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How Amazon got to the top by breaking the rules

In just 20 years, Amazon has become one of the largest and fastest growing companies in the world and is a contender for being the first trillion-dollar company.

With an aggressive business strategy that extends their value and diversifies their revenue streams, they continue to shock big business, most recently with their jump into brick and mortar with the opening of their bookstores and beta grocery store Amazon Go.

So, how do they do it and what can other companies learn to ensure their own long-term success? The answers may be surprising, as Amazon challenges many traditional lessons we’ve learned for how to be successful in marketing and in business. And even today, they contradict the focus of many of our jobs, the direction we’re given from upper management and the basis for which our success or failure is measured.

As you can imagine, their move to brick and mortar was a controversial one, since they so infamously put some of the largest bookstores in the nation out of business, and continue to take a large chunk out of in-store sales. Even though Amazon’s success has historically been limited to online, they are feared, as the “Amazon Effect” has been blamed for closing thousands of stores nationwide.

But we’d be remiss to think that being a brick and mortar giant was their end goal. This is just one piece of their ultimate vision, as proven through their other ventures in manufacturing, operations, logistics, technology and data intelligence. So, although retail is getting the heat now, it’s safe to say disruption is inevitable in any industry, whether from Amazon, another one of the five big tech companies, or an underdog who takes the initiative to identify and fill the gaps left open in the marketplace.

It’s critical marketers understand how to identify opportunities to not only protect themselves from the seemingly unpredictable disruptors out there today, but to become disruptors themselves. With that, I’ve laid out a few surprising and controversial lessons you can learn from Amazon to ensure your own long-term growth and viability.

#1 Your business should not be your focus

Hearing “customer first” is nothing new, but most companies seem to follow that only if it aligns with what seems best for their business and its profitability. When, in reality, what is best for your customers, more often than not is what’s best for your business, even if that doesn’t seem obvious.

Amazon’s secret weapon is their most notable leadership principle: “Customer Obsession.” At the end of the day, everything Amazon does is grounded in simplifying and enhancing the lives of its customers. Even if that means making sacrifices to their bottom line or forgoing their own goals in the hopes of the long-term payoff they get from having a satisfied and growing customer base.

Take Amazon Prime, for instance, where customers get cheap, fast delivery, among other perks, and Amazon is footing the bill. Although it is far from profitable, they are bringing shoppers into their ecosystem, giving them power through data, accessibility and scale, which are much more lucrative. Like Prime, you can put money on the fact that Amazon did not open bookstores to make a profit on books. They are filling some major gaps in brick and mortar, offering shoppers new sources of value in-store. And in return, they gain access to new shoppers. Not to mention, being able to understand them more holistically by capturing a myriad of offline (and in-home) data to which they previously did not have access.

#2 Customers aren’t buying what you’re selling

The fact is, you’re never going to differentiate on products; products can be copied and are available anywhere. They’re buying something you’re giving them that others can’t or won’t. Whether that’s an experience, convenience, cost savings, an intangible feeling, or a way to kill time. It’s something that they value enough to pick you over every other option out there.

Case in point, everything that Amazon sells is available for purchase somewhere else. So why are people spending over $136 billion a year with them? At first, they were selling low costs and two-day shipping. Now they’re selling that, plus same-day shipping, one-click checkout, Prime rewards, customer reviews, product selection, site performance and more. Shoppers are buying a growing list of things from Amazon that they can’t get anywhere else.

#3 The true value of data is not for optimizing performance

Traditionally, data was used for insight into business, telling organizations what was/was not performing and used as a tool for optimization. Today, data is much more powerful than that; it is a key asset for identifying new ways to provide value. Businesses today should be using data strategically as a means for identifying new sources of innovation and new ways to provide value to their customers that extend beyond their original value proposition.

The more customers Amazon has, the more data they have, and the more data they have, the more fuel they have to further elevate their shopping experience online and in-store. The real value of that data, however, is that it has enabled them to identify new ways they can add value and break into completely new revenue streams. This explains Amazon’s diverse growth strategy that extends both on- and off-line, across industries and varying business models, including retail, manufacturing, delivery, technology and more. For example, Amazon saw their competitive advantage over other manufacturers and launched Amazon’s own brand, AmazonBasics, which is now disrupting a variety of manufacturers across industries through their competitively priced products.

#4 Innovation is not about technology

Long-term success hinges on your ability to rapidly innovate. But contrary to popular belief, innovation is not about technology. It’s about changing the way you think as a business. It’s about knowing your user on a very intimate level. And having the wherewithal and commitment to cross-pollinate and manipulate the environments in which you engage with them in a way that takes advantage of their unique strengths.

When jumping into brick and mortar, Amazon took a unique approach to retail based on:

  • an understanding of user needs and behaviors within the brick and mortar space (a limited number of only the best books have made it into the store and geographic data is leveraged to serve local foot traffic);
  • the knowledge they gained about their users online (data collected online is leveraged to stock and organize the store: most/highest reviewed, most wished for, page turners, bought together);
  • a vision for how they could leverage Amazon’s strengths online and connect them with the offline world (up-to-the-minute, dynamic pricing is viewable with scanners located throughout the store, as well as through their app, which can also be used in-store by enabling shoppers to scan a book with their phones to get even more information, to buy the book online or to checkout within the store);
  • and a clear view on how they could use their physical space to engage in ways they can’t do online (an entire area is dedicated to their electronics, where shoppers can see, feel and trial products).

In the end, nothing is static. As the landscape in which our businesses operate continues to change rapidly, so should the rules we follow. Don’t be afraid to break rules, make your own rules, take risks, and encourage a cultural environment that fosters and promotes innovative ideas. It’s through creativity and experimentation that new paths are paved and new leaders are made.

Laura Markewicz is VP of digital strategy at Laughlin Constable. She tweets @LauraMarkewicz

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