Thursday, June 13, 2013

Amazon: Online retailing to electronic good to cloud infrastructure services. Next?

Strategy: “To ‘Get Big Fast’ by investing aggressively in new product categories and new businesses, by spending money on brand awareness and getting new customers.”

Amazon’s strong market initiatives and its evolving presence in a number of business verticals has always kept me excited and tuned in. The agility with which they move into the emerging markets makes them a leader and a market maker to a large extent. So, is the agile methodology just built-in the roots of their organizational culture and strategic fundamentals? And have there been any major changes in their agile thinking?

Well, it has been an increasing adopter of the agile methodology amidst an exponentially rising competition and shortening of time to market. Amazon was born in 1994 as an online retailer, aimed at distributing the top 5 products that people like to purchase online. After a careful analysis of the market products, the list incorporated compact discs, computer hardware, computer software, videos, and books. Thereafter beginning their online retail operations in 1995, the dot com bubble burst in the later part of 20th century saw many such businesses wiped out from the books of e-commerce start-ups. However, the long-term vision of Jeff Bezos, the founder, helped Amazon to hang around and build on their retail operations. Time Magazine featured Jeffrey Preston Bezos as Person of the Year in 1999, calling him "king of cybercommerce." But to say the least, the journey was never easy with competitors like eBay eyeing for an almost similar market.

Thereby, soon after it launched their online auction service, and expanded its footprint in the industry, while experimenting with the idea of online auction market framework. It also formed an alliance with Target Stores for warehousing and delivery of goods purchased through their online portal. Next year, they went announced the launch of their Amazon Web Services platform. In essence, we can observe signs of fast-changing strategic initiatives and an agile development style right back then. In the initial 6 years of its growth, it had penetrated into e-commerce, auction markets, partnered product distribution/shipment, amidst the dot cum bubble burst.


However, racing into 2013 with an established business footprint, their emphasis on agility has become deeper and they have moved from portfolio agility to essentially strategic agility. They are no longer tapping into the formed market potential but they are visionary and shaping the cloud computing market with their diverse set of offered services. Their AWS portfolio has seen tremendous growth and stands near the $3billion mark in revenues. Another exciting suite of products are the low-cost, user-friendly, and task efficient range of Kindle(s). They are an offset of their digital content publishing business, offering ebooks, their media content library and their newly introduced mobile browser “Silk” which is optimized for easy and efficient access to cloud data services.

The rationale behind this transformation form portfolio agility to strategic agility is embedded in the current state of affairs in the web and telecommunication industry and its rapid evolution. The approach of portfolio agility is linked to aligning your business focus to the bigger share of target market, hence increasing the income potential and scope. Strategic agility, which Amazon can be said to have been following now, deals with leading and transforming the market through your own interpretation of the future trends. It assumes a leadership position in the business arena rather than being a follower or adopter.

So what has caused Amazon to move so swiftly, face the competition upfront and build a great customer base. It’s their well-formed vision identified by a unique set of capabilities and translated into reality through effective leadership. Their recruitment policies have transformed over years to support only the best talent, people who are the “masters” of their domain, so that speed and quality are ensured. Their continuous growth and agile practices is further propelled by its HR practices of “bar raiser” interview rounds, which is to ensure its functional momentum is maintained. They have essentially mapped the organization’s capabilities with the employee’s core competencies and leadership ability.

Amazon has multiple growth verticals having different strategies depending on the market position of their products in each. This multi-faceted growth strategy requires great customer focus and market insights which it fosters through its exceptional employees and able leadership. Their online retail solutions have been a consistent revenue earner for their business. However, an interesting trend to look out for is its increasing rising % of revenues in cloud storage services and its device sales. There has been a random but substantial advance in the web services and cloud market that has driven Amazon into this parallel growth strategy. 

The question now is, are they agile enough to ride this emerging but unpredictable market trend?



References:
1. “How Amazon’s Unconventional Business Model Changed Me From Hater To Customer For Life.” Business Insider. Accessed June 13, 2013. http://www.businessinsider.com/why-amazon-is-so-hugely-successful-2012-12.

2. “The History of Amazon.com | eHow.” eHow. Accessed June 13, 2013. http://www.ehow.com/about_5377195_history-amazoncom.html.

3. Vladimir Matovic. “Amazon Business Model.” Technology, January 3, 2012. http://www.slideshare.net/Vlacke/amazon-business-model.

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