stratechery
stratechery

Amazon and the Benefits of Vision

In case you missed it – and how could you? – this happened:


While professional skeptics have been skeptical, the sheer audaciousness – and frankly, awesomeness – of Amazon’s drone proposal has attracted a near unanimous outpouring of amazement and adulation, at least if my Twitter feed is to be believed.

It truly is a masterstroke, and perhaps the purest expression of the unbounded vision Jeff Bezos has. The benefits are manifold (even if the drones never actually come to pass):

  • Positive PR: To say that the drone story generated positive PR is a dramatic understatement. Amazon, particularly in the holiday season, is susceptible to horror stories about work conditions in their distribution centers, and this helps blunt that
  • Increased Sales: The happy coincidence of the drone reveal happening the day before “Cyber Monday” was certainly noted by the aforementioned skeptics, and there is likely some truth to the claim that Amazon saw great benefit in being front-of-mind for consumers planning holiday purchases
  • Improved stock performance: While Amazon’s stock is up over the last few days, the added justification of their insane P/E ratio is the more important takeaway. The most elementary valuation of a stock is the sum of all future (discounted) growth, and talking about drones leaves open the possibility that Amazon’s business isn’t even close to being fully fleshed out
  • Improved morale: My timeline, both on Twitter and Facebook, is full of Amazon employees simply in love with their company. That translates into that many longer hours at too little pay during the most difficult month of the year
  • Competitive pressure: In this case I’m referring to the pressure Amazon is putting on not just its competitors, but also its partners. Small surprise that UPS suddenly announced that they too are looking into drones. This helps keep them on their toes.

And yet, vision that moves the needle like this drone announcement is exceedingly difficult to pull off for a few reasons:

  • Vision must be aligned to the company’s mission: What is great about the drones is that they actually make a lot of sense given Amazon’s core business model. As I wrote previously in Amazon’s Dominant Strategy:

    Jeff Bezos’ critical insight when he founded Amazon was that the Internet allowed a retailer to have both (effectively) infinite selection AND lower prices (because you didn’t need to maintain a limited-in-size-yet-expensive-due-to-location retail space). In other words, Amazon was founded on the premise of there being a dominant strategy: better selection AND better prices – the exact same as Sears.

    And, just like Sears, Amazon has added convenience. No, they haven’t opened retail stores; instead they created the amazing Amazon Prime. Prime is the reason my family made 173 separate orders from Amazon in 2012: it’s so much more convenient to order toothpaste the moment you open the last tube than it is to make a trip to Target. And Amazon is pushing even further down this route, testing same-day delivery in multiple markets for everything from said toothpaste to TVs to tomatoes.

    And, now, potential 30-minute delivery

  • Vision must be surprising, yet (just) plausible: Vision that is totally predictable is likely attainable, but doesn’t garner any of the aforementioned benefits. On the other hand, vision that simply isn’t possible destroys credibility.

    Amazon Prime Air came out of nowhere, and yet, if you squint your eyes just enough, you can see it coming true. Talking about marginally decreasing page load times may be impactful (and you can be sure Amazon is focused on this), but it doesn’t exactly inspire

  • Vision must come from a trustworthy source who has done it before: Companies that regularly promise a fantastic new future and then fail to deliver lose vision because they lose credibility. This isn’t an issue for Amazon:


The benefits of vision are clear, and yet, given the necessary conditions, vision that resonates is quite rare. Just take a look at some of the largest consumer technology companies (in order):

  1. Amazon: Still laser-focused on completely owning shopping. Infinite selection, lowest prices, and, in the future, immediate delivery
  2. Google: Still laser-focused on organizing all of the world’s information, even if it makes folks uncomfortable that that information includes you. Things like self-driving cars and Google Glass fit the vision criteria nicely as well
  3. Apple: Still laser-focused on iterating great products that people love to use, but there are reasons for concern, particularly when it comes to the iPad. That’s not a surprise, actually: the iPhone and the Mac are operating in defined markets; while the iPad is defining a new one, and is thus more dependent on vision. This is precisely why I find recent iPad marketing so concerning; if Apple isn’t getting that right, is it for lack of vision? And if so, what does that mean for future products?
  4. Facebook: The challenge for Facebook is not a lack of vision – clearly, they wish to connect everyone – but rather, that they have just about accomplished their founding goal. What’s next?
  5. Twitter: Twitter is in many ways the exception that proves the rule. It’s not clear what vision, if any, the current management team has, but the product is so good that it hardly matters. Except, of course, it does, particularly now that Twitter is a public company. Will they maximize their potential?
  6. Microsoft: Microsoft suffers from a more advanced case of Facebook’s malady: they have long since accomplished their goal of a PC on every desk. From Skating Towards the Goal:

    But again, what is the new goal? What is Microsoft’s reason for being? What ends are achieved by a massive conglomerate spanning CRM systems to database software to gaming consoles? Microsoft, perhaps more than any other company, needs focus, vision, and a problem worth solving. To be sure, that falls on the next CEO, but the bigger question that must be asked is if such a problem – one suitable for the unwieldy behemoth that is Microsoft – even exists.

    This uncertainty is why Microsoft’s impressive R&D arm is still rather irrelevant. How can you create something aligned to the company’s mission when said mission is so murky? And, of course, this is compounded by Microsoft’s tendency to overpromise and underdeliver
  7. Yahoo: Marissa Mayer is nice, but does anyone yet know what the point is? At least Microsoft’s core business – enterprise software – seems more stable than Yahoo’s display advertising.

I could go on for quite some time, particularly with earlier stage companies, but the bigger conclusion is that vision at a minimum seems correlated with relevance on one hand, and stock performance on the other.

Unfortunately, by definition, it’s not something that can be learned through “best practices.”