Amazon’s continual focus on innovation is driven by the fear of being outdone by a competitor, its CTO claimed this week.
Speaking in a keynote this week at the Wired Smarter conference, Werner Vogels claimed that if Amazon stops innovating “[it] will be out of business in 15 years.”
This is not because there will be another Amazon, says Vogels, but because somebody will come along and do individual areas such as delivery better.
To illustrate the company’s approach, Vogels referred back to Chairman and CEO Jeff Bezos’s first annual letter to shareholders in 1997, when he wrote: “We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions.”
The letter also said that Amazon would make “bold rather than timid investment decisions where [it] see[s] a sufficient probability of gaining market leadership advantages.”
Lofty principles, but what does this mean in practice? Vogels highlighted the Kindle e-reader, first launched in 2007, as a particularly important example of this.
“Our goal has always been to sell these devices at cost. If you buy a Kindle, put in your drawer and never read an ebook, Amazon is not making any money. It’s purely targeted at priming that whole market.”
He cited the company’s Echo voice interfaces as another example of this approach, as well as the Amazon Web Services cloud business.
“The criteria [for investing] is: if it becomes really big we will make a lot of money.”
Any given new product must “work from the customer backwards”. Amazon starts by writing a press release – strictly for internal consumption – to clarify what it is going to deliver as a product. It then writes the FAQs and answers, only writing the product description right at the end of the process.
Innovation does require a willingness to embrace failure, said Vogels. “Something is not an experiment if you know the outcome.”
But the approach to risk-taking is that “decisions are most often two-way doors. You may as well make a decision based on having 80 percent of the information.”
This leads to what Vogels refers to as “the institutional yes”.
“In principle we always say yes unless there’s a really good reason not to.”
In HR terms, this means ensuring that taking risks is not disincentivised at a personal level, and in particular that people are not worried they will lose their jobs. There is an internal TV station where employees talk about their failed projects and why they went wrong.
Throughout Amazon’s experiments, however, it is worth noting that some things remain the same, as Vogels points out. One of these is that the more products there are in the catalogue, the more likely it is that people can find what they want. The other is, unsurprisingly, the importance of price.
And of course, Vogels cited Amazon’s stated aim of being the “Earth’s most customer-centric company” as guiding the overall direction of innovation.
Image credit: Amazon