[Evolution] Amazon’s road to profitability Hrush
We recently linked to a Harvard Business Review interview with Amazon CEO, Jeff Bezos. Bezos has always been a proponent of executing for the long term and ignoring the short term. Amazon’s early history is peppered with stories of investors punishing the stock because the quarterly numbers weren’t run the way the average CEO would run them–upwards and to the right, quarter after quarter.
Under Bezos, Amazon has demonstrated an unflinching willingness to “plant seeds and wait a long time for them to turn into trees:”
Every new business we’ve ever engaged in has initially been seen as a distraction by people externally, and sometimes even internally. They’ll say, “Why are you expanding outside of media products? Why are you going international? Why are you entering the marketplace business with third-party sellers?” We’re getting it now with our new infrastructure web services: “Why take on this new set of developer customers?” These are fair questions. There’s nothing wrong with asking them. But they all have at their heart one of the reasons that it’s so difficult for incumbent companies to pursue new initiatives. It’s because even if they are wild successes, they have no meaningful impact on the company’s economics for years. What I have found—and this is an empirical observation; I see no reason why it should be the case, but it tends to be–is that when we plant a seed, it tends to take five to seven years before it has a meaningful impact on the economics of the company.
We made a diagram charting Amazon’s critical milestones from the launch of their business to the time they delivered their first profit; and it’s evident that Bezos stuck to his guns.
The interviewer asked Bezos how he goes about identifying which “seeds” to plant and the answer is remarkable. Remarkably simple, remarkably obvious:
One useful habit is to ask the question, “Why not?” When something seems like an opportunity–it seems like you have the skills, and maybe some kind of advantage, and you think it’s a big area–you will always get asked the question, “Why? Why do that?” But “Why not?” is an equally valid question. And there may be good reasons why not–maybe you don’t have the capital resources, or parts of your current business require so much focus at this key juncture that it would be irresponsible. In that case, if somebody asked, “Why not?” you would say, “Here’s why not…” But that question doesnt get asked. It’s an asymmetry that is linked to those errors of omission.
That’s very solid thinking. We’ll soon be posting a timeline and some thoughts on Google’s evolution.
Having worked with Amazon.com in the past, I could assert that Amazon.com is a company that indulges in a lot of experimental projects, even those that would take years of work and tonnes of money.
Ram–is that a bad thing? Amazon seems to have done well with picking the experiments to indulge in?
I wish more companies could use the method Amazon uses to simplify difficult questions about the utility of features & products – ‘What’s better for the customer?’
That would hopefully stop them from resorting to random, underhanded means of squeezing money from customers for short term gains resulting in long term damage to goodwill.