What Amazon’s ‘spaghetti at the wall’ business model gets right
Amazon has tried many things over the years. It’s also failed many times. The firm’s consumer ventures have been a truly mixed bag. While the Echo smart speaker and the Kindle tablet were both hits, its Fire smartphones fizzled out, for instance. Having virtually killed off the traditional high-street bookstore in the late 2010s, it opened several of its own across the US – and soon closed them, choosing instead to focus on its bricks-and-mortar grocery business.
Despite these ups and downs, few brands are as recognisable – or as innovative, with products ranging from a home-monitoring robot to a bedside sleep tracker. It even has a marketplace for works of fine art worth millions of pounds.
This ‘throwing spaghetti at the wall and seeing what sticks’ strategy is paying off, with the firm automatically becoming a force to be reckoned with in any market it chooses to enter. Of course, with a market cap of just under $1tn (£840bn), Amazon can afford to take several hefty punts in its bid to realise Jeff Bezos’ dream of creating “an everything store”. Even so, it’s worth examining the company’s approach to see if it’s possible for those without buckets of cash to replicate elements of it.
Adopting an innovative mindset
Bethan Vincent is the founder and managing partner of Open Velocity, a consultancy that helps fast-growing tech firms with their marketing strategies. She believes that Amazon’s focus on innovation is what truly sets the business apart from the crowd.
“You have to be innovating constantly to escape the competition,” says Vincent, who adds that the impediment she has often seen, particularly in larger organisations, is “a real fear of committing to test something, because people don’t want to disrupt the status quo”.
To prime a firm for the sort of innovation that could give it a competitive edge, its leaders must first “foster a culture where people can disagree with you. That’s when you get the most productive ideas and outcomes,” she argues.
Simon Vaarning, chief technology officer at data creation company Walr, agrees. The key to developing an innovative mindset is establishing “a really good team atmosphere in which everyone feels empowered. This is all about building an environment where you have full trust and respect, no matter what your position is in the business or how long you’ve been around,” he explains. “It should be an environment where you’re allowed to fail, because – let’s face it – innovation is also about failing. You need to understand that you can do that.”
A 2015 study of team performance at Google concluded that such psychological safety was the most important characteristic of a high-performing group. More recent academic research conducted in South Korea has also highlighted this link.
Testing the waters
While Amazon has the capacity to test fully formed new offerings on an international scale if it wants to, this level of experimentation is clearly unviable for the vast majority of businesses. For smaller firms wishing to take a leaf out of the Bezos playbook, the minimum viable product (MVP) is a popular enabler.
In essence, an MVP is the most basic form of a new offering, which can be used to gather feedback from early adopters before more money is spent on adding the bells and whistles. Vincent explains that this approach requires firms “to ask themselves: ‘What is the smallest iteration that enables us to test out an idea and validate that it’s the right model for us?’”
Anyone who shopped with Amazon when the business was gaining traction 20 years ago may remember the website’s clunky design, its overwhelming product categorisations and the numerous clicks it required of users to complete transactions. A masterpiece of user experience it was not, yet it was functional.
Likewise, early users of Amazon Web Services may recall that it started as an incomplete offering, with missing tools and patchy documentation. Crucially, though, it established a foothold in the market because it was deemed adequate – and therefore good enough for Amazon to invest in improving it.
Vincent stresses how crucial it is to the success of the MVP approach to listen carefully to the feedback provided by early adopters and keep this in mind when enhancing the product. At Open Velocity, she ensures that all client businesses speak to their customers regularly, because listening to users doesn’t have to mean implementing a large-scale customer survey programme.
“At Amazon, our main business model is delighting the customer,” says one of the firm’s data scientists. “We’re willing to experiment if it means the customer is going to enjoy the outcome.”
This factor is key to Walr’s preferred way of testing new offerings with early adopters. It likes to go one step further than the MVP, favouring a “minimum lovable product”, Vaarning says. “We want to create some joy in actually working with it. By involving our user experience team at an early stage, we can focus on ensuring what we’ve built is really enjoyable to use.”
Delighting early adopters not only invites constructive criticism from enthusiasts who want to make a good offering even better; it also encourages them to become brand ambassadors, according to Vaarning.
It can sometimes be hard for a firm to hear criticism from customers about its shiny new creation, however well intentioned that is, Vincent notes. But it’s an essential part of the process. Equally, it’s worth remembering that it can be a “very frustrating experience for customers” when it seems to them that their carefully considered feedback is falling on deaf ears.
“You can’t do innovation in isolation, you can’t do innovation without customers and you can’t involve customers without being able to shift stuff on the back end,” she says. “There is no point in doing any of this if you aren’t willing to iterate.”