- before Amazon, hedge fund using algorithms to trade
- Bezos the young VP at the investment firm D.E. Shaw .
- idea of "everything" store in D.E. Shaw
- started with book, since books are identical, a list of other products ready to be on e-commerce
- typical laughter
- narrative fallacy
-
2000 - 2001, dot-com bust
- Amazon $107 to 21 months of decline
- matter of survival
-
dot-com issues:
- companies without business models
- no financial footing
- no more optimistic view of companies maturing to take profits
- $672 million convertible bonds in European market before stock market crash: 6.9% interest
- cash as a hedge against nervous suppliers asking to be paid more quickly
- (get big fast) -> (get our holes in order): 1998: 1,500 employees to 2000: 7,600
- time to reduce waste and improve efficiency: Linux, slow new product launch etc.
- cost reduction from shipping with mail
- Suria (Lehman analyst) predicts Amazon doom (out of cash in the next 4 quarters)
- though Amazon strong in cash, great in working-capital, prediction may scare suppliers & consumers -> self-fulfilling prophecy
- Bezos charm offensive, many interviews, customer -> working backwards
- dot-com collapse too drastic. Amazon cutting fixed cost and payroll
- Suria's prediction induces public sentiment change -> change in stock price :-(
- Amazon approached Lehman regarding Suria's report
- Bezos accused of insider trading for reading report first (though not entirely true)
- ripple effect of stock crash
- huge layoff
- 2002 to 2003: too many people leaving, stock vested, no longer believing in it, low salary, etc.
- eBay overtook Amazon in value
- Jenson (CFO), left Amazon
- Amabot leads to the downfall of editorial group
- 2002 profitable quarter -> wanna hang the positive news in office, Jeff wants to the negative one to keep people alert
- 2003 profitable year, a message to the press milliravi, Jeff won! (at least for now)
- platform rather than a shop
- once $200 billion reached, half from product, half from commission (Bezos target)
- Toy: Amazon platform, ToyR does selection
- in the short term, the stock market is a voting machine. In the long run, it is a weighing machine
- focus on customer, problem automatically solved
- Harry Potter promotion, customer loyalty (losing a few dollars on every one of the 255,000 customer orders)
- customer obsession, Bill Price left due to 4-min wait time
- Amazon had the most authoritative product catalog to be exploited (!!!! still important observation today)
- Amazon marketplace for 3rd-party sellers selling anything, lots of complaints initially
- Jeff only cares about more product selections, upsetting everyone
- Proposed Amazon collaboration with Walmart, not working
- conversation with Sinegal (founder of Costco)-> Amazon should have "everyday low prices"
- self-reinforcing loop: lower prices -> more customers -> higher volume of sales & 3rd party sellers -> lower fixed costs -> even lower prices
- high volume order free shipping: (2 groups: fast delivery sensitive to time, free shipping sensitive to price)
- Bezos biological father abandoned him (like Steve Jobs & Larry Elison)
- Attentive mother: Jackie, allow Bezos to explore all, attend gifted program, etc.
- Valedictorian of high school
- Princetion
- Silver Knight (a statewide award)
- $2 billion net worth in 2000
- started space lab
- always willing to explore more despite current success
- like to be counted on
- 9000 employees by 2004
- internal structure does not fit anymore (cost of inter-departmental communication, poor management at distribution centers)
- Jeff Wilke: key person fixing the distribution system (Princeton, MBA from MIT), joined as VP and manager of worldwide operations
- fulfillment centers instead of distribution centers
- matching demand to the right FC
- 6-sigma and Toyota's lean manufacturing philosophy -> rationalize every expense
- management style similar to Bezos, promoted to SVP in a year
- the most efficient organization should avoid communication, no need if process is set right
- birth of agile management -> embraced by Google, Facebook etc.
- independent teams to be entrepreneurial
- personal ritual to read & think after holiday
- pizza team: autonomous groups of fewer than 10 people
- competing over resources & duplicated efforts
- fitness function: a linear equation to measure impact without ambiguity
- good fit for tech, but not finance & legal
- narrative over PPT during meeting, mock press release if a new feature
- current one cannot work for Amazon (a third party vendor product)
- reinvest to make a new one!
- more accurate & reliable, promises on customer purchases
- A year after the decision, click-to-ship time 3 days to 4 hours, cost per unit falls, ship times shorten
- favorable terms with UPS, integrated Fedex first, turned UPS off, then convinced UPS
- launch in marketplace, observe, then design
- allow customers to design their own rings
- limitless in shelf space
- personalization on every customer
- never bound by the traditional retailing rules
- employee suggestion, time-sensitive customers are not price sensitive
- Ravindran led the effort, asked by Bezos, in a few weeks, later chief digital officer for the Washington Post
- $79 per year
- wrong from financial point of view since more orders will cause company to lose money
- however, behavior encourages bigger orders, higher volume, more favorable terms
- combining customers' order from similar location, further reduction in cost
- later Fulfillment by Amazon, allow merchants to use Amazon distribution center
- age of Stanford Phds instead of Harvard MBAs
- tech companies become the new darlings
- tech powered business models are more welcome
- Jeff needs to convince the public that Amazon is a tech company
- "invent our way out!"
- chief scientist from Yahoo, stayed for 16 months
- chief UX from Apple, then left
- Udi Manber, chief algorithm officer
- search inside book, open up the possibility of fully digital library
- 20 over patent applications
- enhanced search on Amazon.com
- service-oriented architecture starts to show merits, old code base hard to maintain
- transformation slow & painful, many left
- Manber left for Google search team
- Street view beat Amazon
- Amazon A9.com search engine was shutdown
- Search tech team general vs internal
- retailing two senior managers
- Holden left since Jeff supported Manber
- Manber left to Google
- 2 most technical people in Amazon left when the company needs to prove its technical capability
- O'Reilly's proposal to expose APIs for others to use Amazon data
- turn Amazon to a platform
- open up Amazon price/product/shopping cart/1-click payment/ APIs
- "Let them surprise us!!!!!!"
- born of Amazon Web Services
- monolith to SOA
- initially, a group to control who could access what
- various teams have to plead for resources to try out things
- need a playground!!!!
- Jeff wants to create the building blocks of computing, breaking infrastructure down into the smallest, simplest atomic components & allow developers to freely access them
- Developers are alchemists and our job is to do everything we can to get them to do their alchemy
- storage, bandwidth, messaging, payments etc.
- service to run any application, regardless of its type on Amazon's servers: EC2!!!!!
- S3 team
- Jassy, non-tech background, shadowing Jeff
- 1997, start to think about mobile computing
- want to put books inside an e-reader, started Rocketbook
- 1997, display, battery & computing technology ready to create e-reader
- Gemstar failure led to the failure of Rocketbook
- Bezos believed in the future in another 10 years
- started Lab126 for digital books
- First Kindle
- meeting with Jobs: Jobs believed client application is better than web store for music, and Apple overtook everyone else to be the largest music retailer
- Jobs' passion for music -> iPod, Bezos' passion for books -> Kindle
- Dominance in music
- Amazon's 74% revenue from books, music, & movies -> need to protect itself
- it is far better to cannibalize yourself than someone else does it!!!!!!
- Kindle to be like iTunes
- Kessel to lead the effort (Stanford business school)
- assembled the team of engineers & designers
- Difficulties:
- Hardware not in Amazon's core competency
- control the entire customer experience: like iPod
- Amazon to embrace digitalization
- The Innovator's Dilemma: reluctance to embrace promising new markets that might undermine their traditional businesses
- Sears, not able to move from department stores to discount retailing
- IBM, mainframe to PCs
- no wifi (too tech savvy), cellular component instead
- "Kindle had to get out of the way & disappear so that you could enter the author's world"
- Bezos insisted on keyboard: to search for books
- Thousands of books must be ready for download
- Amazon uses size to pressure publishers to lower book prices
- Steele who led the effort of getting publishers onboard, "job as dragging publishers kicking and screaming into the 21st century"
- in the fall of 2006, Amazon started showing the device to publishers
- Amazon really a bully to publishers, many people left
- instant gratification of immediate book download -> big advantage
- planned $9.9 of book price, never revealed to publishers
- pirating is even harder in book business than in music
- sold out immediately
- Scott Devitt first noticed accelerating sales & 3rd party sellers' activities
- others are pessimistic
- prime member idea starts to pay off: shop for something -> buy more -> sellers to stock more -> lower cost
- Bezos: grow e-commerce pie, no competition bet/w eBay & Amazon
- target 200 billion: clothing industry
- Bezos wants to be a better leader
- more selective in acquiring companies
- $900 million to acquire Zappos the shoe shop, original estimated to be $150 million, good lesson
- lots of offline retail business died during recession
- walmart of the web, warlmart starts to get nervous
- 90% of e-reading market
- enter into publishing industry: authors' direct publish
- Apple to help the publishers with iPad, Apple charge commission & allows publishers to set their prices
- forcing Kindle to increase book prices, but Amazon becomes more profitable as a result (ironically)
- AWS
- Kindle
- Asia & Europe
- same standard as Apple & Google
- opponents could not understand the company
- missionary rather than mercenary: missionary will end up making more money
- NY tax law, many other follow
- remote working employees affected
- no more tax-free online purchases
- compensate by Amazon fresh, Amazon lockers (cabinets in supermarkets)
- analyze competitors doing better at other areas
- Diapers manage to do a better job at distributing bulky diaper items
- Diapers.com sold to Amazon, due to Amazon's fierce competition, though Walmart offered more
- Amazon selling cheap for premium knife Wusthof, supply cut
- Dyson similar experience
- Sony, Black, Decker, Apple etc.
- Amazon not serious in acquisition
- 2009, DVD to online movies
- Lovefilm (similar to Netflix) became the target, same strategy as Diapers.com etc.
- Prime members could watch some free selections on Lovefilm after acquisition
- agency model takes over
- Apple, Kobo etc. takes more market share
- Even well meaning gatekeepers slow innovation,” Bezos wrote in his 2011 letter to shareholders. “When a platform is self-service, even the improbable ideas can get tried, because there’s no expert gatekeeper ready to say ‘that will never work!’ And guess what—many of those improbable ideas do work, and society is the beneficiary of that diversity.
- Amazon more on direct book publishing
- customer to scan QR code and compare price on Amazon
- “Some big companies develop ardent fan bases, are widely loved by their customers, and are even perceived as cool,” he wrote. “For different reasons, in different ways and to different degrees, companies like Apple, Nike, Disney, Google, Whole Foods, Costco and even UPS strike me as examples of large companies that are well-liked by their customers.” On the other end of spectrum, he added, companies like Walmart, Microsoft, Goldman Sachs, and ExxonMobil tended to be feared."
- action to be loved: increasing Amazon’s odds of standing out among the loved companies
- biological father interview: wanting to reconnect
- Jeff forward email with "?", employees have to resolve in hours
- email marketing for health & personal care was terminated when Jeff heard about emailing sex toys
- bad customer experience more relevant than metrics
- confrontational culture within
- lower pay than other giants such as Google, Facebook
- Fast!!!!
- press releases
- Kindle Paperwhite
- Explored newsletter to add more personal touch to Amazon, but did not continue
- Any process can be improved.
- Defects that are invisible to the knowledgeable may be obvious to newcomers.
- The simplest solutions are the best.
- Amazon instead of Amazon.com
- Jeff: Amazon, Blue origin, Bezos Expeditions (personal vc) etc.
- in the long run, everything store -> everything company
- same day delivery in urban areas, own infrastructure, more countries, grocery service etc.