Jeff Bezos Follows the Money

By Shlomo Maital


 Have you been following Jeff Bezos’ remarkable reinvention of Amazon? Ignore his purchase of a new toy, The Washington Post – that isn’t part of the reinvention.

   Bezos is doing what many successful companies fail to do.   As Peter Drucker explained decades ago, companies fail not because they do things wrong, but because they do the wrong things… they do the right things for too long until they BECOME wrong. Amazon became a market leader in on-line book sales, then broadened to selling everything, was highly successful – and while it was successful, Bezos is reinventing it, a highly difficult task. (“If it ain’t broke, why fix it? How many CEO’s believe that, and die with their company).  

   According to David Streitfeld (NYT April 4, p. 15), Amazon Fire TV “is part of a multi-billion-dollar effort by Amazon to move from selling goods produced by others, (low margin), to presiding over the entire process of creation and consumption (downloads and streaming).”  

Amazon is now selling a device, Amazon Fire TV, that lets consumers watch Amazon’s video library, as well as play games, on their TV sets.

   Recall that very quietly, Bezos positioned Amazon as a major supplier of cloud services, leaving Microsoft, IBM and other huge technology companies behind.

   Bezos is using what Bain & Co.’s Orit Gadiesh called “profit pools” – a tool that shows profit margins at each stage of the value chain, and asks senior managers to ask, ‘where is the money [today]?’ and ‘where will the money be in 5 years?’?   This is precisely what Bezos asked. His answer: creating download content. And he is able to move Amazon, with alacrity and skill, to where the money will be.

     Bezos may well slip and fall in future. But until now, his strategic moves have been alacritous and visionary. And risky – he is not afraid to risk billions.

     He’s worth watching carefully, to learn how to innovate tomorrow even when what you innovated yesterday is a big success.