Why Amazon and Jeff Bezos Are So Successful at Disruption No other organization in the world better embodies the power of audacious and continual disruption than Amazon.
By John F. Furth Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
Today everyone seems to be talking about "disruption." It's modern, hip, trendy. Very new millennial.
But business disruption is much more than a passing fad. Mankind discovered early on that the best way to increase our standard of living was to create order out of chaos by constantly inventing and reinventing our most important tools: technology, processes and systems.
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This cycle of disruption and renewal has made it easier, faster and cheaper to get food, clothing and many other goods and services we want and need. It has made education available to billions of people and helped us travel more quickly and inexpensively, be entertained 24/7, eradicate most life-threatening diseases and on and on.
The problem is that as soon as we've gotten used to a system, it often becomes a target for yet another disruption. Despite the longer-term benefits, almost every meaningful large-scale disruption produces winners and losers in the short term. Companies go out of business, people lose their jobs. Whole communities can be decimated.
What has caught the attention of the business community more than anything else over the last 30 years is the enormous wealth large disruptive companies create for their founders, investors, employees and many others involved with these companies.
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No other organization in the world better embodies the power of audacious and continual disruption than Amazon. This is the company that, upon its founding by Jeff Bezos in 1994, took on publishers and booksellers around the world. Along the way, it forced many incumbents to disrupt their business models or turn off the lights.
The short-term negative consequences of Bezos's and his team's initial actions were overshadowed by the immense value they created by providing billions of books and other printed material to people around the world more efficiently and cheaply than previously possible. The stock market rewarded the company with an over 5,000 percent increase in the price of its stock a little less than two years after the company's 1997 initial public offering (IPO).
Not content to be just a logistics company, Bezos and his team then went on to successfully disrupted Sony, Apple and Samsung's early domination of two large categories: e-readers (Barnes & Noble only comes in a distant fifth with the Nook) and tablets.
Amazon is now the second most important ecommerce company -- behind the Chinese conglomerate Alibaba -- and dominates important segments of the consumer electronics, entertainment and IT industries while pushing out many large and previously powerful companies that could not or did not want to take the threat seriously.
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What has kept Amazon at the height of its powers for almost 25 years?
At the heart of everything Amazon does is a short and simple mission statement: "Our vision is to be Earth's most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online."
Because Amazon's entire reason for being is its customers, the company is not hampered by proprietary technology, products or systems that are core to its mission that one day might, in turn, be disrupted or challenged by an even more forward-thinking and aggressive upstart company.
Bezos has proven that by putting the consumer at the center of the ecosystem of an industry that has previously been dominated by a handful of powerful organizations or people, a chain reaction is set off that often has a transformative effect for the world's population.
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At the end of 2016 Amazon announced its intention to disrupt the traditional bricks-and-mortar grocery store format, first by rolling out 2,200 Amazon grocery stores that use new technology to make the shopping experience that much more efficient and enjoyable. Then, it purchased the Whole Foods chain in mid-2017.
The dust had barely settled after the Whole Foods deal when Amazon announced something even bigger and bolder. It is going to work with JP Morgan and Berkshire Hathaway to disrupt and transform one of the most dysfunctional industries in existence -- the U.S. healthcare system.
There are six very good reasons to believe that these three companies have a better chance of succeeding than the government and the thousands of entrepreneurs and business leaders who have tried before them:
1. The timing couldn't be better. More than the gun debate, income inequality, failing infrastructure or a myriad of other current domestic concerns, our healthcare system has been the number one hottest unresolved issue in the country for decades. It touches every citizen, regardless of race, level of education and income, age or political persuasion. It not only involves our pocketbooks but also our deepest-held beliefs and emotions about life and death. Unfortunately, our government has proven itself incapable of developing and implementing a better system.
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2. The combined financial resources and purchasing power of the partners are immense. The combined market capitalization of Amazon, Berkshire Hathaway and JP Morgan Chase on May 7, 2018 was $1.635 trillion. Although that's less than half the market capitalization for the entire U.S. healthcare industry -- estimated to be $5.12 trillion -- it's still more than twice the market capitalization of $720 million of the three largest pharmaceutical companies in the world (Johnson & Johnson, Pfizer and Novartis). That's a very large war chest indeed.
3. Three of the greatest businessmen today -- Bezos, Jamie Dimon and Warren Buffett -- are committed to fixing the problem. These men have proven time and time again that they can provide significant returns to their investors while growing their companies consistently, year after year. Their experience and skill sets are highly complementary: Bezos is the disruptive technologist and entrepreneur, Buffett is the prudent and wise investor and Dimon is the pragmatic realist. They know that a combination of well-deployed technology, smart business models and proper controls will win the game.
4. They're starting their journey at home. While the initial announcement might have rocked the global stock markets and sent shivers down the spines of many incumbents, it appears that the three partners will initially only focus on improving the quality and lowering the costs of healthcare for their combined 1.1 million employees. This gives them a lot of leeway to learn, experiment (within reason) and refine highly disruptive solutions before bringing them to market.
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5. There are potentially few or no conflicts of interest. JP Morgan Chase is a banker to many of the major incumbents in the healthcare industry, and Berkshire Hathaway may own stock in several of the large drug companies, but none of the partners have any history operating a healthcare-related business. Focusing initially only on their employees also allows them to work out of sight of competitors, legislators and the media, which can easily put a stop to any disruption before it can get started.
6. Other major corporations are following their lead. Following on the heels of the Amazon–JP Morgan Chase–Berkshire Hathaway announcement, Apple said it would be opening health clinics for Apple employees and their families called AC Wellness. This is a significant development, especially since Apple's operating system is HIPAA compliant. This will make it that much easier to roll out mobile applications to a wide audience when the time comes.
There is always the risk that Bezos and his team will lose focus in their never-ending quest for the perfect disruption. But for the time being, at least, Bezos has not only sustained his position as the master of business disruption but has also become the richest man on the planet. The company he founded 24 years ago is set to achieve $200 billion in revenue sometime this year, sustaining an annual compounded growth rate of 41 percent.
