Amazon Has Purposely Built in Room for Failure. Has Your Company Done the Same?

For some companies today, it's OK to launch products early and let them hit the battlefield before they're officially ready to be scaled.
Amazon Has Purposely Built in Room for Failure. Has Your Company Done the Same?
Image credit: JGI | Jamie Grill | Getty Images
Guest Writer
Founder and CEO, Varidesk
6 min read
Opinions expressed by Entrepreneur contributors are their own.

Amazon dominates the retail market with a gross profit that is five times that of the next top five retailers combined -- a list that includes Walmart, Target and Costco. But Amazon's success is not random. The tech giant's rocketing gross profits are an indicator that its earlier investments are paying off.

Related: What Is the Secret of Amazon's Huge Success? Jeff Bezos Credits Commitment to These 3 Principles.

According to Eugene Kim of CNBC, Amazon's gross profit margin has grown steadily over the past few years and, in the first quarter of 2018, reached 40 percent for the first time after having stubbornly remained at around 30 percent since 2016.

Because of Jeff Bezos’s vision and strategy, laid out in his letter to shareholders, the robust foundation Amazon established allows it room for failure, and then, ultimately, progress through the use of trial and error.

Wait one second.

"Error" is a word that strikes fear in entrepreneurs everywhere, but just try to name an endeavor that hasn't included an error (or a dozen). Young businesses can get trapped in a perfection mindset that requires every little detail to be just right before a product or service can be launched. This kind of fear, however, can derail momentum and distract business leaders from what's most important.

Bill Gates pioneered a new approach when Microsoft quickly started releasing software and allowed the end users to debug the software for them. That's how things work for some founders now; in their minds, it's OK to launch products earlier and let them hit the battlefield before they're officially ready to be scaled.

Toward this goal, Microsoft has a group of beta testers who work out the major kinks in product offerings, but nothing matters if the end users don't buy in. Giving them the keys and letting them find the flaws is a great way to promote engagement.

This willingness to expose the warts of an imperfect product reminds me of Mark Cuban, who has repeatedly warned against perfecting an idea, overthinking it and ultimately complicating a product before launch. While you need a strong foundation, you don’t need perfection, Cuban says. “Perfection is the enemy of profitability,” says Cuban, and I totally agree.

Related: Mark Cuban Shares the Best Advice He Ever Got

Ultimately, it’s OK in the early stage to let your products and services crash to the ground; it's how you react and adjust that's key. When building the foundation of your business, you have three main parameters to consider. In order to thrive and not merely survive, you should keep these critical elements in mind:

1. First, cement your core business.

At my current company, we focused early on, on marketing our standing desks. The trend became a movement, and our core business crystallized. But, as we've grown, our mission has expanded. Now, we look to help companies pursue health, wellness and an active workspace. With a strong core business in place, we can risk pushing into services, like space planning, which are natural extensions to our existing business.

Moreover, our client base is hungry and willing to pay. Our initial efforts told us that we could push the envelope. But we needed our core business in place first.

With a proven core business, you'll have momentum and presence, and there will be interest in your next move. Take Richard Branson and his constant innovation. With Virgin firmly established, Branson apparentlly felt comfortable launching into ventures such as a soda initiative, even a new airline, because he could apply to the new what he had learned from the old.

2. Connect with clients for feedback.

During the first six months of your business, you need feedback, because immediate feedback builds momentum. Reach out to your customer base to find out what people think of your product or service and how much they're willing to pay. This will help you make any necessary tweaks to your primary offering(s).

Interestingly enough, users often come up with innovations to products while the credit goes to manufacturers. MIT professor Eric von Hippel has noted that consumers are quick to develop improvised versions of goods to meet their specific needs, and manufacturers can adopt those modifications once they've seen the improved product catch on with a group of users. In a study of 1,193 successful innovations, von Hippel discovered that 60 percent had come from users.

I've witnessed this dynamic firsthand, considering that our original product went through more than 20 revisions based on the feedback we received from a group of early advocates.

So don’t be afraid of feedback. A product has to stand on its own. The problem you're solving or the service you're providing must be obvious, because you won’t always be around to explain it. Get as much feedback from your customer base as you can, because their advocacy should help steer your future decisions.

3. Know your scaling goals.

Have a specific destination in mind -- but not necessarily a specific path. In the early stages, it's vitally important to use a reiterated process that incorporates feedback and allows for reorientation when that's necessary.

Entrepreneur Hamdi Ulukaya is an example, though he came upon his fortune almost accidentally. In 1996, the New Yorker was so underwhelmed while shopping for feta cheese in preparation for his father's visit from Turkey that he started his own cheese company. Nine years later, he bought a defunct yogurt-and-cheese factory and decided to venture into Greek yogurt.

He called his nascent company Chobani.

Related: How to Scale Fast and Win the Race to Market

Subsequently, in 2007, Ulukaya knew he had a tremendous opportunity to scale. Competition was virtually nonexistent, and the product was immensely popular in the limited region where it was available. Ulukaya believed that popularity would translate nationwide, but investments were necessary.

Meanwhile, his success was more and more evident: Between 2005 and 2012, Chobani's workforce grew from 40 to 2,000, and annual revenue went from $2 million to $1 billion. This was made possible by Ulukaya's focus on mass retailers: He knew his product would succeed if he could get it on store shelves across the country. The rest is history.

Related: Five Ways Failure Can Help Your Career

When my own company was launched, I could see our core business ignite before my very eyes. People were exposed for the first time to our product, and I could see their reactions. They had questions, and they had suggestions. A buzz was created, and we became a topic of conversation.

None of that would have transpired had we not identified our core business and stationed it as our North Star, implored our product advocates for pointed feedback and envisioned our opportunities to scale.

All the rest is background noise.

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