Blog #3 Coherence Premium: Do Fewer Things but Do Them Well - Eduardo Fuentes (efuentes)

Jack of all trades, master of none is what comes to my mind after reading The Coherence Premium article, which makes it clear: figure what you are good at, develop it and use it to be the best-in-class, or how the CEO of my company says: do fewer things but do them well. This time the company that came to my mind, after learning about the Coherence Premium, was Amazon.

Amazon has seen both sides of the coin: they have focused on what they do best and have tried to enter into markets that are not their area of expertise in the interest of growth, at least this is how it could look to the common eye; is that true or does Amazon's strategy need to be deeply analyzed before jumping to conclusions?

What is Amazon good at?

- Bring data-driven 

- Providing a whole platform and ecosystem to fulfill customer needs.

- Keeping low costs, efficient operations, and optimal distribution performance (e.g. delivery)

- Technology innovation (e.g. Amazon Web Services, Alexa, Kindle, Amazon.com)

When I look at this list and I remember one day I woke up in 2017 and read Amazon had acquired Wholefoods, the upscale grocery chain, I start to wonder, is Amazon disciplined enough to focus on what it does best? Is it that I should not see this acquisition as Amazon getting into the groceries market but something else?

“Amazon’s acquisition of Whole Foods last August was the corporate equivalent of mixing tap water with organic extra virgin olive oil.” (Blanding, HBS. 2018) reads an article from Harvard Business School. Isn’t this statement making it clear this violated the Coherence Premium? It depends what angle we see this story from. If this move was made by Amazon to take Walmart down from its dominance of the online grocery ordering market by: making use of its data-driven strengths, cost efficiency, good price perception, experience in distribution and technology, to bring both worlds together;  online and offline shopping, then I would say there’s coherence here; if their interest is to sell groceries, shame on them, there’s no coherence.

This strategic acquisition is not about the groceries market, is about Amazon extending its distribution centers, about getting closer to the consumer analysis; the frequency a customer does grocery shopping is way bigger than the frequency at which people buy online, so what a great opportunity to analyze consumers and be able to provide them what they want, when they need it and how the want it (online or offline).

I have concluded there was coherence in Amazon’s acquisition of Wholefoods and that this move is not about getting into the groceries market, but another step to get closer to the consumer and use Amazon’s data-drive strengths to be the best-in-class. So what? This story demonstrates that what can look like a bad strategy to the common eye, might not be a bad strategy, but the other way around too, that is why coherence is essential to a successful business strategy but is useless if there’s no real devil’s advocate review of such strategy, what might seem coherent might not be and viceversa.

Blanding, M. (2018). Amazon vs Whole Foods: When Cultures Collide. Harvard Business School. https://hbswk.hbs.edu/item/amazon-vs-whole-foods-when-cultures-collide

Simon, H. (2017). Whole Foods Is Becoming Amazon’s Brick-and-Mortar Pricing Lab. Harvard Busines Review. Retrieved from https://hbr.org/2017/09/whole-foods-is-becoming-amazons-brick-and-mortar-pricing-lab