Amazon’smission statement is to “serve consumers through online and physical stores and focus on selection, price, and convenience.” Amazon’s vision statement is “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices.”
Back in 1993-4, Jeff Bezos worked for a firm on Wall Street called D.E. Shaw, and he looked into the Internet.
As the story goes, he was impressed by the staggering growth rate of the Internet and decided it made sense to build something on top of it.
While he had a well-paid job, and a more linear career ahead, on the other side, he recognized this was the opportunity of a lifetime.
Thus, to come to a final decision he used a regret minimization framework, and he resigned from his job, thus, starting Amazon.
Initially, it wasn’t easy to get Amazon off the ground, and neither to find potential investors.
Indeed, the first investors were Bezos’ parents. Yet, as Amazon kicked off its operations, it did that, by choosing a niche: books.
In fact, Bezos believed that Amazon could prove the viability of e-commerce, by selling an item, which is easy to package and ship, and that comes mostly in a few standard sizes.
Sales soon took off. And as Amazon expanded throughout the late 1990s, the company and Jeff Bezos placed wild bets on other internet players.
And in the meantime, Amazon had also started to expand to other categories, from DVD to music, and toys.
However, by 2001, the dot-com bubble burst, making Amazon lose 90% of its market cap, with many analysts predicting its demise.
It took years for Amazon to recoup its market cap from the dot-com bubble. Yet a key thing happened throughout these years, a paradigm shift.
Amazon understood that to scale its operations, it needed to stop thinking of an e-commerce player, and start implementing a platform strategy.
That is why the company started to build the internal infrastructure to enable third-party stores to build on top of Amazon.
This strategy would take more than ten years to fully roll out, and by the mid-2010s, Amazon’s third-party platform had become the dominant player, worldwide, hosting millions of small stores across the world.
In the meantime, as Amazon had tried to clean up the “jumbled mess” of its tech infrastructure, it built its own servers, in what would become, later on, Amazon AWS.
In addition, after several failed products (one of the greatest failures was the Kindle Fire), the company successfully stumbled upon Amazon Prime and Amazon Advertising.
All these pieces, came together, to build the Amazon we know today. If we were to break down Amazon’s history, we might break it down in these four waves:
Amazon pre-dot-com bubble (1994-2000)
Here we have an aggressive company with an ambitious vision, starting from books and expanding very quickly.
While the vision was ambitious, the way to achieve it was blurred.
And Amazon placed many bets on the Internet, also in areas it could not directly control.
Amazon post-dot-com bubble (2001-2009)
The Amazon of the post-dot-com bubble is a redefined company, with a clear vision and much more focused, on building its own infrastructure to transition from e-commerce to a platform business model.
The new Amazon (2009-2015)
The new Amazon is a company that focuses on expanding internationally by capitalizing on the infrastructure and growth playbook built in the previous decade.
The Amazon of these years expands in various countries, by testing, in each, a different growth model.
The tech giant (2015-forward)
Here we see Amazon, which had consolidated its business model and growth playbook, and it had become a dominant player and a monopolist in its space. This is the Amazon we know today.
When Amazon.com launched in 1995, it was with the mission “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices.
In its annual report for 2019, Amazon highlights its mission to “serve consumers through online and physical stores and focus on selection, price, and convenience.”
Selection.
Price.
Convenience.
I’ve highlighted in Amazon Flywheel or Virtuous Cycle how this focus has been in place since the start, and it has been one of the critical elements of Amazon speed!
The Amazon Flywheel or Amazon Virtuous Cycle is a strategy that leverages customer experience to drive traffic to the platform and third-party sellers. That improves the selections of goods, and Amazon further improves its cost structure so it can decrease prices which spins the flywheel.
We design our stores to enable hundreds of millions of unique products to be sold by us and by third parties across dozens of product categories. Customers access our offerings through our websites, mobile apps, Alexa, and physically visiting our stores. We also manufacture and sell electronic devices, including Kindle e-readers, Fire tablets, Fire TVs, and Echo devices, and we develop and produce media content. We strive to offer our customers the lowest prices possible through low everyday product pricing and shipping offers, and to improve our operating efficiencies so that we can continue to lower prices for our customers. We also provide easy-to-use functionality, fast and reliable fulfillment, and timely customer service. In addition, we offer Amazon Prime, a membership program that includes unlimited free shipping on over 100 million items, access to unlimited streaming of thousands of movies and TV episodes, and other benefits.
To be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices.
However, its vision gets traction from a core belief summarized as always being in “day one.”
Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.
Now, it might be easy to say that Jeff Bezos made it, so he can say whatever he likes.
However, he has been obsessed with this concept since the beginning.
In the 1997 Shareholders Letter, Jeff Bezos explained:
But this is Day 1 for the Internet and, if we execute well, for Amazon.com. Today, online commerce saves customers money and precious time. Tomorrow, through personalization, online commerce will accelerate the very process of discovery. Amazon.com uses the Internet to create real value for its customers and, by doing so, hopes to create an enduring franchise, even in established and large markets.
Breaking down customer-centrism according to Amazon
Customer obsession goes beyond quantitative and qualitative data about customers, and it moves around customers’ feedback to gather valuable insights. Those insights start with the entrepreneur’s wandering process, driven by hunch, gut, intuition, curiosity, and a builder mindset. The product discovery moves around a building, reworking, experimenting, and iterating loop.
Customer obsession was also highlighted in the 2017 Shareholders Letter as a critical parameter:
The American Customer Satisfaction Index recently announced the results of its annual survey, and for the 8th year in a row customers ranked Amazon #1
Amazon is aware of the fact that customer obsession isn’t an easy game. And in the 2017 Shareholders Letter, Jeff Bezos highlighted:
One thing I love about customers is that they are divinely discontent. Their expectations are never static – they go up. It’s human nature. We didn’t ascend from our hunter-gatherer days by being satisfied. People have a voracious appetite for a better way, and yesterday’s ‘wow’ quickly becomes today’s ‘ordinary’.
This puts Amazon in a cycle where not being able to exceed customers’ expectations can make its flywheel slow down.
Jeff Bezos specified:
I see that cycle of improvement happening at a faster rate than ever before. It may be because customers have such easy access to more information than ever before – in only a few seconds and with a couple taps on their phones, customers can read reviews, compare prices from multiple retailers, see whether something’s in stock, find out how fast it will ship or be available for pick-up, and more.
Thus, how do you stay ahead of this game? Jeff Bezos offers us the answer:
There’s no single way to do it – it’s a combination of many things. But high standards (widely deployed and at all levels of detail) are certainly a big part of it. We’ve had some successes over the years in our quest to meet the high expectations of customers. We’ve also had billions of dollars’ worth of failures along the way.
For Jeff Bezos, high standards have four core characteristics:
The four elements of high standards as we see it: they are teachable, they are domain specific, you must recognize them, and you must explicitly coach realistic scope. For us, these work at all levels of detail. Everything from writing memos to whole new, clean-sheet business initiatives. We hope they help you too.
And most of all, they have to be unreasonably high!
Breaking down Amazon’s leadership principles
Amazon’s fundamental principles that drove and drive the company are:
Customer Obsession
Ownership
Invent and Simplify
Are Right, A Lot
Learn and Be Curious
Hire and Develop the Best
Insist on the Highest Standards
Think Big
Bias for Action
Frugality
Earn Trust
Dive Deep
Have Backbone; Disagree and Commit
Deliver Results
Breaking down Amazon’s business model
Amazon Revenue Breakdown
2022
Online stores
$220B
Physical stores
$18.96B
Third-party seller services
$117.71B
Subscription services
$35.22B
AWS
$80B
Advertising
$37.74B
Other
$4.25B
Let’s see all the components of the Amazon Business Model and how those fit together, in part, to create a whole.
Amazon Platform: Both Consumer-Facing (With Amazon E-commerce) And Enterprise/SMB (With AWS)
A Peek Into The Amazon’s Empire
Amazon is a consumer e-commerce platform with a diversified business model spanning e-commerce, cloud, advertising, streaming, and more. Over the years Amazon acquired several companies. Among its 12 subsidiaries, Amazon has AbeBooks.com, Audible, CamiXology, Fabric.com, IMDb, PillPack, Shopbop, Souq.com, Twitch, Whole Foods Market, Woot! and Zappos.Jeff Bezos was best known for founding eCommerce giant Amazon in 1994. However, the entrepreneur owns companies in several industries, including health care, retail, robotics, real estate, and media. Many of these companies have been acquired by Amazon over the years, but some have been the result of direct investment from Bezos himself (through his investment arm is called Bezos Expeditions).
Understanding Amazon From A Systemic Standpoint
Amazon future success is influenced by Political (new regulations and potential breakups of the company), Economic (new global economic dynamics influencing e-commerce adoption), Social (changing consumer behavior at a global level), Technological (new technological challenges, like last-mile delivery at scale), Environmental (enabling sustainable operations), and Legal (compliance with international laws).
Amazon’s Way Of Thinking: Working Backward
The Amazon Working Backwards Method is a product development methodology that advocates building a product based on customer needs. The Amazon Working Backwards Method gained traction after notable Amazon employee Ian McAllister shared the company’s product development approach on Quora. McAllister noted that the method seeks “to work backwards from the customer, rather than starting with an idea for a product and trying to bolt customers onto it.”
In 2022, Amazon closed its divide in terms of total revenue, as it generated over $513 billion in revenue, compared to over $572 billion in revenue from Walmart.
In 2021, Amazon generated almost $470 billion in revenue, vs. eBay’s over $10.4 billion. In comparison, looking at revenues, Amazon was 45x times larger than eBay.
Amazon was not profitable once AWS was removed in 2022. In fact, Amazon, without AWS generated $10.6 billion in operating losses. While Amazon, without AWS, generated $12.2. billion operating income.
Amazon has a diversified business model. In 2022 Amazon posted over $514 billion in revenues, while it posted a net loss of over $2.7 billion. Online stores contributed almost 43% of Amazon revenues. The remaining was generated by Third-party Seller Services, and Physical Stores. While Amazon AWS, Subscription Services, and Advertising revenues play a significant role within Amazon as fast-growing segments.
Amazon’s mission statement is to “serve consumers through online and physical stores and focus on selection, price, and convenience.” Amazon’s vision statement is “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices.”
In the Amazon Shareholders’ Letter for 2018, Jeff Bezos analyzed the Amazon business model, and it also focused on a few key lessons that Amazon as a company has learned over the years. These lessons are fundamental for any entrepreneur, of small or large organization to understand the pitfalls to avoid to run a successful company!
Amazon has a business model with many moving parts. The e-commerce platform generated $220 billion in 2022, followed by third-party stores services which generated over $117 billion; Amazon AWS, which generated over $80 billion; Amazon advertising which generated almost $38 billion and Amazon Prime, which generated over $35 billion, and physical stores which generated almost $19 billion.
The Amazon Working Backwards Method is a product development methodology that advocates building a product based on customer needs. The Amazon Working Backwards Method gained traction after notable Amazon employee Ian McAllister shared the company’s product development approach on Quora. McAllister noted that the method seeks “to work backwards from the customer, rather than starting with an idea for a product and trying to bolt customers onto it.”
The Amazon Flywheel or Amazon Virtuous Cycle is a strategy that leverages on customer experience to drive traffic to the platform and third-party sellers. That improves the selections of goods, and Amazon further improves its cost structure so it can decrease prices which spins the flywheel.
In the letter to shareholders in 2016, Jeff Bezos addressed a topic he had been thinking quite profoundly in the last decades as he led Amazon: Day 1. As Jeff Bezos put it “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.”
Adidas’ mission is “To be the best sports brand in the world.” Adidas AG is a German multinational initially founded in 1924 by Adolf Dassler who developed spiked running shoes out of his mother’s house. Today, the company is the largest sportswear producer in Europe and the second largest globally behind rival Nike.
Tesla’s vision is to “create the most compelling car company of the 21st century by driving the world’s transition to electric vehicles,” while its mission is “to accelerate the advent of sustainable transport by bringing compelling mass-market electric cars to market as soon as possible.” Tesla used a transitional business model as its ecosystem grows.
Amazon’s mission statement is to “serve consumers through online and physical stores and focus on selection, price, and convenience.” Amazon’s vision statement is “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices.”
Apple’s mission is “to bring the best user experience to its customers through its innovative hardware, software, and services.” And in a manifesto dated 2019 Tim Cook set the vision specified as “We believe that we are on the face of the earth to make great products and that’s not changing.”
Netflix’s core mission, strategy, and vision are that of “improving its members’ experience by expanding the streaming content with a focus on a programming mix of content that delights members and attracts new members.”
Coca-Cola’s Purpose is to “refresh the world. make a difference.” Its vision and mission are to “craft the brands and choice of drinks that people love, to refresh them in body & spirit. And done in ways that create a more sustainable business and better-shared future that makes a difference in people’s lives, communities, and our planet.”
Starbucks highlights its mission as “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.” And its vision is to “treat people like family, and they will be loyal and give their all.”
Microsoft’s mission is to empower every person and every organization on the planet to achieve more. With over $110 billion in revenues in 2018, Office Products and Windows are still the main products. Yet the company also operates in Gaming (Xbox), Search Advertising (Bing), Hardware, LinkedIn, Cloud, and more.
Walmart’smission can be summarized as “helping people around the world save money and live better – anytime and anywhere – in retail stores and through eCommerce.” While its vision is to “make every day easier for busy families.” Walmart defines “busy families” as the bull’s eye of its business strategy.
Nike vision is “to bring inspiration and innovation to every athlete in the world.” While its mission statement is to “do everything possible to expand human potential. We do that by creating groundbreaking sport innovations, by making our products more sustainably, by building a creative and diverse global team and by making a positive impact in communities where we live and work.”
Google mission statement is to “organize the world’s information and make it universally accessible and useful.” Its vision statement is to “provide an important service to the world-instantly delivering relevant information on virtually any topic.” In 2019, Sundar Pichai emphasized a renewed mission to allow people “to get things done!”
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
