Amazon’s Strategy: The Customer Is God—and the Need for Insight

#Strategy #AmazonStrategy #LongTermStrategy #BuildYourStrategyAroundCustomers As in the two preceding posts, Robin: “You must discover your customers’ real needs. Customers play the role of God, inspiring Bezos and leading Amazon to keep disrupting itself, never stopping or standing still, but continually breaking new ground.” ---- #Strategy #Tactics Put simply, strategy means planning for the future: imagining an end state, using it to guide what you should do today, and drawing a roadmap. That is what we usually understand strategy to mean. Strategy creates opportunities that have not yet emerged; it focuses on what can be added. Tactics solve immediate problems; they focus on what already exists and how to optimize it. Tactics tend to look like patching things up, whereas strategy is an insight into the future. ---- Does Amazon have a long-term strategy? Amazon often looks like a company pulling a cart with its head down, barely looking at the road ahead—a company living in the present. Ask Bezos where his strategy lies, and he seems to say that the road is beneath his feet: solve the immediate problem, and the path will emerge naturally. Is that really the case? Not quite. Bezos is extremely pragmatic and pays close attention to details and metrics. To some extent, this may make him seem clever about small things but less so about the big picture. That is not the case either. Great minds can operate with two kinds of logic at once. He also cares deeply about looking ahead and daring to ask where the road leads. Bezos has a well-known saying: “If you think about what to do over the next year, you immediately see many competitors. If you think about what to do three years from now, you find that more than half of them disappear. If you think about what you should do five, seven, or even ten years from now, you cannot think of who your competitors are.” We often find Amazon working on a highly promising, competitive business for the future, yet with nobody competing against it for a long time. Take its cloud business, AWS, officially launched in 2006. For a long time, nobody competed with it. Competitors appeared only once the business was widely recognized as having enormous potential and truly representing the future. By then, Amazon was far ahead. Even today, with Microsoft, Google, and others entering cloud computing, AWS still has more than 50% market share, while second-place Azure has only a share in the teens. Amazon kept working on a business belonging to the future—a strategic business. Only in the period before 2017, ten or eleven years after Amazon formally launched its cloud business, did the field become one pursued by many players. Can you say that was not strategic? Another issue is that Amazon has always been imitated. When it moved from a mail-order bookstore to an online bookstore, major traditional publishers and bookstore giants immediately followed. Afterward, every new move seemed to attract another group of imitators. Yet Amazon does not seem particularly troubled by this. How does it manage? It is simple: wave after wave of imitators appears, soon stays where it is, and Amazon quietly moves on. The danger is doing something, seeing others rush in, and stopping to fight them indefinitely. By the end, you may have gone from pioneer to casualty. It is like someone being chased by a pack of dogs, throwing something down for them to fight over, then continuing on. Do not fear moving slowly; fear standing still. Amazon’s most important way of escaping imitation is to keep moving forward. Keep moving without lingering: it sounds good, but how easy is it? Who wants to be a homeless wanderer in the business world? Once your influence grows, you are more likely to feel an urgent desire to build an empire. What force, then, drives and guides Amazon? Rather than settling comfortably in a corner, content with modest prosperity, it makes the road—not a wall—its Great Wall. The best defense is not to build a wall but to open a new road. Think of the Han and Tang dynasties and the Mongols continually expanding their territories rather than building a Great Wall. Amazon likewise expands its domain by using offense as defense. Amazon’s business keeps expanding and moving: from mail-order books to online books, Marketplace, and Prime; from paper books to Kindle; into cloud computing; and from online stores to physical stores. Beginning as a mail-order bookstore, Amazon is now one of the strongest technology companies in intelligent data. Imagine if it had stopped at any stage: it might not merely have shrunk, but disappeared. What drives and guides Amazon to keep running away from its original businesses? In the Jewish people’s historical memory, there is a leader named Moses, credited with leading his people out of Egypt. He did not simply decide on a whim to leave. According to the account, he heard God’s call to lead everyone away. If Bezos is Moses, who is God? ----- The customer is God A familiar statement of business philosophy says: first, be customer-centric; second, base every other principle on the first. But when you actually run a company, you quickly discover that customers are not simply God. Jobs even strongly opposed listening to customers. Jobs said that great products are not things customers tell you to make. If you wait for them to ask, the product will never exist. If Ford had surveyed people when developing the automobile, asking what kind of vehicle they wanted, everyone would have asked for a better horse-drawn carriage. They could not imagine a car. Only after you made one would they like it. Professor Christensen, associated with The Innovator’s Dilemma, said many large companies died precisely because they were customer-centric. Consider Kodak. When digital cameras were beginning to show results—still toy-like, but already showing momentum—Kodak’s core customers said they were photography toys, not cameras: photographs taken on film were so good. If Kodak made digital cameras, it would immediately lose that enormous customer base, something it could not accept. It therefore decisively abandoned the digital-camera business. As Christensen put it, customers can sometimes drag your company down. ---- Robin: “You need accurate insight into customers’ real needs, starting with the ultimate purpose of the problem they want to solve. Does your customer want a car? A better horse? Or simply to reach a destination quickly and comfortably? Does your customer need a phone with better features, one that will not break when dropped, or one that is easy to use? Or a more effective way to communicate and interact?” Robin: “Should you listen to customers or not? Is your project a must-have or a nice-to-have? First, define who your customers are. Then understand their needs, genuinely solve their problems, and help them achieve their underlying purpose.” You might ask many customers what they want, make exactly what they describe, and find that it will not sell. Can you blame them? Customers are a mixture, and you may not know what that mixture contains. When developing and using customers as a resource, we first need a highly precise ability to identify their needs. Many needs are not things customers will tell us. Understanding users requires a prism of needs, or a microscope, a magnifying glass, and a whole set of instruments. Refract a need through that prism, and you see a spectrum of multiple needs within it. Only by satisfying those hidden, spectrum-like needs do you truly meet the customer’s needs. Other needs require strong magnification before you can identify them. Without these capabilities, speaking generally about customer needs or saying the customer is God tells you little. Needs also unfold over time: sometimes solving one problem reveals another, which you can only then recognize. How can you understand customer needs? I think the ancients put it more clearly: those who know something are surpassed by those who love it, and those who love it by those who delight in it. Knowing is not as powerful as liking, and liking is not as powerful as taking delight in something and becoming absorbed in it. There is a vast difference between someone who merely knows how to play chess and someone obsessed with it. Real recognition is not simple knowledge. It is the understanding gained through a state approaching obsession. Obsession may look like an emotional state, but it also contains a cognitive capability. Amazon has always emphasized its attitude toward customers. Its culture includes the aspiration to become the world’s most customer-centric company. Amazon leaves an empty chair at meetings. Why? It is reserved for the customer. Although customers are absent, every company decision must take them into account. The emphasis on customers’ importance has reached an extraordinary degree. Another expression is “customer obsession”: not merely knowing their needs, but becoming deeply absorbed in understanding them. Being customer-centric and treating the customer as God are not merely intentions or attitudes. More importantly, they are capabilities. “Before his departure, she stitches closely, fearing his return will be delayed.” Someone else sewing the garment would not worry that the son might be away a long time, so the resulting product would not have those close stitches. This customer obsession can therefore be described as one of Amazon’s capabilities. Often, companies do want to treat customers well and do recognize their importance. What they do not understand is that customer centricity is fundamentally a capability, not an intention. Wanting it does not mean you can do it. You may want to know what users need, yet without customer obsession, you lack that prism of needs. Bezos greatly admires management thinker Christensen and has long accepted his theories. Christensen once said he had yet to find a company anywhere that had truly established an ongoing mechanism for disruption. Gradually, however, he came to think Amazon might be such a company. Amazon can practice disruptive innovation not because it inherently enjoys making life difficult for itself or continually negating itself, but because its path and strategy are built on insight into customer needs. In other words, Amazon’s grasp of customer needs is not a single event or an accident; it is a story. It is a continuous process: recognizing one need leads to another, and when satisfying a need creates another problem, Amazon helps solve that too. Customers continually lead Amazon to disrupt itself. #得到 (Dedao) #吳伯凡每周商業評論 (Wu Bofan’s Weekly Business Review, descriptive title) Put simply, strategy means planning for the future: imagining an end state, using it to guide what you should do today, and drawing a roadmap. That is what we usually understand strategy to mean. Strategy creates opportunities that have not yet emerged; it focuses on what can be added. Tactics solve immediate problems; they focus on what already exists and how to optimize it. Tactics tend to look like patching things up, whereas strategy is an insight into the future. ---- Does Amazon have a long-term strategy? Amazon is a company pulling a cart with its head down, not looking ahead at the road—a company living in the present. Ask where its strategy lies, and it seems to say the road is beneath its feet: solve the immediate problem, and the path will emerge. Is that really the case? Not quite. Bezos is extremely pragmatic. As we have discussed, he pays close attention to details and metrics. To some extent, this may make him seem clever about small things but less so about the big picture. That is not the case. Great minds can operate with two kinds of logic at once. He also cares deeply about looking ahead and daring to ask where the road leads. Many people may have heard this saying of his: if you think about what to do over the next year, you immediately see many competitors. If you think about what to do three years from now, there are far fewer. If you think about what you should do five, seven, or even ten years from now, you cannot think of who your competitors are. We often find Amazon working on a highly promising, competitive business for the future, yet with nobody competing against it for a long time. Take Amazon’s cloud business, officially launched in 2006. For a long time, nobody competed with it. Competitors appeared only once the business was widely recognized as having enormous potential and truly representing the future. In fact, these were not real competitors, or at least they did not pose a substantial threat. Amazon kept working on a business belonging to the future—a strategic business. Only in the period before 2017, ten or eleven years after its cloud business formally began, did the field become one pursued by many players. Can you say that was not strategic? Another issue is that Amazon has always been imitated. When it moved from a mail-order bookstore to an online bookstore, major traditional publishers and bookstore giants immediately followed. Afterward, every new move seemed to attract another group of imitators. Yet Amazon does not seem particularly troubled by this. How does it manage? It is simple: wave after wave of imitators soon stays where it is, while Amazon quietly moves on. The danger is doing something, seeing others rush in, and stopping to fight them indefinitely. By the end, you may have gone from pioneer to casualty. To put it bluntly, it is like someone being chased by a pack of dogs, throwing something down for them to fight over, then continuing on. Do not fear moving slowly; fear standing still. Amazon’s most important way of escaping imitation is to keep moving forward. Keep moving without lingering: it sounds good, but how easy is it? Who wants to be a homeless wanderer in the business world? Once your influence grows, you are more likely to feel an urgent desire to build an empire. What force, then, drives and guides Amazon? Rather than settling comfortably in a corner, content with modest prosperity, it makes the road—not a wall—its Great Wall. The best defense is not to build a wall but to open a new road. Think of our Han and Tang dynasties continually expanding their territories rather than building a Great Wall. Amazon likewise expands its domain by using offense as defense. Amazon keeps escaping: from mail-order books to online books, Marketplace, and Prime; from paper books to Kindle; into cloud computing; and from online stores to physical stores. It moved from mail-order books to online books and is now one of the strongest technology companies in intelligent data. Imagine if it had stopped at any stage: it might not merely have shrunk, but disappeared. What drives and guides Amazon to keep running away from its original businesses? In the Jewish people’s historical memory, there is a leader named Moses. As we have discussed, he is credited with leading everyone out of Egypt. But he supposedly did not simply decide on a whim to leave. According to the account, he heard God’s call to lead everyone away. If Bezos is Moses, who is God? ----- The customer is God Consider a company’s business philosophy: first, be customer-centric; second, base every other principle on the first. That sounds moving. But when you actually run a company, you quickly discover that customers are not simply God. Jobs strongly opposed listening to customers. He said that great products are not things customers tell you to make. If you wait for them to ask, the product will never exist. If Ford had surveyed people when developing the automobile, asking what kind of vehicle they wanted, everyone would have asked for a better horse-drawn carriage. They could not imagine a car. Only after you made one would they like it. Christensen said many large companies died precisely because they were customer-centric. Consider Kodak. When digital cameras were beginning to show results—still toy-like, but already showing momentum—Kodak’s core customers said they were photography toys, not cameras: photographs taken on film were so good. If Kodak made digital cameras, it would immediately lose that enormous customer base, something it could not accept. It therefore decisively abandoned the digital-camera business. As Christensen put it, customers can sometimes drag your company down. Does that sound contradictory? Many concepts seem obvious until someone asks you to explain them. What exactly is a customer? When we say the customer is God, we often mean customers are an exceptionally valuable resource. Lose that resource and you lose the people who sustain your livelihood; your company must close. Customers are an exceptionally important resource, more important than the others your company possesses. But have you considered that a resource needs a matching capability to have value? Without that capability, the resource is useless. Take petroleum, discovered in the Northern Song dynasty. Shen Kuo coined the Chinese term 石油, “rock oil,” in his 夢溪筆談 (Dream Pool Essays). Seeing a black, oily substance emerging from cracks in rock that could also be burned, he named it rock oil. Yet it was of no use. Petroleum is a mixture of many compounds. Until you can separate them and have petrochemical capabilities, petroleum means nothing to people. Customers are similar. Until you have a strong customer-acquisition capability, customer resources are not important. Or, put another way, customer needs are like petroleum: a mixture you cannot readily define. You might ask many customers what they want, make exactly what they describe, and find that it will not sell. Can you blame them? Customers are a mixture, and you may not know what that mixture contains. When developing and using customers as a resource, we first need a highly precise ability to identify their needs. Many needs are not things customers will tell us. Remember our story about buying a mattress? Users may not even realize that buying a mattress involves multiple needs. They are not just buying something to put on a bed and sleep on at night. The purchase needs the right setting. For a double-bed mattress, both people need to be present; otherwise, the customer may struggle to decide. And once a new mattress is bought, where does the old one go? That is a major problem in the United States. There are further complications. What looks like one need contains multiple problems and multiple needs for solving them. Without the ability to identify these, you can find someone who very much wants a mattress but still will not buy. That ability is therefore crucial. Understanding users requires a prism of needs, or a microscope, a magnifying glass, and a whole set of instruments. Refract a need through that prism, and you see a spectrum of multiple needs within it. Only by satisfying those hidden, spectrum-like needs do you truly meet the customer’s needs. Other needs require strong magnification before you can identify them. Without these capabilities, speaking generally about customer needs or saying the customer is God tells you little. Needs also unfold over time: sometimes solving one problem reveals another, which you can only then recognize. How can you understand customer needs? I think the ancients put it more clearly: those who know something are surpassed by those who love it, and those who love it by those who delight in it. Knowing is not as powerful as liking, and liking is not as powerful as taking delight in something and becoming absorbed in it. There is a vast difference between someone who merely knows how to play chess and someone obsessed with it. Real recognition is not simple knowledge. It is the understanding gained through a state approaching obsession. Obsession may look like an emotional state, but it also contains a cognitive capability. Without intense, consuming devotion, one cannot attain Buddhahood. All of this relates to Amazon. We know its attitude toward customers, something it has always emphasized. Its culture includes the aspiration to become the world’s most customer-centric company. It is said that at Amazon meetings, Bezos does not sit in the chairman’s chair. It remains empty, and he sits beside it. Why? That chair is reserved for the customer. Although customers are absent, every company decision must take them into account. The emphasis on customers’ importance has reached an extraordinary degree. Another expression is “customer obsession”: not merely knowing their needs, but becoming deeply absorbed in understanding them. A kindergarten teacher’s understanding of a child is very different from the mother’s. As we say, nobody knows a child like the mother; mother and child are connected at heart. Amazon treats the people who sustain its livelihood with a parent’s care. Being customer-centric and treating the customer as God are not merely intentions or attitudes. More importantly, they are capabilities. “Before his departure, she stitches closely, fearing his return will be delayed.” Someone else sewing the garment would not worry that the son might be away a long time, so the resulting product would not have those close stitches. This customer obsession can therefore be described as one of Amazon’s capabilities. Often, companies do want to treat customers well and do recognize their importance. What they do not understand is that customer centricity is fundamentally a capability, not an intention. Wanting it does not mean you can do it. You may want to know what users need, yet without customer obsession, you lack that prism of needs. Amazon greatly admires management thinker Christensen and has long accepted his theories. Christensen once said he had yet to find a company anywhere that had truly established an ongoing mechanism for disruption. Gradually, however, he came to think Amazon might be such a company. In our view, Amazon is indeed such a company. It can practice disruptive innovation not because it inherently enjoys making life difficult for itself or continually negating itself, but because its path and strategy are built on insight into customer needs. In other words, Amazon’s grasp of customer needs is not a single event or an accident; it is a story. It is a continuous process: recognizing one need leads to another, and when satisfying a need creates another problem, Amazon helps solve that too. Customers continually lead Amazon to disrupt itself.