Amazon is the most successful company of our time. Its revenue has grown from $7B in 2004 to $232B in 2018. Amazon has never been particularly profitable but that is also changing. Its profits tripled between 2017 and 2018 to $10B. Both Amazon’s revenue and profits are on a seemingly never-ending upward acceleration.
What has made them so successful? Can we replicate what they do to boost our businesses?
I would like to ask you three questions that can be answered by studying Amazon. I’m suggesting that these three questions, if answered and implemented, will boost your business.
1) What to focus on?
Amazon has 14 leadership principles. By far the most important principle is the first — Customer Obsession.
Customer experience has been an increasing focus for most companies, but no company has been as fanatical at this than Amazon.
“If there’s one reason we have done better than any of our peers in the Internet space over the last six years, it is because we have focused like a laser on customer experience, and that really does matter, I think, in any business. It certainly matters online, where word-of-mouth is so very, very powerful.” — Jeff Bezos
Here are a few benefits of being customer obsessed:
Customers are up to 6 times more expensive to win than retain. Keep the ones you have.
Happy customers buy and pay more, e.g., Amazon Prime.
Customers can become brand advocates, which leads to referral business.
You can identify when your customer’s demands change and then make the necessary changes to your business.
Your staff, and you, will be happier and more productive.
Amazon will go as far as reducing prices, and change business processes to their disadvantage, to the betterment of their customers.
2) What to do?
Amazon has created a Human Centred Design process called Working Backwards.
“Start with the customer and work backwards” — Jeff Bezos.
Working Backwards is used to answer the following 5 questions:
Who is your customer?
What is the most important problem or opportunity?
What is the most important customer benefit?
How do you know what your customer needs or wants?
What does the experience look like?
The Working Backwards output is not a Powerpoint slide deck but rather a press release. Here are some guidelines for the press release:
No more than 1 page.
Language understandable to a 12-year-old.
Testimonial expressing the ‘Wow!’ factor.
Assume customers will only read the first paragraph.
Leave more complex aspects for the FAQ.
For more information on the Working Backwards methodology, I have written a complete blog on the topic that can be found here.
3) How to do it?
The “Flywheel Effect” was a term created by Jim Collins in his book “Good to Great”. A flywheel is a self-reinforcing loop made up of a few key initiatives. Those initiatives feed and are in turn driven by each other, and build a long-term business.
Amazon uses the concept of the Flywheel and has taken it to the extreme. This is one of the key reasons for their success and accelerating revenues.
Jeff Bezos spoke about how the success of Amazon.com has fueled the launch of Amazon Prime Video.
“Because we have this unusual way to monetize the premium content, we can charge less for the premium content than we would otherwise have to charge, if we didn’t have the flywheel spinning to help sell more shoes” — Jeff Bezos.
I have written a comprehensive blog on the amazing Flywheel Effect that can be found here.
I am absolutely sure that if you implement the results of these three questions into your business that it will accelerate its performance.
The three questions are:
Question 1: What to focus on?
Answer: Focus on Customer Obsession and have it as your number one principle.
Question 2: What to do?
Answer: Work out what the customer wants using the Working Backwards methodology.
Question 3: How to do it?Answer: Place your effort into activities that cause a Flywheel Effect.
I hope you enjoyed this article and that it makes an impact in your life and adds to the success of your business.
I am always interested in your stories and thoughts which can be emailed to me at firstname.lastname@example.org.
The views of this blog are my own and don’t represent the views of the company I work for.