Quick -- think about the most disruptive company on the planet today. I’m guessing it didn’t take long for you to say Amazon. This book-seller-gone-wild-creation of a mild-mannered tech executive –Jeff Bezos -- has “disintermediated” many companies that previously had secure, stable businesses.
There is no greater symbol of Amazon’s power than the fact that governments want to create entire bureaucracies dedicated to reining them in. And when Amazon announces even a passing interest in disrupting a new category or vertical, the stock prices of the incumbent companies drop immediately – and the executives of said companies go running for the prescription-strength antacids (of course, soon to be sold by Amazon Pharmacy).
Consider, for a moment, how Amazon has created its market-swaying brand of might. You might say they -- meaning Bezos -- looked into the future to discern future trends and then acted on them, right? Like many technology companies, having a “golden gut” to see through all the noise, and to discern what people might want tomorrow, is essential, right? Surprisingly, no.
In a recent interview, Bezos said he only invests in “current” trends -- those that he knows will last for at least a decade. Interestingly, the trends he is investing in today have been around for decades – convenience, value, and selection. Every retailer – bricks and mortar, or web, or both – understands the importance of these three tenets of retail. But by focusing on a trend that will not change, Amazon can afford to invest huge capital over the long term, because the basic benefit is stable and generates a return. If you think about it, there is no other way to do it. Would you invest billions in a trend that might be here today and gone tomorrow?
Think of a counterexample. If you bet billions on the expectation that bright red cars will be huge in two years, and it turns out the silver cars are what is huge, what happens to all of the investment you made in red cars? Amazon, very smartly, doesn’t try to figure out what color car will be big in the future.
So what is the secret sauce? The way Amazon is successful is to take those classic benefits – convenience, value and selection – and to elevate them to a new level. Follow the value chain systematically and consistently and relentlessly improve, using both technology and process.
Let’s take convenience. The first step – online shopping -- seemed absurd at the time, when everyone went to the mall to shop. Those first efforts held little promise of elevating convenience – you would click on the item you desired, and it would arrive at your door in the next couple of weeks. The “next couple of weeks” sounds so quaint in today’s world, but back when the Internet was more of a thing of wonder, it really didn’t matter.
The second step toward improved convenience – a step up in shipping time – came with a velvet rope, of sorts. You could still wait around until Amazon got around to shipping the item, or you could pay a premium and “jump the line,” receiving your shipment in three to four days’ time.
OK, let’s keep going. The third step – the one which began to define Amazon as a leader in convenience – was to introduce Prime – now you could get an item in two to three days at no extra cost, with an annual Prime subscription. Fourth -- how about getting an item the next day? Fifth -- how about getting an item by the end of the same day? And, unbelievably, sixth, how about, if you live in certain cities, getting an item within two hours?
So, the secret sauce, in Amazon’s world, is a classic benefit, relentlessly refined through a combination of technology and process.
How can you apply this formula to your small or mid-market business? Start small. Let’s say you are a distributor. When is the last time you truly considered how convenient your offerings are for your customers? Here are some examples of what to look for:
Reviewing the value chain like this, even for a single benefit – convenience -- can pay huge dividends. You too can adopt the Amazon “secret sauce” – focus on a timeless benefit, and relentlessly work on incremental improvements each day. Get some help to do this if necessary, and get into a cadence, such as one improvement per quarter -- or for big changes, one per year. This cadence will return great dividends, including incredible loyalty from your customers; and ensure your company continues to grow in the year ahead.
Topics: CEO Business StrategyTue, Mar 20, 2018