How Jeff Bezos created a company worth $1 trillion

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It is hard to imagine what he says seriously, as sales, profits and Amazon’s stock price is trending up, the latter increased by 270% over three years, and over the past 12 months, 103%. Amazon catching up to Apple in the fight for the title of most expensive companies in the world, and Jeff Bezos, whose personal fortune approaching $160 billion, became the richest man on the planet, and with a decent margin. Nevertheless, Bezos is talking about Amazon as if this dizzying startup that just closed a first round investment. “In fact, the market volume is not limited,” says Bezos. Sleeve shirt a 54-year-old businessman rolled-up, pumped up and visible hands — the result of weightlifting in adulthood, as was a lot of gossip. His insights about the growth potentials based on the hugely successful coincidence of circumstances: the market size of retail in which Amazon was born, — “many trillions”, and, according to him, a cloud-based market, the pioneer of which was the division of the Amazon Web Services (AWS) is so great. “There are industries where market size is limited, — said the head of the company, the proceeds of which this year will reach $210 billion — But we have no such problem”.

Как Джефф Безос создал компанию стоимостью $1 трлн

Bezos already the most formidable businessman in the world, and its “limitless” possibilities should alert the head of any company. Yes, he’s cynical, he’s a master long-term results, but the main strength of Bezos, revealed to the world in recent years, the ability to fit Amazon to conduct scalable business in related industries, some of which seem related, but if you look back. This ability can be measured: Forbes for eight years, leads the ranking of most innovative companies, and recently we have attracted three professors of management to determine the most innovative business leaders of America.

They applied the methodology, taking into account the public reputation and influence of the businessman, the growth of capitalization the company headed by him and the award of investors in its stock unconditionally puts Bezos in the first place. “What Jeff Bezos did and probably still do, is perhaps the most amazing achievement of all is that I saw told me last year Warren Buffett, when I asked him to name the most outstanding business mind, for his nearly 80 years of observations of the market. He took two very big industry and then you can say, under the noses of the competitors actually became a leader in them, he transforms them and succeeds in a very big business”.

Although Bezos and Buffett talked about the retail and cloud technologies, there are still industries in which Bezos is not actually restricted a lot of what. First, thanks to AWS, the company, that prefers the growth of profitability finally began to earn billions, and Bezos enough market confidence to reinvest them wherever he wants. Second, the scale, which is necessary for Amazon’s growth requires expansion. And finally, dominating the retail and digital business (the two fields come into contact with almost all other business sectors), it can easily practically move to any adjacent field, which seems to him profitable. He plays a billion on at least four markets — healthcare, entertainment, consumer electronics and advertising, and there are many companies that have not yet intimidated by Amazon. It is no coincidence that the volume of each of these sectors or reaches the trillion mentioned by Jeff Bezos, or close to it.

His colleagues, the founders of the dot-com era, adhered to the principle of open kimono — no secrets in the business. Bezos always considered stealth to be very useful — he was hiding new initiatives inside of larger projects and show feigned indifference to the prospective candidates. As social status Bezos grew his public appearances and interviews with him became less frequent, although he owns the Washington Post. He refuses to discuss Donald trump, who has a habit to criticize Bezos and the Washington Post on Twitter, but of course realizes that he became a target. When he was the head of the influential advertising company, asked if he carried any lessons from the debacles experienced by Facebook last year, his response was brief, diplomatic and enigmatic. “No,” said the supporter of the study of business and made a long pause, showing that it is not going to discuss it anymore. The same with the question about whether or not to engage in data processing. “I never thought about it in relation to Amazon,” the man said, managing a company that relies on no other data. Reacting to the assumption that the data is at least a tool, Bezos immediately said: “One of many”.

However this morning that Jeff Bezos spent with Forbes, telling how he innovates and chooses the direction of development, was sketched road map for Amazon. The company is moving both vertically and horizontally, given its size portends a big shock for each direction. Even five years ago, Bezos seemed to be simply trying to sell all everything, to become a bugbear for retailers and wholesalers. But this Maestro of innovation now in the hands of a full palette — every industry on its taste.

In this limitless era the most important word in Amazon is “Yes”. Bezos correctly explains the traditional corporate hierarchy: “Suppose the head of the lower link got an idea and he wants to try it out. He needs to convince his boss, and that — his, and one head chief and so on. And the first “no” in the chain can kill any idea.” That’s why so many startups are flexible to easily circumvent ossified dinosaurs: even if the 19 venture capitalists say no, enough 20 said Yes to a breakthrough idea came to life.

Accordingly, Bezos has structured Amazon in the form of, as he calls it, the many ways to “Yes.” This is especially true of “two-way doors”, based on incremental change and from which it is easy to give up, if they are incorrect. Hundreds of leaders can give new ideas the green light, and staff can offer them within the company. “He knows and we know that inventions and experiments are not without failures, says Jeff Wilke, a longtime aide to Bezos, who runs consumer and reteylovy areas in the Amazon. We appreciate, and we want them. Jeff [Bezos] do not need to endorse. And I don’t need”.

But in terms of broader ideas and verticals — so-called “door, leading one way” that will inevitably change the direction of the company, Bezos proudly acts as “General Manager for the slowing.” He is looking for in every idea three things. First, the originality. “We need a competitive idea, not just a suggestion in the spirit “and I also want to say,” he says. Second, the scale. “We, fortunately, have very large units that we have built, and we can’t afford to waste your time on something, even if it works, will remain small.” Finally, the coefficient of return innovation worthy of Silicon valley: “Even if there is significant scaling, the idea is to give a good return on capital”.

The whole idea of matching the three parameters, go back to one of the two models. Or we look back and consider the needs of consumers: we have noticed that some people in a special way to behave, so let’s offer them the appropriate product. Either getting ahead of ourselves: we know how to do anything worthwhile, so let’s get this out of the buyer. The power of Amazon in the second model. Initially a niche player, Bezos could easily focus on how to become the world’s largest store digital books controls how Etsy crafts, and Zappo — shoes. But, mastering the skill of bookselling, Bezos realized that he could use the same tools — from inventory management to recommendation algorithms to move into adjacent areas. And he began to trade music and DVD, then toys and electronics, then practically anything that can be sold retail.

Bezos boldly (and successfully) used their knowledge, opening the platform to independent Amazon sellers, former competitors, strengthening its reputation as an innovator in retail, along with such figures as Sam Walton, Aaron Montgomery ward, and Julius Rosenwald of Sears Roebuck’s. And the story could have ended.

However, as the main online retailer the Western world, the Amazon to solve global technological and logistical challenges. And Bezos is not considered received during the techniques just help in core business, and saw in them an independent business. The company inadvertently developers have led to the emergence of Mechanical Turk, one of the first exchanges in the world of crowdsourcing. Building amazingly effective infrastructure delivery to create logistics service, Fulfillment by Amazon, and the ability to take the money for each purchase generated Amazon Pay.

But the most important occurred when Amazon began to expand to store their data in the cloud. Bezos realized that other companies may want to store your information in the same way. So there AWS (revenue in 2017, $17.5 billion).

Как Джефф Безос создал компанию стоимостью $1 трлн

And even concept, consumer-oriented, generate dividends, based on experience. Take, for example, e-book Kindle, Amazon’s first step into the area of production equipment made in 2007. Wilke, who came from the aerospace company AlliedSignal, remember how he objected to the Board: “I stood up and said, “I disagree. I think we can thwart the stated delivery time. Our production capacity is too low. It does not pay off. We will produce too little product. We angry buyers. Equipment is difficult to do. We are a company producing technological solutions.” Jeff said, “Well, I’m willing to admit that all of this will happen, and still think is correct for our company vision is to learn very well to make the device, so we need to start to learn.”

And they started. Kindle is an iconic product for Amazon because it is the first step in the production of devices and because it goes back to the roots of the company books. However, the Kindle does not have transformed the company, and the subsequent other devices failed, such as the catastrophic Fire smartphone. But Betcom taken the decision eventually led to the emergence of smart speakers Amazon Echo, which became a real breakthrough.

“Today we have good experience in device manufacturing, but then we did not have, says, chuckling, Bezos. — It is necessary to have patience. It takes time not only to learn something. It will take time to truly blossomed”. In other words, if you look closely at the technologies that currently develops Amazon, you will have a pretty clear idea of what they will soon begin to sell.

Now Bezos eyeing healthcare. It is the largest industry in America — 18% of GDP. And one of the most inefficient. Last year Bezos together with Buffett and head of JPMorgan Chase Jamie Diamon said that three companies are working together to organize a non-profit initiative with a well-known Manager Atul Gawande headed. The aim of the initiative is to provide the best medical care for less money for their own employees. The idea is to create a scalable model of care that is suitable for copying. It’s a big deal together, the three companies employ 1.2 million employees. If you add family members, it turns out the pilot project across the States of Oregon or Connecticut.

Bezos categorical in regard to the intentions of Amazon in this area. “This is a non-profit initiative, as you know. It is quite another matter,” he interrupted the journalist, not even waiting to hear the question. Buffett agree with him, a few months earlier he had explained to me: “After our application we were asked the crowds who said, “We also want to join.” We said, “You don’t need to join. Steal what we’ll get if something happens.” “If we succeed” is the key phrase. “Like Columbus before departure, we don’t know where we’re — said Buffett. But we hope that somewhere far away there is another continent and we will crack at some point from the edge of the Earth.”

But even if they float away over the edge of the Earth, Bezos will benefit from the fact that Amazon will break in technology for the treatment of approximately the fifth part of the American economy. According to Bezos, any enhancements developed with Buffett and Daimon, “still remain in this non-profit organization”, but “each company is free to develop their own projects.” And Bezos has already begun. In June, Amazon agreed to pay nearly $1 billion for PillPack, a startup that delivers patient Packed in envelopes daily dose prepared for him prescription drugs. All of this so he can do well Amazon: order processing, adaptation to customer requests and reliability of delivery. And this is another rod, abandoned in the health of the pond.

Bezos studies and advertising. The latest quarterly report reveals the surprising figure: the Amazon income from advertising this year will exceed $8 billion, which is almost twice more than in the past. And why not? Google knows what you want to buy, Facebook is able to calculate what you would be interested, but Amazon knows what you actually bought or going to buy. There are a variety of conflicts. Bezos talks about his pathetic obsession with consumers, but few want to get even more targeted advertising. Bezos says that the trust of customers will guarantee that Amazon will not step over the line and, in turn, will treat her with understanding. “It is very valuable, and you should not do anything that will destroy the trust, he says. — It allows us to expand the business.” If Bezos will be able to keep the balance, it is easy to imagine that advertising with Google Facebook duet will become a trio.

In Seattle the most interesting building among the skyscrapers in the heart of the Amazon is a grocery store that looks out of the basement of the tower Day 1. Acquired by Amazon last year for $13 billion chain of organic supermarkets Whole Foods is not the most interesting grocery initiative Amazon. Much more interesting open in January 2018 Amazon Go experiment in the field of offline barrier-free trade in the area of 170 sq. m.

Grocery shop Go is probably the most Amazon thing at Amazon. Bezos has always placed emphasis on frugality, and here his staff (and some residents of Seattle and tourists) choose your lunch by purchasing it from Amazon and giving the company a lot of data for the development of the technology. More importantly, Go shows what possibilities open up if different aspects of many units Amazon together.

Go combines the data received from purchases at Whole Foods, using increasingly complex algorithms and the capabilities of Amazon — artificial intelligence, cameras and sensors that, together, figure out what taken off the shelf (and put back) and by whom. Then payment system Pay Amazon, which carries out the transaction as soon as the app registers the received data. Feel to grab the chocolate milk on the way to the exit is comparable to theft — no line at the cash register, no scanning, no swiping a Bank card. If health and advertising represent a huge vertical expansion for Amazon, then Go combines everything that can be connected horizontally when Amazon collects all its constituent parts in one place.

Как Джефф Безос создал компанию стоимостью $1 трлн

The most important part of your choice. At its core is a marketing tool, a way to encourage purchases and generate revenue from subscriptions (estimated, $10 billion in 2017) on the same principle as the wholesale club stores like Costco and BJ’s Wholesale. But with the development of this service has become a way to bless more than 100 million subscribers, bonuses and benefits. Bonuses and generate new related product line and business. Prime explains why Amazon started to enter the territory, and Netflix is planning this year to spend $5 billion on content, including the highly acclaimed series “the Amazing Mrs Meisel”. In just three years Prime Day is an annual 36 hours of special offers for subscribers only, during which this July the participants spent billions buying more than 100 million of goods, has become a shopping holiday comparable only to the black Friday and cyber Monday. Access Prime is also a way to force foreign retailers to pay more for Fulfillment by Amazon.

Prime keeps afloat offline strategy Amazon: the delivery and removal of the same day require a greater number of physical locations. And they help lead expansion into areas that previously Amazon could not recover, such as food — product with a short shelf life did not fit the classic model Amazon. Today the company, which for many years acted as a killer bookstore, holds 16 permanent points Amazon Books in 11 States. Amazon recently opened a second Go in Seattle. “We need something special and new, says Bezos. That’s exactly what you’ll see if you’ll notice on our strategy of development of physical stores.”

So Prime has become the Central nervous system Amazon, connecting everything in the company, creating a path to reach new markets, simultaneously feeding the main reteylovy the company’s business and not as something separate. “Prime can not become an independent entity, because it is completely tied to our consumer offer,” says Bezos.

Similarly, as seen in the case of Go, artificial intelligence will combine what previously seemed a separate product line from cloud to retail. Take, for example, a highly successful column Echo. It is an effective device that works on software with artificial intelligence that spur reteylovy sale Amazon, acts as a lever to promote their content, etc. “the Most interesting in machine learning is how the horizontal will be this technology, says Bezos. — No one branch of business, or governance, or anything else which it would not be in favor.”

Even made a lot of noise in America, the struggle for the contract for the construction of the second headquarters of the company HQ2 (according to insiders at Amazon, he will be signed before the end of the year) testifies to the intention of the company to grow horizontally. Itself Bezos says over time, the geography does it mean for Amazon less. When different teams have to work together, “it is necessary that these two groups rarely met and created a road map for the future.” “If all correctly to organise, people do not need to be in the same building, or same city, or even in the same time zone, because you can work on the roadmap,” he says.

And you can be sure, Bezos is working on such a roadmap, delegating the task of operative management. Long-term planning has always been a hallmark of Amazon, and cash flow from AWS gives Bezos an opportunity to continue the work of the retailer with almost zero margin and unattainable efficiency and to invest in different from the specialization of the Amazon industry. “I rarely delve into current Affairs, he says. — I, like most of my team managers are working on what will happen in two or three years.” “Friends congratulate me after the quarterly report say: “well Done, good quarter,” I tell them, “Thank you, but this block was laid three years ago.” Now I’m working on a quarter, which will be in 2021″.

This attitude of the head of this giant makes tremble the company of a dozen industries. “I come up with ideas. We can sit here on an idea, or I can fill this Board 100 ideas per hour, says Bezos. If I go an entire week without spending brainstorming, then start whining: “Guys, let’s get to it”. Corporate America — you should write that down!— either you updated or Jeff Bezos will do it for you.”

Translation Mary Hanuting