Amazon's Lesson About Disruption: Rattle Any Market You Can
Entrepreneurs can stick to their static business models or learn from Amazon's innovation mindset.
Reuters reports that Amazon is toying with the idea of partnering with venue owners to sell event tickets, potentially disrupting the industry stranglehold Ticketmaster has enjoyed for decades. The sales powerhouse also made a major move by acquiring Whole Foods for $13.4 billion, continuing a pattern of shaking things up by applying its infrastructure and services to new industries.
On one hand, Amazon's distribution system puts most industry incumbents to shame. Contrast it with that of the U.S. Postal Service, for example, and the results aren't pretty. I recently ordered more than 40 items through my Amazon account, and waited what I'd estimate was half the time (and mistakes) as I'd have suffered through with the post office.
On the other hand, the breadth of Amazon's reach has become somewhat unnerving. The cmpany has sold more than 10 million Alexa-powered Echo devices since the technology debuted in 2014, filling households everywhere with artificial intelligence. Beyond groceries and event tickets, the company is also rumored to be considering a push into the pharmaceutical industry.
According to the New York Times, these moves have sparked a 25 percent increase in Amazon's sales and an 8 percent increase in its shareholder value. So, even if we aren't sure how to feel about Amazon's insatiable appetite for disruption, we can still learn from its strategy.
Inside the belly of the beast
Amazon isn't necessarily an innovative company; it's a bookseller that leveraged logistics to increase customer satisfaction. After conquering the book business, Amazon realized it could feed more than paperbacks into its incredibly efficient sales network.
With a physical distribution network in place for deliveries, Amazon pivoted its business model into what it was always meant to be: an ecommerce titan. Instead of competing solely against bookstores, Amazon has been able to evolve to take on the likes of Walmart and Target. In the end, books were simply a beta test for Amazon's sales infrastructure and business model.
This outside-the-box approach isn't unique to Jeff Bezos, though. Consider Starbucks, which peddles an established product using a novel business model. The chain didn't invent coffee -- it simply came up with a faster way of serving an (arguably) better product. What was once a small Seattle franchise recently sank $1.3 billion into China to stabilize itself in the global economy, according to AOL finance reports.
To beat the Amazons and Starbucks of the world, we need to come up with our own ways to disrupt static industries, regardless of our business. Here are some of those first steps:
1. Figure out what your customers crave.
The key to successfully disrupting any business sector is to understand what customers value. That typically takes plenty of information -- if not tacit knowledge -- and wrong conclusions to weed through,, and it's something that can be learned only by launching products and services, to learn how people actually use them.
Even if you fall flat on your face, view the event as a learning experience. While 63 percent of consumers surveyed told Nielsen they liked to see new products, the Product Development and Management Association has reported that about 49 percent of consumer goods fail. And that reflects the fact that your product or service may be less important than your distribution system. Even a failed product can help move you toward a successful business model.
Amazon's initial work with book sales helped it recognize that people cared quite a bit about getting goods as quickly as possible. This realization helped Amazon as it began to offer different products. It recognized that the delivery logistics involved were just as important as the quality of the goods it offered.
In your own case, figure out what truly matters to your customer base, and adjust your business model to address those needs.
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2. Create unexpected value.
Far too many companies focus on solving existing problems. True disruption involves creating value where it didn't exist before (or where it wasn't expected). The iPhone didn't solve any clear problems -- there were already plenty of cellphones on the market -- but most people would be hard-pressed to go a few days without their beloved smartphones now that we have become so reliant on the technology.
Once Amazon solidified its logistics based on one product category, it began to implement its model to other verticals. Books were relatively easy to disrupt because the buying process in that industry was so abysmal. Now that Amazon has set an industry standard in terms of logistics, it's able to break into different markets by applying its perfected process.
Even with this incredible growth (Prime Day was apparently bigger than Black Friday for Amazon), the company somehow managed to deliver orders as soon as 12 minutes after they were processed. Delight your own customer base by solving problems they never knew existed. Pinpoint a shortcoming that people generally accept as a cost of doing business -- slow delivery, a lack of options or a lackluster review system -- and explore potential ways to eliminate those stumbling blocks.
3. Satisfy every customer.
Amazon's most brilliant move was applying a basic principle of human nature to the business world. Amazon doesn't provide fast delivery just for speed's sake; it's able to increase customer satisfaction about the product being delivered by reducing wait times. A timely delivery prevents customers from becoming impatient or experiencing buyer's remorse before they ever receive their purchase.
Before Amazon came along, people drove to their local bookstores to sift through thousands of titles on shelves. Staff members weren't always knowledgeable, and the books were often organized in ways that defied logic. What's more, neither source could tell you which books you were looking at had been favorites of other consumers or whether those titles were related to your own favorite books.
Those bookstore visits weren't an effective use of time, but retailers could get away with this because they were competing only with libraries and schools.
Amazon upended that industry: Statista estimates that there will only be 22,600 bookstores left in the United States by the end of next year. And Amazon helped create that trend by helping people find what they want to read in a much shorter amount of time.
The lesson here is that if your company can meet a basic human need (and do it better than anyone else), you're in solid shape to carve out a substantial customer base.
Whether we like it or not, Amazon seems determined to continue blazing trails in new sectors of the business world. Entrepreneurs can stick to their static business models and wait for innovators to eventually put them out of business, or they can learn from Amazon's seemingly unstoppable rise to global domination. Personally, I'm following Amazon's lead.
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