If you wan to mug up in the critical themes of modern marketing in less than 15 min, get hold of the laste issue of Harvard Business Review (HBR) and read the interview with Amazon’s founder Jeff Bezos
Bezos makes many points in this interview. For example, he observes that all his big decisions have taken between five and seven years to have “a meaningful impact on the economics of the company”. Where that leaves companies which insist on three-year payback times, I don’t know.
But let’s focus on a few points. First, HBR asked Bezos how he decides which innovations to prioritise – which big investments to plump for? His answer may surprise you. Amazon bases its strategy on “things that won’t change”, he says.
Focus innovation on things that won’t change? How does that stack up? Bezos’ answer is simple. Over the next five to ten years loads of things are going to change, but if you try to predict exactly what they are or how they will unfold, first you’ll almost certainly get it wrong and, second, you’ll be chopping and changing your “strategy” every few minutes.
But while technologies, products and channels often change dramatically some things don’t. For example, it’s unlikely that in ten years’ time customers will be saying “I love Amazon, but if only they could deliver my products a little more slowly”. Or at a higher price. So if Amazon develops “flywheels” that improve these aspects of its service, says Bezos, “ten years from now it’ll be spinning faster and faster”.
Bezos’ point goes much deeper than first impressions. A lot of baloney has been spouted about how consumers are changing. If truth be told however, people don’t change much over decades or even centuries. Their basic needs and desires remain pretty much the same. What changes is how they go about meeting these needs and desires.
The unchanging core of what consumers want is better use of their personal assets – such as time, money, energy, attention and so on – to achieve better outcomes in their lives, such as greater emotional enrichment and less hassle. The secret of success for any product, service, technology or channel, therefore, is not its particular attributes but how well these attributes address this unchanging core: how to improve the person’s economics?
That (in turn) means that the only metrics that really matter – the only ROI figures that actually impact market performance – is personal ROI. Does it save me time, money or energy? Does it give me a richer return in some way? Yet none of these metrics currently register on brand managers’ reports or boardroom agendas. Old favourites such as market share, sales volumes, margin and retention rates hardly connect with the metrics that really matter. They are product and corporation-centric and not person-centric. But Bezos is focusing on person-centric metrics such as “time saved”, “money saved” and so on. Obvious? Yes. Simple? Probably not. Fundamental? Absolutely.
This has knock-on implications for corporate cultures and decision-making processes. Bezos distinguishes between companies that operate on the basis of the “Institutional No” versus the “Institutional Yes”. There are occasions where there are so many variables and unknowns that “we get into an infinite loop and can’t decide what to do”, he observes. If X happens it will all turn out fine. But if Y happens we will have egg on our face, and Y is a real possibility. In companies where the “Institutional No” prevails, the result is paralysis. Nothing happens because the risks of doing anything are too high.
But at Amazon, Bezos has created a simplifying decision-making short-cut: make the decision on one criterion only – “what’s better for the consumer?” Whichever option is best for the consumer gets the “Institutional Yes”. This creates a new focus: we have decided to do this, now we have to “figure out a way” to make it happen, which involves being “stubborn on the vision and flexible on the details”.
Figuring out a way has its own knock-on implications. Bezos never says this in as many words, but here’s my take on it: in the end all innovation boils down to the challenge of operational excellence. Great ideas don’t remain great unless they are implemented, and implementing great ideas almost inevitably involves changing the way we do things. So, according to Bezos “defect reduction and execution are one of the reasons we have been successful for customers”. Success comes from continually improving repeatable processes – “lean’ thinking” – or what Bezos calls “big-time process management”.
Are your eyes begin to glaze over? For many marketers, this glaze-over factor is a real problem because the only way to deliver those critical customer metrics (saved time, saved money, etc) is via “big-time process management”. The marketer’s job is to identify the metrics customers most want to improve and to champion those “big-time” processes that will deliver these metrics. This is how marketers connect the external to the internal to add value.
There’s one final point that Bezos makes, and it is huge. He tells the story of how Amazon opened its site to third party competitors: they display their prices next to Amazon’s and Amazon helps you buy from the competitor if you want to.
To any traditional marketer this is crazy. You invest all that money getting the customer to your outlet, and once they are there you hand them over to your competitor. So, for example, Amazon’s buyer of digital cameras has just bought 10,000 digital cameras only to discover that now he’s also helping customers buy exactly the same camera from somebody else. Bezos remembers one person saying to him “Maybe you don’t understand your business. You make money when you sell things.”
Bezos then goes on: “But I thought to myself, We don’t make money when we sell things; we make money when we help customers make purchase decisions.”
With this, Bezos has pinned down the next mega-shift in marketing and customer relationships. People’s desire to make better decisions (and to implement these decisions better) is not going to disappear over the next ten years. It’s unchanging. But how they do it is changing rapidly (search, price comparison, peer-to-peer information sharing etc).
Better decision making is the emerging epicentre of consumer value because (by definition) it addresses all those key personal key performance indicators while subsuming every product and every service into its orbit. It also fundamentally changes the way you think about marketing and brands.
So if you do nothing else this week, set aside 15 minutes to read what Bezos has to say. Then think through what it may mean for you.
Alan Mitchell, www.alanmitchell.biz