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Be afraid of your customers – not your competitors

“Yes, you should wake up every morning terrified with your sheets drenched in sweat, but not because you’re afraid of our competitors. Be afraid of our customers, because those are the folks who have the money. Our competitors are never going to send us money.”

Jeff Bezos, CEO, Amazon.com (Interviewed in Harvard Business Review, October 2007)

Jeff Bezos’s recent interview in HBR is well worth reading in full by all students of strategy. It describes his iconic company’s remarkable inception, its predicted demise, and its rise to solid profitability. Amazon.com is a true maverick whose strategic moves have often left traditional analysts scratching their heads and predicting its imminent doom. Yet Amazon today occupies some of the prime real estate on the internet – the first port of call for many web customers searching for anything from books to electronics to toys.

What was most revealing is that Bezos’s hi-tech virtual company is run by a man with some very sound, age-old ideas about good business. One of the most compelling is the company’s willingness to play for the long run. In Bezos’s words: “We are willing to plant seeds and wait a long time for them to become trees. I’m very proud of this piece of our culture, because I think it is somewhat rare.” He goes on to explain an article of faith: “When we plant a seed, it tends to take five to seven years before it has a meaningful impact on the economics of the company.”

Bezos describes himself as “congenitally customer focused”. This is a condition many more CEOs would benefit from being afflicted by. This customer focus should be seen in two parts: first, a clear understanding of what customers want; second, an obsessive desire to deliver. Sounds utterly logical, but is done well by very few. Amazon is clear about what its customers want: a wide selection, low prices and speedy delivery. And Bezos is clear that that won’t change anytime soon. But the important thing is what Amazon does with that knowledge. It puts immense energy into creating an operation that is effective for its customers: a low defect rate, first-time quality, on-time delivery.

Bezos is at pains to explain that Amazon does not ignore its competitors; it stays very alert to what they are doing. But Amazon is not a ‘benchmarker’ or a ‘close follower’. It does not go down blind alleys just because someone else is doing it. The excerpt I have selected above comes from 1997, when Amazon was all of two years old and America’s giant bookseller Barnes & Noble had just started its own e-commerce website. Amazon had 125 employees and US$ 60 million in sales; B&N had 30,000 staff and a turnover of $ 3 billion. Amazon, the industry watchers said, was toast.

Bezos asked his people to ignore the huge elephant at their shoulder, and get on with serving customers better than anyone else. Amazon introduced simpler shopping on its website, offered free shipping over orders of a certain amount, improved personalisation, added a plethora of product categories, and lowered prices. Customers liked all of that, and the rest is history. Amazon now has $ 13 billion in turnover. Long may its love (and fear) of customers continue.

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