From time to time you come across a concept that makes you really stop and think about your approach to business. For example, in our last edition, I quoted Amazon.com CEO, Jeff Bezos, who stated in a Harvard Business Review article that that he based Amazon’s strategy on what was not going to change over the next 10 years, and not (as most companies do) on what will change. By following this approach Bezos is able to give a long-term focus to the organisation for radical innovation.
In many ways this is a simple notion. Yet it is also I believe vitally important for longer-term business success. Unfortunately, most companies build their strategy by focussing on the latest market changes and dynamics and extrapolating their impact into the future.
The pace and scale of change in the business and financial environment continues to gain pace and is increasingly non-linear. Technological advances and the connectedness of the global economy mean that new developments can quickly overwhelm the less agile competitors – just ask HMV in music retailing or Northern Rock in banking!
Given this environment it is common for organisations to focus their strategy on the latest, most immediate market issue. The apotheosis of this approach was the dot.com bubble. Feeling pressurised by others’ activities companies quickly jumped on the bandwagon in fear of being left behind and literally wasted millions if not billions of pounds, dollars and euros.
Amazon’s approach is both different and better. The leadership team have agreed the key themes that will not change in the midst of all the noise and turmoil of today’s business environment. For Amazon’s consumer business, they have identified three areas: range selection, low prices and fast delivery.
Perhaps this doesn’t sound like rocket science, but the power of the Amazon approach is the focus and relentlessness with which they pursue their agreed themes. For example, the agreement around low prices led Bezos and his team to create the Marketplace concept. Amazon now allows other sellers to sell the same products as Amazon on the same page as the Amazon product. This is equivalent to Tesco bringing other butchers, bakers (but probably not candlestick makers) into their store to give customers more choice on price and value.
There are two immediate and interconnected advantages of Bezos’ approach:
It creates organisation-wide focus for innovation. Amazon’s three themes are simple to understand for all in the organisation, and enables clarity of focus for radical innovation.
It enables true leadership and avoid defensiveness. It is common for market leaders to become victims of their success, seeking to defend their position. The Amazon team is prepared to take ongoing leadership decisions within these three areas. In this way they are continuing to stay ahead of their competitors and maintain a leadership position.
So what’s the catch? Why don’t all companies follow this approach? There are three major consequences of this approach that executives and organisations need to come to terms with:
Accept cannibalisation. Constant innovation on these themes is likely to damage current business. For example, you can imagine how difficult it was for Amazon’s buyers to accept the idea that other competitors could undercut them on the website. The organisational and stakeholder issues of cannibalisation are not for the faint-hearted.
Accept the chaos. Innovation is a messy, disordered process. Ongoing prototyping, testing, improvement and implementation activities require an entrepreneurial mindset across the business. Not everything will work, especially to start with, and most projects require several iterations to get it right.
Be right. Perhaps the most important issue for Amazon is make sure that they have picked the right themes to focus on. Only time will tell if Bezos and his team are right, but, critically, they have made a clear choice and are willing to live (or die) by it.
The bottom line
You can begin today to identify and discuss with your team the key themes that will not change for your business and start to back-up your ideas with research and analysis. The next stage is to develop possible new business improvements around these themes. If the consequences of these innovations appear daunting you’re probably on the right track!
To find out more contact Stuart by clicking here or call +44-(0)1636-526111.