{"id":58069,"date":"2019-02-01T00:00:00","date_gmt":"2019-01-31T22:00:00","guid":{"rendered":"https:\/\/richardvanhooijdonk.com\/blog\/the-amazon-effect-getting-innovation-right\/"},"modified":"2021-06-07T09:59:33","modified_gmt":"2021-06-07T07:59:33","slug":"the-amazon-effect-getting-innovation-right","status":"publish","type":"post","link":"https:\/\/blog.richardvanhooijdonk.com\/en\/the-amazon-effect-getting-innovation-right\/","title":{"rendered":"The \u2018Amazon effect\u2019 \u2013 getting innovation right"},"content":{"rendered":"<ul class=\"bold-list\">\n<li>Business model innovation should be the main focus<\/li>\n<li>Experimentation is crucial for innovation<\/li>\n<li>\u2018Eliminate \u2013 Reduce \u2013 Raise \u2013 Create\u2019<\/li>\n<li>So much to learn from Amazon<\/li>\n<\/ul>\n<p>In today\u2019s ever-changing business landscape, in which companies need to try and stay ahead of their competition, innovation should be one of the most important focus areas. One company that gets <a href=\"https:\/\/blog.richardvanhooijdonk.com\/en\/blog\/advancing-into-extended-financial-services-where-banks-fail-amazon-delivers\/\">innovation<\/a> right is Amazon. It was instrumental in making free and same-day shipping the new normal, which is something we\u2019d never have heard of ten years ago when navigating a complicated checkout process, paying for shipping, and waiting weeks for delivery was the norm.<\/p>\n<p>Amazon\u2019s processes have become the global benchmark for <a href=\"https:\/\/blog.richardvanhooijdonk.com\/en\/blog\/supermarket-future-self-driving-run-ai\/\">online shopping<\/a>, and with its delivery times exceeding expectations, other online retailers are struggling to keep up. Of course, there are a variety of other ways in which Amazon beats the competition at their game, with business model innovation being at the core of it all.<\/p>\n<h2>Business model innovation should be the main focus<\/h2>\n<p>For businesses to gain and maintain a competitive advantage, business model innovation should take centre stage. Keary Crawford, a co-author of <em>Growth Thinking: Building the New Growth Strategy Enterprise<\/em>, <a href=\"https:\/\/www.wired.com\/insights\/2014\/01\/amazon-innovates-business-model-drones\/\">writes<\/a> for <em>Wired<\/em>: \u201cAccording to <em>the Economist<\/em>, over 50 percent of executives believe that business model innovation will be even more important than product or service innovation. Yet, the American Management Association determined that no more than 10 percent of innovation investment at global companies is focused on developing new business models\u201d.<\/p>\n<figure id=\"attachment_2471\" aria-describedby=\"caption-attachment-2471\" style=\"width: 800px\" class=\"wp-caption aligncenter\"><img fetchpriority=\"high\" decoding=\"async\" class=\"wp-image-2471 size-full\" src=\"https:\/\/blog.richardvanhooijdonk.com\/wp-content\/uploads\/sites\/4\/2019\/05\/shutterstock-326465084.jpg\" alt=\"Child with red t-shirt, jeans, cap, and headphones with toy rockets strapped to his back stretching out his arm and making a fist\" width=\"800\" height=\"534\" \/><figcaption id=\"caption-attachment-2471\" class=\"wp-caption-text\">For businesses to gain and maintain a competitive advantage, business model innovation should take centre stage.<\/figcaption><\/figure>\n<p>This discrepancy can, however, lead to major missed growth opportunities. Crawford <a href=\"https:\/\/www.wired.com\/insights\/2014\/01\/amazon-innovates-business-model-drones\/\">continues<\/a>: \u201cFinding the business model sweet spot can help companies generate both incremental growth from optimizing existing businesses and transformational growth from generating entirely new sources of revenue and value creation. Rather than simply figuring out more efficient ways to operate in existing markets, the components of business models can, individually or collectively, be reinvented to create entirely new markets, new opportunities and structural competitive advantages.\u201d<\/p>\n<h2>Experimentation is crucial for innovation<\/h2>\n<p>One of the reasons why Amazon is so effective at innovation is because it\u2019s agile and because it experiments with new trends and technologies. Experimentation is crucial to innovation. Testing ideas helps organisations realise potential faults early on, and it reinforces new knowledge and reduces costs. Through the process of experimentation, ideas are converted into products, services, and even (new) business models. Furthermore, today\u2019s new technologies &#8211; such as, for instance, rapid prototyping and computer simulation &#8211; make carrying out experiments more efficient, faster, and more cost-effective.<\/p>\n<p><iframe title=\"Amazon Warehouse Robots : Mind Blowing Video\" width=\"800\" height=\"450\" src=\"https:\/\/www.youtube.com\/embed\/cLVCGEmkJs0?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture\" allowfullscreen><\/iframe><\/p>\n<p>The executive director of the MIT Leadership Centre, Hal Gregersen, <a href=\"http:\/\/fortune.com\/2015\/09\/17\/amazon-founder-ceo-jeff-bezos-skills\/\">writes<\/a> for <em>Fortune Magazine<\/em> that according to Amazon\u2019s founder and CEO, Jeff Bezos, experimentation plays a crucial role in their business: \u201cExperiments are key to innovation because they rarely turn out as you expect and you learn so much. We\u2019ve tried to reduce the cost of doing experiments so that we can do more of them. If you can increase the number of experiments you try from a hundred to a thousand, you dramatically increase the number of innovations you produce\u201d. Gregersen continues: \u00a0\u201cExperimenting is the ultimate way to transform an idea into reality. It\u2019s the mechanism by which great new insights translate into new markets.\u201d<\/p>\n<h2>\u2018Eliminate \u2013 Reduce \u2013 Raise \u2013 Create\u2019<\/h2>\n<p><a href=\"http:\/\/www.wired.com\/insights\/2014\/01\/amazon-innovates-business-model-drones\/\">According<\/a> to Crawford, Amazon is so successful because it\u2019s implemented the four key components required for effective business model innovation: \u2018Eliminate \u2013 Reduce \u2013 Raise &#8211; Create\u2019. These components form a part of the <a href=\"https:\/\/www.amazon.co.uk\/Blue-Ocean-Strategy-Expanded-Uncontested-ebook\/dp\/B00O4CRR7Y\/\">Blue Ocean Strategy<\/a> by W. Chan Kim and Ren\u00e9e Mauborgne, and encourage companies to identify the key features used to compete in the marketplace.<\/p>\n<figure id=\"attachment_2472\" aria-describedby=\"caption-attachment-2472\" style=\"width: 800px\" class=\"wp-caption aligncenter\"><img decoding=\"async\" class=\"wp-image-2472 size-full\" src=\"https:\/\/blog.richardvanhooijdonk.com\/wp-content\/uploads\/sites\/4\/2019\/05\/bos-diagrams-new-errc1.jpg\" alt=\"Blue image with the words \u2018eliminate\u2019, \u2018raise\u2019, \u2018reduce\u2019, and \u2018create\u2019\" width=\"800\" height=\"543\" \/><figcaption id=\"caption-attachment-2472\" class=\"wp-caption-text\">These components form a part of the Blue Ocean Strategy by W. Chan Kim and Ren\u00e9e Mauborgne, and encourage companies to identify the key features used to compete in the marketplace.<\/figcaption><\/figure>\n<p>Amazon <em>e-l-i-m-i-n-a-t-e-d<\/em> the traditional retail distribution channel. It forged direct relationships with suppliers and leveraged new technologies, creating new avenues for its customers. It also made a decision to <em>r-e-d-u-c-e<\/em> large margins or even forego any profits in the short-term in exchange for long-term growth. Amazon didn\u2019t make a full-year profit until 2004, which is ten years after it started. Bezos prefers to invest in creating new markets and building scale instead of paying shareholders \u2013 presenting a powerful competitive advantage for businesspeople and investors alike. Furthermore, Amazon <em>r-a-i-s-e-d<\/em> the bar in terms of customer experience by building next-level infrastructure and offering customers unparallelled options and value. Its mantra has always been to become \u2018Earth\u2019s most customer-centric company\u2019. Not only has Amazon\u2019s dedication to customer service played a significant role in the meteoric rise of the online retail behemoth, it\u2019s actually transformed the retail game itself.<\/p>\n<p>And lastly, the Amazon Web Service or AWS, has <em>c-r-e-a-t-e-d<\/em> extremely cheap cloud computing, providing storage, servers, networking, email, mobile development, and security to startups and Fortune-500 companies alike. AWS now accounts for nearly 10 per cent of Amazon\u2019s revenue, <a href=\"https:\/\/aws.amazon.com\/resources\/analyst-reports\/\">is<\/a> at least ten times bigger than its nearest competitor, and hosts not only popular websites like Instagram and Netflix, but also Unilever, General Electric, the US Department of State, Dow Jones, Samsung, Airbnb, the European Space Agency, Spotify, the Financial Times, BMW, Guardian News &amp; Media, Harvard Medical School, Lamborghini, NASA, Philips, Pinterest, Siemens, and the UK Ministry of Justice, among others.<\/p>\n<p>Joe Coleman, an award-winning speaker and author of \u2018<em>Never Lose a Customer Again\u2019,<\/em> <a href=\"https:\/\/www.destinationcrm.com\/Articles\/ReadArticle.aspx?ArticleID=124230\">writes<\/a> for <em>CRM Magazine<\/em>: \u201cAmazon is also taking its customer-first strategy to other markets. Its $13.7 billion acquisition of Whole Foods has the company poised to conquer the grocery industry, and I predict that in the next five years, Amazon will consider buying the U.S. Postal Service, as it is already showing a desire to revolutionize shipping services (provocative tweets from Washington D.C. notwithstanding)\u201d.<\/p>\n<h2>So much to learn from Amazon<\/h2>\n<p>Amazon hasn\u2019t met our expectations. It hasn\u2019t even exceeded them. What it\u2019s done is redefine what we think is possible. It\u2019s upped the ante for companies across each and every industry. We can totally see this company selling real estate on Mars in a couple of years\u2019 time. And we\u2019ll find it hard to believe that its humble beginnings consisted of selling books on the internet in 1994. While most companies can only dream of even coming close to what Amazon has, does, and is, every business has much to learn from the principles that helped this company get to where it is now \u2013 the most important ones being its focus on innovation and experimentation.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Business model innovation should be the main focus Experimentation is crucial for innovation \u2018Eliminate \u2013 Reduce \u2013 Raise \u2013 Create\u2019 So much to learn from Amazon In today\u2019s ever-changing business landscape, in which companies need to try and stay ahead of their competition, innovation should be one of the most important focus areas. One company [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":51345,"parent":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_coblocks_attr":"","_coblocks_dimensions":"","_coblocks_responsive_height":"","_coblocks_accordion_ie_support":"","footnotes":""},"categories":[2882],"tags":[4600,4601,4500,4629,4571],"article-type":[],"trends":[],"class_list":["post-58069","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-retail","tag-amazon-en-2","tag-innovations-en-2","tag-success","tag-technologie-en-2","tag-technology-en-2"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.6 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>The \u2018Amazon effect\u2019 \u2013 getting innovation right - Richard van Hooijdonk Blog<\/title>\n<meta name=\"description\" content=\"Amazon has redefined what we all think is possible. 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