Jeff Bezos recently gave an interview to Business Week magazine, available here. In this interview he discusses the priority of innovation and the difficulty in justifying creativity to shareholders. This is an interesting discussion that really exposes the fundamental principles that underlie Amazon’s success.
Most people are familiar with the folkloric tale of Amazon’s start, Bezos wanted to start an online retail business and cast about looking for a commodity to sell - finally deciding on books as an easy to ship, cheap to store product. What isn’t discussed is the story of Amazon’s development, growth and pre-eminence as an e-commerce giant; arguably the reigning king of the e-commerce jungle.
I’ve always been a big believer about innovating and creating within constraints. The tired cliché of “think outside the box” has been so heavily molested as to be an invalid heuristic. The original intent was to ensure people didn’t create artificial boundaries to their creative processes - it has since been construed as the willful refusal to acknowledge ANY boundaries; which defeats the purpose of design.
Bezos recognizes the importance of rapid fire, micro-innovation - something Tom Kelly of IDEO has written about. Rather than exercise a huge project in a single pass - rapidly constructed prototypes of each “take” are tested and compared. They are then synthesized into a new generation of concept.
This is a Darwinian style development process that has reaped Amazon huge rewards while keeping the cost of and risk levels very low.
Amazon, however, broke the form of its small, accretive style of innovation when it released the Kindle - the electronic book reader. However, no matter the success of Kindle, Amazon has won the day in many respects.
Firstly, if Kindle works Amazon has now secured itself a (temporary) monopoly on an entire market since its the first mover.
Secondly, even when other companies move into the market Amazon can still make money because it’s still the largest distributor of the content available - it doesn’t face that innovators dilemma because it’s happily planted in between the customer and the competition no matter which path you take.
Thirdly, it has scared the crap out of publishers - a pretty staid lot. Amazon has lit a fire under their asses like no other by presenting them with a very harsh ultimatum - enter the new market or we’ll take money and creative talent from you by the truck load.
Fourthly, since Amazon is willing to act as a publisher and distributor of electronic books; traditional publishers will have to work doubly hard at doing their real (actually useful) jobs - securing talent, identifying consumer demand for content and getting books written.
So either nobody enters the market and Amazon monopolizes it, or Amazon faces competition from which it can profit. Amazon has also made competition out of people who have a poor track record of taking on real innovation - like Sony.
Sony has an eBook reader, in fact it is (was?) the market leader in that category. Sony has attempted to secure deals with publishers to distribute content but judging from the near impossibility in obtaining a device - no Sony I’ve been to has even the foggiest idea when Sony might release it in Canada.
With the Kindle, Amazon has not only positioned itself as an alternative publisher but as (potentially) the pre-eminent distributor of 2nd screen text based media. That sounds obscure but it really isn’t. As traditional media slowly exhales its death rattle, Amazon is already moving ahead to the next arena. Most people who read electronic text do so sitting at their laptops or computer screens - something that is rendered unpleasant by the limitations of screen technology.
The Kindle however, is as easy on the eyes as any novel but is provides the mechanism for instant distribution. This mechanism breathes new life into old, large volume formats. These are the last redoubt for traditional media enthusiasts and Amazon has eliminated it at a stroke; Amazon who rakes in billions of dollars from the sale of these very same stacks of dead tree.
This is game changing at its finest - Amazon has used its innovation risk management process chain to establish a system for content delivery. It has recognized that print and the reliance on physical distribution as the weakest point and eliminated it. It has done so in such a way that no one can move on this change in dynamic with improving Amazon’s circumstance.