Tuesday, May 01, 2012

Business as a Platform - Amazon

#bizarch Excellent article by @haydn1701 on Why Amazon Succeeds (Forbes, 29 April 2012) via @davegray and @ruthmalan.

Haydn Shaunessy points out the following features of Amazon's strategy.

Understanding ecosystem

Shaunessy starts by defining the notion of ecosystem fairly narrowly, and links it to the information market. "Bezos is not as great as Jobs at playing the information market but he is good." This may well be true, but it misses the point. Jeff Bezos's understanding of ecosystem has always been much more profound than that of any of his peers, and Amazon's ecosystem is a lot broader than zen marketing.

One way of seeing it is that Jobs coerced people to do things that were in his (Apple's) interests, whereas Bezos gives them opportunities to do things in their own interest, from which he benefits in more subtle but perhaps more sustainable ways. But of course there's always another story.

Radical adjacency

The ability to go beyond normal business practice and to seize opportunity in widely adjacent markets.


Shaunessy identifies a number of characteristics
  • Tearing business away from "the straight jacket of old management theory" - "the outdated idea of core competency" 
  • Providing a new way to scale business
  • Bringing (shared) value to all parties

Technical enablers

Shaunessy identifies two in particular
  • Universal connectors - not merely technical protocols but contractual protocols that radically reduce the transaction costs of using the platform 
  • Cloud computing

Organizational enablers

Shaunessy talks about ability to attract and retain very talented, imaginative resources. I would also add the ability to build these into an effective and innovative company - what I call Organizational Intelligence.

Strategic Outcome

This combination of strategies has allowed Amazon and Apple to develop what Shaunessy calls complex options portfolios. He notes that "the ecosystem is full of businesses that can jump quickly into new opportunity" and argues that this yields the true meaning of shared value.

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