Jeffrey Bezos has written a letter you need to read. Bezos and his company Amazon.com scare many in the electronics industry and beyond. From CEOs, down to product managers the industry is both surprised and frightened by how Amazon has savaged many markets in the general economy.
The electronics supply chain is awed by the speed, ferocity and decisiveness with which Amazon neutralized the competition and brazenly marched into areas dominated by seemingly untouchable mega-size enterprises. They’ve also been alarmed by signs Amazon has been poking around in the electronics market with clear signs it wants to become a leading seller of finished equipment as well as components.
Those fears are real but Amazon’s march into the electronics components distribution business isn’t unstoppable. Avnet Inc. CEO William Amelio, for one, believes Amazon is most effective when it targets its amazing supply chain at segments of the economy where commoditization had eroded barriers to entry.
“In order for us to keep the likes of Amazon out of our ecosystem we’ve got to be excellent in digital, we’ve got to be a low-cost player and we’ve got to make it unattractive for them to come in because it takes too much for them to win,” Amelio said in a recent interview. “The more we look like a commodity [market], the more attractive it would be to attract the likes of Amazon because it would be easy pickings.”
Amelio isn’t alone in holding this line of thought. Others in the electronics industry are spending a ton of money to improve their digital offerings, partly in response to companies like Amazon but also due to changes being forced upon them. However, in many ways, the electronics market is already looking like a commodity business. Distributors have for long waged an unending war to reduce their reliance on traditional, simple, stock-and-ship activities by offering value-added services. They’ve got to intensify their efforts. Amazon has offered itself as an alternative platform for buyers and sellers seeking opportunities to reduce costs and make it easy for everyone involved to do business with each other.
It is not enough, though, to simply strengthen Fortress Electronics. Amazon won’t go away notwithstanding any roadblocks the industry might put up. Amelio is right that companies like Avnet “can make [distribution] an unattractive place for them to come and disrupt” but I don’t believe Amazon will simply walk away. That’s not the way the company operate.
I suggest an additional strategic action: Get to know the opponent, study Amazon finely, copy their moves where necessary, anticipate the next plan and come up with original winning steps. Above all, focus intensely on the customer and execute on plans to serve and make life easier for them. This is the Amazon way and Bezos, founder, president and CEO of the company, spelled it out in a recent letter to shareholders. It’s a must read.
In addition to the more recent letter, Bezos also published another letter he wrote to shareholders in 1997. It’s another Must Read. Bezos emphasized how his company is always focused on what he described as “Day 1”, adding that an enterprise that slips into Day 2 will eventually die.
“I’ve been reminding people that its Day 1 for a couple of decades,” Bezos said in the letter. “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by Death. And that is why it is always Day 1.”
I’ve pulled 4 key points from the latest letter. These center on what companies can do to fend off Day 2 and corporate demise. Click here for the full letter. Excerpts follow:
True Customer Obsession: There are many ways to center a business. You can be competitor focused, you can be product focused, you can be technology focused, you can be business model focused, and there are more. But in my view, obsessive customer focus is by far the most protective of Day 1 vitality.
Why? There are many advantages to a customer-centric approach, but here’s the big one: customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great. Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf. No customer ever asked Amazon to create the Prime membership program, but it sure turns out they wanted it, and I could give you many such examples.
Resist Proxies: As companies get larger and more complex, there’s a tendency to manage to proxies. This comes in many shapes and sizes, and it’s dangerous, subtle, and very Day 2. A common example is process as proxy. Good process serves you so you can serve customers. But if you’re not watchful, the process can become the thing. This can happen very easily in large organizations. The process becomes the proxy for the result you want. You stop looking at outcomes and just make sure you’re doing the process right. The process is not the thing. It’s always worth asking, do we own the process or does the process own us? In a Day 2 company, you might find it’s the second.
Embrace External Trends: The outside world can push you into Day 2 if you won’t or can’t embrace powerful trends quickly. If you fight them, you’re probably fighting the future. Embrace them and you have a tailwind. These big trends are not that hard to spot (they get talked and written about a lot), but they can be strangely hard for large organizations to embrace. We’re in the middle of an obvious one right now: machine learning and artificial intelligence.
High-Velocity Decision Making: Day 2 companies make high-quality decisions, but they make high-quality decisions slowly. To keep the energy and dynamism of Day 1, you have to somehow make high-quality, high-velocity decisions. Easy for start-ups and very challenging for large organizations. The senior team at Amazon is determined to keep our decision-making velocity high. Speed matters in business – plus a high-velocity decision making environment is more fun too. We don’t know all the answers, but here are some thoughts.
First, never use a one-size-fits-all decision-making process. Many decisions are reversible, two-way doors. Those decisions can use a light-weight process. For those, so what if you’re wrong? I wrote about this in more detail in last year’s letter.
Second, most decisions should probably be made with somewhere around 70% of the information you wish you had. If you wait for 90%, in most cases, you’re probably being slow. Plus, either way, you need to be good at quickly recognizing and correcting bad decisions. If you’re good at course correcting, being wrong may be less costly than you think, whereas being slow is going to be expensive for sure.
Third, use the phrase “disagree and commit.” This phrase will save a lot of time. If you have conviction on a particular direction even though there’s no consensus, it’s helpful to say, “Look, I know we disagree on this but will you gamble with me on it? Disagree and commit?” By the time you’re at this point, no one can know the answer for sure, and you’ll probably get a quick yes.
Fourth, recognize true misalignment issues early and escalate them immediately. Sometimes teams have different objectives and fundamentally different views. They are not aligned. No amount of discussion, no number of meetings will resolve that deep misalignment. Without escalation, the default dispute resolution mechanism for this scenario is exhaustion. Whoever has more stamina carries the decision.