The Amazon Case: Why Amazon Is Winning

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We believe that every organisation, large or small, has much to learn from Amazon. If you're in any kind of commerce or logistics, you absolutely must pay attention to Amazon.

In The Amazon Case we'll explain you why they are winning and how they are doing it.

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The Amazon Case: Why Amazon Is Winning

  1. 1. THE CASE Why Amazon Is Winning
  2. 2. In all of our research and trendwatching, Amazon is one of the most fascinating organisations we have ever seen. It employs unique strategies according to highly regarded philosophies, which has lead it to unprecedented success. We believe every organisation, large or small, has much to learn from Amazon. In The Amazon Case, we’ll give you 
 insights in how Amazon works 
 and why it is so successful. CASE BROUGHT TO YOU BY: Dado Van Peteghem dado.vanpeteghem@duvalunion.com @dadovanpeteghem Sam Wouters sam.wouters@duvalunion.com @sdwouters Jo Caudron jo.caudron@duvalunion.com @jcaudron
  3. 3. A BRIEF OVERVIEW OF
  4. 4. First office in Seattle From humble beginnings in the 90s
  5. 5. A successful IPO in 1997
  6. 6. 10 years of rapid business expansion
  7. 7. 2x Walmart Becoming twice as valuable as Walmart
  8. 8. Amazon’s US e-commerce market share 0% 5% 10% 15% 20% 25% 30% 35% Category Axis 2010 2011 2012 2013 2014 2015 2016 34% 33% 32% 31% 27% 25% 21% To e-commerce Market Domination
  9. 9. PHILOSOPHIES All while following the same
  10. 10. “Because of our emphasis on the long term, we may make decisions and weigh tradeoffs differently than some companies.” ~Jeff Bezos in his 1997 letter 
 to Amazon's shareholders Read the full letter
  11. 11. Amazon has been investing ALL of 
 its profits in expansion for decades
  12. 12. Jeff Bezos on running a 350K-employee company with a start-up mindset
  13. 13. ~Jeff Bezos, CEO of Amazon #1 Set the bar high in hiring This has been, and will continue to be, the single most important element of Amazon.com's success. You can work long, hard, or smart, but at 
 Amazon you can’t choose two out of three.
  14. 14. #2 True customer obsession Staying a startup requires you to experiment patiently, accept failures, plant seeds, protect saplings, and double down when you see customer delight. A customer-obsessed culture best creates the conditions where all of that can happen. ~Jeff Bezos, CEO of Amazon
  15. 15. #3 Proactivity to create trust When we’re at our best, we don’t wait for external pressures. We are internally driven to improve our services, adding benefits and features, before we have to. We lower prices, increase value for customers and invent before we have to. ~Jeff Bezos, CEO of Amazon
  16. 16. #4 Resist proxies As companies get larger and more complex, they focus on doing the processes right instead of the outcomes. The process is not the thing. It’s always worth asking, do we own the process or does the process own us? ~Jeff Bezos, CEO of Amazon
  17. 17. #5 Embrace external trends If you fight trends, you’re probably fighting the future. 
 If you embrace them, you will have a tailwind. We’re in the middle of an obvious one right now: 
 machine learning and artificial intelligence. ~Jeff Bezos, CEO of Amazon
  18. 18. #6 High-velocity decision-making The team at Amazon keeps its decision-making velocity high. Speed matters in business – plus its a more fun environment. 1. Never use a one-size-fits-all decision-making process. 2. Make most decisions with ~70% of the info you wish you had. 3. Quickly recognise and correct bad decisions. 4. “Disagree and commit” if you trust the people but not the idea. 5. Recognise true misalignment early and escalate it immediately. ~Jeff Bezos, CEO of Amazon
  19. 19. "You need to be making big, noticeable failures. The great thing is that, when you take this approach, a small number of winners pay for dozens, hundreds of failures, and so every single important thing we've done has taken a lot of risk, risk-taking, perseverance, guts, and some have worked out. Most of them have not. That has to happen at every scale level all the way down." High-velocity decision-making comes with failure ~Jeff Bezos, CEO of Amazon
  20. 20. Some of Amazon’s costly failures -$170M -$60M-$231M
  21. 21. And its recent Big Bets Buying WholeFoods for $13.7B Offering $9B for Slack Buying souq.com for $650M
  22. 22. And much, much more… Acquisitions Investments
  23. 23. Before we get into the strategic part, here’s a picture of Amazon’s new office in Seattle to feed your inner instant-gratification monkey.
  24. 24. STRATEGY Amazon rarely explains its short-term tactics or its long-term strategic vision. It values surprise.
  25. 25. The Strategic Foundation STRATEGICALLY, WE ARE MOST INTERESTED IN THE FOUNDATION THAT WAS LAID HERE.
  26. 26. To keep performance high and 
 innovation in a continuous loop, Amazon is deploying an Externalisation Strategy
  27. 27. Services this strategy is used on Artificial IntelligenceIT Infrastructure Freight logistics Video Conferencing 3rd party marketplace Data security marketplace
  28. 28. Internal 
 Services Amazon’s Externalisation Strategy INTERNAL EXTERNAL AMAZON
  29. 29. Amazon has been pushing its internal services to the edge of the organisation for 15 years. We identified 9 strategic reasons to do this. Amazon’s Externalisation Strategy INTERNAL EXTERNAL AMAZON Internal 
 Services
  30. 30. Amazon’s Externalisation Strategy INTERNAL EXTERNAL AMAZON#1 Additional revenue: Creating additional revenue streams. Internal 
 Services
  31. 31. Most obvious to everyone Amazon’s Externalisation Strategy INTERNAL EXTERNAL AMAZON #2 Expansion: 
 To different markets, using the same strategy. #1 Additional revenue: Creating additional revenue streams. Internal 
 Services
  32. 32. Pressure from both internal & external clients Amazon’s Externalisation Strategy INTERNAL EXTERNAL AMAZON #3 Increased accountability: Revenue targets result in no dormant internal services. Internal 
 Services
  33. 33. Amazon’s Externalisation Strategy INTERNAL EXTERNAL AMAZON #4 Benchmarking: 
 If the market doesn’t want our service, we aren’t using the best tools internally. Internal 
 Services
  34. 34. Amazon’s Externalisation Strategy INTERNAL EXTERNAL AMAZON #5 Innovation: 
 Insights from the market on how to improve the service. Internal 
 Services
  35. 35. Amazon’s Externalisation Strategy INTERNAL EXTERNAL AMAZON #6 Capacity optimisation: 
 Optimally using excess capacity left by internal use. Internal 
 Services
  36. 36. Amazon’s Externalisation Strategy INTERNAL EXTERNAL AMAZON #7 Leverage with partners: Higher volumes lead to better deals with partners. Internal 
 Services
  37. 37. Amazon’s Externalisation Strategy INTERNAL EXTERNAL AMAZON #8 Challenging competition: Incumbents are forced to keep innovating. Internal 
 Services
  38. 38. INTERNAL Amazon’s Externalisation Strategy EXTERNAL AMAZON #9 Removing growth barriers:
 Even if the competition innovates, it may not be enough and slow down growth. Internal 
 Services
  39. 39. Amazon’s Externalisation Strategy EXTERNAL INTERNAL AMAZON#1 Additional revenue: Creating additional revenue streams. #2 Expansion: 
 To different markets, using the same strategy. #3 Increased accountability: Revenue targets result in no dormant internal services. #4 Benchmarking: 
 If the market doesn’t want our service, we aren’t using the best tools internally. #5 Innovation: 
 Insights from the market on how to improve the service. #7 Leverage with partners: Higher volumes lead to better deals with partners. #8 Challenging competition: Incumbents are forced to keep innovating. #6 Capacity optimisation: 
 Optimally using excess capacity left by internal use. #9 Removing growth barriers:
 Even if the competition innovates, it may not be enough and slow down growth. Internal 
 Services
  40. 40. Let’s look at one service in detail marketplace What happened when Amazon pushed its own sales-platform to the edge of the organisation?
  41. 41. Amazon began to offer fulfillment services, which completely unburdened 3rd parties. How Amazon won over 3rd parties
  42. 42. In 2005, Amazon introduced its $99 / year Prime membership, with free 2-day shipping for millions of (3rd party) items. How Amazon won over customers
  43. 43. Strategy applied to its 3rd party marketplace #1 Additional revenue #2 Expansion #3 Increased accountability #4 Benchmarking #5 Innovation #7 Leverage with partners #8 Challenging competition #6 Capacity optimisation #9 Removing growth barriers Additional revenue stream by taking a cut from 
 3rd party sales, regardless of their profitability. Amazon can offer goods in markets it doesn’t sell itself through millions of sellers, benefitting prime members. 3rd parties began using the platform, 
 increasing volume and the need. If 3rd parties stick with other marketplaces, 
 Amazon needs to up its game. More users on the platform leads to 
 more data and feedback to improve it. Amazon gets to use the excess capacity 
 that isn’t filled up by its own sales. Higher shipping volumes lead to more leverage 
 and better deals with logistics partners. Incumbent logistic partners are forced 
 to innovate to remain relevant for Amazon. Competing marketplaces and logistic partners can be barriers in Amazon’s growth, so it needs back-up plan.
  44. 44. Third-party sales on the marketplace 0% 20% 40% 60% 80% 100% Category Axis 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 50%50% 46% 42% 40%40% 38% 35% 30%30% 26% 30%30% 28% Now good for $23B ~17% of Amazon’s revenue
  45. 45. Amazon revenue breakdown marketplace
  46. 46. The strategy applied to AWS Amazon wants to be the biggest shop Builds the best online infrastructure “invents” the commercial cloud Disrupts the entire storage and server industry > > >
  47. 47. Imagine they apply this 
 to Amazon Food Services? Amazon starts selling Fresh Food Builds the best distribution infrastructure “Invents” the commercial “fresh cloud” Disrupts the entire distribution and food retail > > >
  48. 48. So Amazon is winning in the front… Channel & Destination
  49. 49. and like a Trojan Horse
 in the back… (Infrastructure & Distribution)
  50. 50. No other organisation can do this right now, because Amazon is the only one with the full value chain. This is Why Amazon Always Wins.
  51. 51. Amazon is a digital-first company, which does not mean digital-only. It needs to be present in the physical world too, for sales and distribution.
  52. 52. Amazon getting into your home
  53. 53. Amazon’s physical locations
  54. 54. Amazon buys for $13.7B And its most recent addition… Full post at slate.com
  55. 55. LOGISTICS Goods need to be taken to- and from all of these places
  56. 56. We can’t explain to you how all of this works, but it looks like it was made by someone who knows what they’re doing, doesn’t it?
  57. 57. Amazon has 45.000 Kiva robots operating (in) its warehouses
  58. 58. Amazon mostly relies on partners for delivery
  59. 59. And its network of flexworkers
  60. 60. Amazon is also investing in its own logistic solutions
  61. 61. For rapid fresh-food delivery & more
  62. 62. Amazon invested $1.5B in its own 40-plane air cargo hub
  63. 63. Next up: 45.000 drones for 2-hour delivery?
  64. 64. Delivery from flying warehouses? Dropped by parachute? Delivery by self- driving pods? patents
  65. 65. What will you do with all this knowledge? That’s just what we found, Amazon is doing way more. The big question is,
  66. 66. 1. Work out your long term “North Star” strategy instead of just focusing on the short term. 2. Think about the steps you can take to become a digital-first organisation. 3. Set a high standard in hiring, you transform your organisation through people, not technology. 4. Externalise your internal strengths and services for any of the 9 reasons Amazon does. 5. Don’t wait for external pressure to improve, start innovating proactively. 6. Embrace external trends, don’t waste your energy fighting the inevitable. 7. Engage in high-velocity decision-making at all levels. You will fail a lot, but learn more. 8. Don’t try to fully copy Amazon or you will be a cook, not a chef. Create your own path. 8 Takeaways And above all, start today!
  67. 67. Sold in 50+ countries! Want to run your organisation the way Amazon does? Start with our book. Buy the book
  68. 68. CASE BROUGHT TO YOU BY: Dado Van Peteghem dado.vanpeteghem@duvalunion.com @dadovanpeteghem Sam Wouters sam.wouters@duvalunion.com @sdwouters Jo is a founding partner at DUC with over 20 years of experience in the digital world. He helped many large organisations transform through our methodologies, described in the Digital Transformation book. Sam is a consultant and speaker on Blockchains & AI.
 He helped write the Digital Transformation Book. Dado is a founding partner at DUC. He has helped dozens of large organisations transform through his pragmatic approach. He is co-author of the Digital Transformation book and an entrepreneur. Jo Caudron jo.caudron@duvalunion.com @jcaudron
  69. 69. Duval Union Consulting We help organisations transform and become future-proof. duvalunionconsulting.com
  70. 70. THE CASE Why Amazon Is Winning

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