Apply the practical principles of Amazon’s corporate growth strategy in your business. Listen to today’s episode and grow your business like Amazon.
Steve Anderson, is the author of the new book “The Bezos Letters, 14 Principles to Grow your business like Amazon”.
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Been in the insurance industry. Last 20 years, looking at emerging technology.
The biggest risk for all businesses is not taking risks correctly.
The growth of software has made it hard to evaluate opportunities.
Eg: Kodak, Blockbuster – missed innovation.
Amazon was excellent at dealing with correct risk with technology and corporate growth strategy.
Steve started reading the Bezos letters. Hidden in plain sight were principles Bezos had used to grow their corporate growth strategy.
What is it from a business/investing 100,000-foot view?
Starting any business implies
– What are your objectives/why do this?
– Goal setting
– Comparing business vs. Any investments
– Eg: own business vs. The property, stock market, bonds, forex etc.
– Compare online to offline businesses
– Ecommerce vs. Info marketing and consulting
– And mastermind
Let’s start with the Amazon marketplace. It was a radical idea in the early 2000s. There was strong internal opposition. Putting 3rd party sellers against Amazon right next door.
Evaluation of whether the marketplace is right for you, you should understand why the 3rd party marketplace exists.
It’s about customer obsession. If 3rd party sellers can sell something amazon can’t or for a better price, that actually means because customers benefit, long term Amazon benefits.
1st one – Auctions – tried to compete with eBay. This failed.
Z shops were on a separate site and log in. This failed too.
The third version is the marketplace. This worked amazingly well in their corporate growth strategy.
The opportunity is you don’t have to build an online process – infrastructure development.
On the other hand, if you don’t understand how Amazon sees the customer, you may be misguided.
You’re playing on someone else’s corporate growth strategy platform.
But Amazon is always in the news with the marketplace and 3rd party sellers – they use the info from 3rd party sellers to find possible product lines.
How to evaluate risk vs. Reward?
Do what Amazon does which is to experiment!
“Successful Failure” is principle #1.
Amazon experiments all the time with new products and services. They have a reasonable expectation of success but they didn’t know the answer.
Amazon is an inventive company – and the reason why is that failure is not a career-ending move.
It’s like learning to walk! People don’t really fear failure; they fear the consequences of failure. There is less to lose when you start.
Jeff Bezos talks about growing the size of failures as Amazon grows. “We need $1B failures!”
How to evaluate Amazon as a platform?
The first thing is your expertise or skill sets.
The same applies to property or Forex for example.
The other question is: What skills am I willing to learn?
Return for time and money in. Nothing is risk-free. There is no reward without risk.
That comes back to your risk mindset/risk tolerance.
And also your “return on risk”. If I take this risk, what could be the return?
How can you protect the downside?
The downsides of being on Amazon Marketplace is getting cut off by Amazon.
So if you have identified a risk, what can you do to protect the downside?
4 Growth Cycles – what are they?
As businesses grow or get bigger, they will go through them repeatedly.
Small or big business
Principle 5 – apply long-term thinking
You need to be thinking about where you want to be 5 years down the road in your corporate growth strategy.
Don’t forget 25 years ago, Jeff Bezos was on his hands and knees packing books!
In the 1997 letter, Bezos says “we are building something we can tell our grandchildren about”. Grandchildren were years away.
How do we test Amazon as a business model?
Amazon found the marketplace. The 2nd big Amazon idea is Prime. Again Prime was very controversial. Nobody could figure out how Amazon could do it.
The 3rd big idea was AWS (Amazon Web Services). One of the keys there is:
If I sell on Amazon, are there other things I can do? AWS was a completely different business from e-commerce. That is unusual.
How are you incentivising your employees? At Amazon, everyone is expected to improve their piece of Amazon. Can you build a culture of that?
Bezos uses the phrase “We invent on behalf of the customer”.
We are looking at what we can do better for the customer.
Innovation is making things better.
Thomas Edison was known as a great inventor. But actually he had a team of 35 people. It was an idea factory.
How do we get started and make decisions about Amazon as a model after say a year?
Principle: generate a high-velocity decision.
At Amazon, they’ve identified “Type 1 Decisions”.
These are big and you need lots of data and a thoughtful process.
“Type 2 decisions”
These are easily reversible so they shouldn’t be overthought.
As businesses grow, we tend to turn type 2 decisions to type 1 decisions.
Every time you slow down decision making, you slow down growth.
At Amazon, they allow decisions to be made at a lower level than most companies.
That goes back to principle 1, Successful Failure. Most failures don’t matter. We can pivot and or learn from them.
Make decisions with at most 70% of info you want. You’ll learn.
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