17 Aug Understanding the innovation spectrum [PART 2]

Amazon has accomplished so many incredible things that most people have a hard time defining it. Some see it as a great retailer. Others describe it as an amazing tech company. From the bookstore to the everything store, from Kindle devices and cloud computing services all the way to virtual assistants Alexa and Echo and its own film/TV production studios and streaming service, Amazon has built a whole new age of innovation.

So far only a few companies have covered the entire innovation spectrum, and Amazon, by all means, is one of them. Confining this gigantic company to a strict definition is pointless because in 10 years from now Amazon will most probably wear even more hats. Instead, let’s identify the core philosophy driving Amazon to constantly break new grounds and review its major innovations at the level of products, customer experiences and systems.

Amazon’s philosophy of innovation

In his survival kit for business innovation – Innovation Inc, Mike Parsons compares the road to innovation to a “marathon that calls for a wide variety of skills and behaviors.” Furthermore, Parsons believes that innovators are part-artists, part-scientists, who need to be driven, courageous and patient.

To a great extent, Amazon focuses on the same values – drive, courage and patience. Last year, at the Annual Charity Gala of the Internet Association, Amazon’s Founder and CEO Jeff Bezos summarized the company’s philosophy into 3 principles:

#1 Get customer-obsessed

Most companies focus on the competition, the product, the technology or the business model. These are proven ways to center a business. Amazon, however, has always focused on the customer, and this key dynamic seems to be driving the engine of all their innovations.

“People have a voracious appetite for a better way, and yesterday’s ‘wow’ quickly becomes today’s ‘ordinary’. You cannot rest on your laurels in this world. Customers won’t have it,” states Bezos in his annual letter to shareholders.

What Bezos and the other 560,000 Amazonians seem to love about customers is that they are always discontent and that their expectations constantly go up. On top of that, customers now have instant access to information more than ever before, and that gives them ultimate power. In just a matter of seconds, they can check what’s on the other side of the fence and drop you for something better.

“Our customers are loyal to us right up until the second somebody offers them a better service. I love that. It’s super-motivating for us,” says Bezos.  

Be that as it may, Amazon’s customers do not seem to be running anywhere. In the annual survey run by the American Customer Satisfaction Index, customers ranked Amazon #1 for the 8th year in a row. Also for the 5th year in a row, Amazon U.K. ranked #1 in the U.K. Customer Satisfaction Index published by the Institute of Customer Service.

#2 Be willing to invent

For the past 22 years, Amazon has been eager to invent and pioneer. Because being customer-obsessed is not just listening to customers. It’s also inventing on their behalf, which often translates into experiments that are prone to failure. At the same time, these experiments often lead to solutions that customers are not even aware of.

“If you’re going to take bold bets, they’re going to be experiments,” Bezos argued shortly after Amazon bought Whole Foods. “And if they’re experiments, you don’t know ahead of time if they’re going to work. Experiments are by their very nature prone to failure. But a few big successes compensate for dozens and dozens of things that didn’t work.”

Amazon is refusing to become overly cautious and failure adverse. Obviously,  it has had its fair share of services that customers did not care about:

• Amazon Web Store, an e-commerce platform that competed with Shopify;
• Amazon Auction, an auction site that went head-to-head with eBay;
• $170 million worth unsold Fire Phones;
• Amazon Destinations, a hotel booking site launched in 2015;
• WebPay, a peer-to-peer payment service similar to PayPal, etc.

The key learning from Amazon’s failed experiments is that it’s not invention that is disruptive, it’s customer adoption. Only when customers like the new way, that way becomes disruptive.

Customers did not embrace any of the above-mentioned new ways, but that did not kill the company’s enthusiasm to experiment. According to Bezos, you cannot invent and pioneer if you do not experiment and embrace failure.

#3 Think long-term

Amazon has always been long-term oriented. From the very beginning, Bezos has encouraged Amazonians to think and work with a 5-to-7-year time frame in mind. This perspective allows them to know exactly where and how to invest their energy.

“If you start thinking this way, it changes how you spend your time, how you plan, where you put your energy. Your ability to look around corners improves. Many things just get better.”

Bezos’s fascination with time also shows in a giant solar-powered clock that he started building inside a mountain in West Texas.

The “10,000 Year Clock,” which is expected to tell the time for the next 10,000 years, is designed to be a symbol, an icon for long-term thinking.

Amazon’s innovation spectrum

In the first part of this series, we’ve highlighted what customer experience, product and system innovation entail. With Amazon, innovation emerges like an octopus, covering the entire spectrum. It starts with building an innovative product that generates a unique customer experience and ultimately ushers in a whole new system, a new way of doing things that rapidly gets adopted by customers. It happened with the everything store, Kindle and Alexa, Amazon Studios and Amazon Web Services, Amazon Go and many more.

Here are 3 Amazon innovations that radically changed products and experiences, creating new landscapes in shopping and entertainment.

#1 Amazon Go

Amazon Go is a great example of customer innovation. After all, shopping at Amazon Go takes only a smartphone and an app.  You don’t need to queue, have cash on you or pay at the register, because there are no cash registers and no cashiers. Amazon Go has redefined two concepts (“shopping” and “store”), enabling customers to experience a new level of freedom. Even if Amazon charges you off your member card on your way out, shopping has become as hassle-free as we can possibly imagine it.

More on Amazon Go:

In 2017 Amazon Go, the first-ever cashier-less grocery store in the world, redefined the concept of convenience and opened a new era in customer experience. In this novel approach to shopping, as long as we have the store’s app on our phones, we can grabs items and walk out of the store without having to stand in line.

According to official sources, Amazon Go uses a system called “Just Walk Out.” Powered by computer vision, deep learning algorithms and sensor fusion, the system recognizes the items that customers have taken off the shelves in real-time. Then a back-end system automatically processes the transaction and charges our Amazon account for what we take out the door.

#2 Amazon Studios

Amazon Studios embody a distinct approach to product innovation. One where content is the product, and the movie industry gains a whole new context; one where screenwriters have access to a platform that offers them more exposure and more chances at seeing their movies done. In this particular case, Amazon started with a product and ended up building a whole new system, where the audience gives feedback on content and the Studios validate potentially successful, high-quality content before getting into production.

More on Amazon Studios:

In 2010, Amazon began producing its own TV shows and movies, and it didn’t take them long to win Golden Globes, Emmys and Oscars. Winning titles such as The Marvelous Mrs. Maisel, Transparent, Mozart in the Jungle, and Manchester by the Sea were the result of a whole new system of movie/TV production that is starting to rival Hollywood.

Hollywood makes movies based on the decisions of a few corporate executives and some test audiences. Amazon is revolutionizing the way TV shows and movies are made and distributed. More precisely, the studios are crowdsourcing their content, engages the community in the development process.

Unlike regular studios, Amazon lets writers submit scripts and gives feedback. Once it accepts a script, it pays the writer ($200,000 for a movie, $55,000 for a TV show) and tests the story through their website. The opinion of hundreds of thousands of people serves as constructive criticism, which Amazon uses to make a choice about whether or not they will invest in producing the movie or the TV show.

Once a show or a movie is completed, Amazon pushes it through its own streaming service – Prime Video, which currently prides on 100 million subscribers. On a side note, Prime Video seems to be already leaving Netflix behind due to its lower costs and stronger production capabilities.

#3 Alexa & Echo

The Alexa & Echo duo make a great case for system innovation. Echo listens to what you’re asking and shoots it to Alexa, your virtual assistant. Alexa recognizes your voice, understands what you’re saying and does what you’ve asked for. You’re not glued to screens anymore, you’re free to do more without missing out. You have a voice interface that keeps you up-to-date and ensures that things around the house are done your way (it’s true, with a little help from an IoT-enabled home system).

More on Alexa & Echo:

Alexa is Amazon’s way of freeing people from being constantly glued to their smartphones. This voice-control system lets you tell your wishes to an Echo smart speaker and see them fulfilled. For the time being, it’s just small wishes, like dimming the lights, playing specific music tracks, etc but there are more to come.

At the heart of Alexa, there is a natural-language processing system – one of the easiest to interact with so far.  With Alexa, you don’t have to ask anything twice, because it relies on several highly sensitive microphones built in all Echo devices.

Whenever you ask Alexa to do something for you, your Echo will stream your voice to Amazon’s cloud computers for analysis and do what you asked. You may request Alexa to read you from Wikipedia, tell you the weather or a joke. All you need to do is ask correctly and have all the capabilities that you need properly integrated into the system.

Unlike Apple, Google, and Microsoft, Amazon is not hooked on building ecosystems of tightly connected apps and services. Instead, it focuses on building and honing platforms that serve their own customers in the best and fastest possible way. With this goal in mind, over nearly 22 years, Amazon has rapidly conquered one sector after another, even if it meant tearing down its own existing structures.