes with confidence and experience. Don’t go out and put your life savings on one private label Amazon listing. That’s not a good strategy. It’s important, though, that you keep innovation and market disruption in mind as you move forward with your Amazon selling business.
If you need help, be sure to reach out to a community that can help you grow. If you live in London, you can join one of my masterminds.