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Amazon: a master of reinvention

"Amazon is the single best example of a serial business model innovator," according to Julian Birkinshaw

By Julian Birkinshaw and Kathy Brewis

12 October 2016

Innovation

“A mazon is the single best example of a serial business model innovator,” says
Julian Birkinshaw, Professor of Strategy and Entrepreneurship at London
Business School and Academic Director of the Deloitte Institute of Innovation and
Entrepreneurship. “It’s a company that has relentlessly built new businesses alongside its
existing ones. Some of these new businesses have been complementary; some have
cannibalised the existing ones. Protecting existing earnings is not a priority.” What can we
learn from this master of reinvention? 

Customer first 

Amazon’s continual self-reinvention flows naturally from Jeff Bezos’ famously customer-
focused approach. “We’ve had three big ideas that we’ve stuck with for 18 years, and
they’re the reason we’re successful,” he has said. “Put the customer first. Invent. And be
patient.” 

There’s a difference between being patient and holding back. “If you’re competitor-
focused, you have to wait until there is a competitor doing something. Being customer-
focused allows you to be more pioneering. We innovate by starting with the customer and
working backwards.”

Be a cannibal

When disruption hits, in any industry, the incumbent can struggle to address the threat,
aka the opportunity, because they’re so stuck in what they are used to doing. One of the
ways of overcoming this is to “eat your own lunch,” Silicon Valley-speak for building a
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business that cannibalises your existing offerings. So, in 2007, Amazon launched the
Kindle, an electronic book reader which, if successful, would directly affect its existing
business of selling traditional books. The sceptics (“Nobody is going to sit down and read
a novel on a twitchy little screen. Ever” – fiction writer Annie Proulx) were proved wrong
within weeks. 

People won't understand. Do it anyway 

Late-adopters still opined that Bezos was trying to kill people’s love of reading. Which
leads us to another of his maxims: “You have to be willing to be misunderstood if you’re
going to innovate.” Amazon continues to self-reinvent at dizzying speed. BusinessWeek called
Amazon Web Services “so far from Amazon’s retail core that you may well wonder if [Bezos] has finally
slipped off the deep end”. Did Bezos care? 

Amazon’s innovations include Amazon Affiliates and Amazon Prime – a massively different
delivery model, creating a club of people who pay a fixed price per month rather than for
individual items. In the last few years Amazon has shifted from being a vehicle for the
movies we watch into producing its own content, snapping up the Top Gear team and
hiring the likes of Woody Allen and Ridley Scott to work on new movies with Amazon
Studios. 

If in doubt, invent

Now there’s Amazon Fresh, just launched in the UK, which expands the shopping on offer
to fresh food groceries – and Amazon Restaurants, promising takeaway food delivery
within an hour in London.  

The pace of innovation at Amazon is made possible by Bezos’ belief that most problems
can be solved through invention, through bringing smart people together to find a better
way. The old-fashioned view of strategy – that you figure out what your core
competencies are and build everything around those – is turned on its head. Here, you’ve
got the exact opposite: “We can always learn to do new stuff – if there’s a customer need
we can buy and find the skills to do it.” 

Take leaps of faith 

Inevitably there are some failures along the way. “What really distinguishes Bezos is his
harrowing leaps of faith,” said Alan Deutschman in a Fast Company article. Some of these
leaps end up the corporate equivalent of a sprained ankle. Take the Fire Phone –
Amazon’s push into smartphones – which launched with considerable fanfare in 2014. It
was quietly withdrawn a year later. And the company has continued to face questions
about its overall strategy. With such a diverse portfolio of businesses, how can the
company continue to succeed on all fronts? Is Amazon’s unusual model truly
sustainable? 

It's always day one

Time will tell, but a man who persuaded his parents to put a large chunk of their life
savings into a business that he told them was 70% likely to fail should never be
underestimated. Bezos raised US$1 million from friends and family to launch Amazon in
July 1995 from a garage with five employees. 

His organisation has maintained a flat hierarchy, where every employee is allowed, in fact
expected, to show initiative. Another of Bezos’ mottos is, “It’s always day one” – in other
words, even though the company is now vast, it still aims to function like a start-up. 

Bezos has generally ploughed profits straight back into growing the company, but in July
Amazon revealed a record-setting quarterly profit for the third straight quarter: it earned
US$857 million, or $1.78 a share, in the second quarter on $30.4 billion in revenue,
i l i f i h f $1 11 $29 5 billi i A
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11/26/2018 Amazon: a master of reinvention | London Business School
surpassing analyst estimates of earnings per share of $1.11 on $29.5 billion in revenue. As
one commentator recently put it, “Bezos’ vision has no end, because the Amazon model
is limitless.” 

Related

Innovators to watch

See more

Authors

JULIAN BIRKINSHAW KATHY BREWIS

Professor of Strategy and Writer at LBS
Entrepreneurship; Academic
Director of the Institute of
Innovation and
Entrepreneurship, Deputy
Dean (Executive Education)

He teaches on the following

programmes:

MBA

Developing Strategy
for Value Creation

Making Innovation
Happen

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