Amazon Founder and CEO Jeff Bezos recently talked about why Amazon is so successful, what he looks for when buying companies and how the business miracle of AWS came about.
Here are some key excerpts from his Q&A at The Economic Club Of Washington:
The secret sauce of Amazon, the number one thing that has made us successful by far is our obsessive-compulsive focus on the customer, as opposed to obsession over the competitor. I talk so often to other CEOs and also founders and entrepreneurs, and I can tell that even though they’re talking about customers they’re really focusing on competitors. It is huge for any company to stay focused on your customer instead of your competitors.
On Buying Companies: Is the Founder a Missionary or a Mercenary?
Amazon buys a lot of companies, usually, there much smaller than Whole Foods, but we buy a bunch of companies every year. When I meet with the entrepreneur who founded the company, I’m always trying to figure out one thing first and foremost, is that person a missionary or a mercenary? The mercenaries are trying to flip their stock. The missionaries love their product or their service and love their customer and are trying to build a great service.
The great paradox here is that it’s usually the missionaries who make more money!
You can tell really quickly just by talking to people whether they are a missionary. When I met John Mackay who’s the founder of Whole Foods, it’s a missionary company and he’s a missionary guy. What we’re able to do is take some of our resources, some of our technological know-how and expand the Whole Foods mission.
They have a great mission which is to bring organic nourishing food to everybody, but we have a lot to bring to the table in terms of resources, but also in terms of operational excellence and technology know-how.
How AWS Reinvented the Way Companies buy Computation
We started AWS (Amazon Web Services) about 15 years ago and worked on it behind the scenes for a long time before we finally launched it. Since then, it has become a very large company that has completely reinvented the way companies buy computation.
Traditionally, if you’re a company and you needed computation, you would build a data center. You’d fill that data center with servers, you’d have to upgrade the operating systems of those servers, keep everything running and so on. None of that added any value to what the business was doing. It was kind of the price of admission. It was undifferentiated heavy lifting.
What we saw at Amazon while we were building data centers for ourselves is that there was a tremendous waste of effort between our applications engineers and our networking engineers, the ones who run the data centers. They were having to have lots of meetings and planning fleet sizes and all these non-value-added tasks.
We said what we can do is develop a set of hardened API’s that allow these two groups, the applications engineers and the networking engineers, to have roadmap meetings instead of these fine-grained meetings, and then we’ll expose those API’s to the applications engineers and they can just take as much compute resources as they want. As soon as we hatched that plan it became immediately obvious to us that every company in the world was gonna want this.
Then A Business Miracle Happened
Then a business miracle happened. This never happens. This is like the greatest piece of business luck in the history of business. We faced no like-minded competition for seven years. It’s unbelievable.
When I launched Amazon.com in 1995, Barnes & Noble launched Barnesandnoble.com in 1997, in just two years. That’s very typical if you invent something new. When we launched Kindle, Barnes and Noble launched Nook two years later. After we launched Ecco, Google launched Google Home two years later.
When you’re a pioneer if you’re lucky you get a two-year head start. Nobody gets a seven-year head start! That was incredible.
I think it was because of a whole confluence of things. The big established enterprise software companies did not see Amazon as a credible enterprise software company and so we had this long runway to build this incredible little feature-rich service. It’s just so far ahead of all the other products and services available to do this work today and the team doesn’t let up.