If there is one company in the world that exemplifies business innovation, that company should be Amazon. A technology company that has used its expertise to create an empire in the retail industry. An industry that exponentially grew its opportunities with the adoption of the internet during the early 90s.
The adoption of this new technology represented a major advancement that drastically changed the landscape of business and communications in the world. As a result of this technological advancement, many new opportunities were created for those willing to embrace the new technology. Amazon is one of those companies that embrace the new technology and most noteworthy, allowed them to become the major player in the industry.
Strategy
At the beginning of the dot-com boom Jeff Bezos, the founder of Amazon had a clear vision for his company. The primary goal was to be the world’s most consumer-centric store. The one-stop-shop for the internet where customers can come to find anything they want to buy. Amazon’s fundamental business strategy focuses on building the most important eCommerce platform in the world.
Surely, there are no universal formulas, key features or design characteristics that guarantee a successful online business. First of all, working on providing your site visitors a clear and easy path to perform a successful purchase transaction should be the number one priority. This can be achieved by building a user-friendly interface that prioritizes a clean design with a one-click shopping solution. This should be combined with great marketing teams design and innovative products list that attracts new customers to the platform.
Amazon’s success and rapid increase in online shopping, combined with a new technological savvy consumer with a new set of values and spending habits, has exposed a problem with an overbuilt of retail stores. Traditional business models are changing and forcing these businesses to embrace change before is too late. Consequently, increasing the number of business competing in the online retail business.
Core Competencies
In order to become the world’s top online shop, Amazon’s plan is to build an infrastructure around its primary business. This means that Amazon’s primary goal is to build its product and services around its marketplace. The products like the echo voice assistant, Kindle tablets and its prime membership services are an important part of that infrastructure. Consequently, the deployment of its product and services has helped amazon in creating a consistent online buying experience for all its costumers base.
Companies in the tech industry claimed the top five spots on investments in research and development in the U.S. Amazon was at the top of the list, in spending with $22.6 billion in 2017. Research and development investment is a very important factor in the success of a company. This investment not only contributes to the company’s innovation and dominance but at the same time, it also contributes to the country’s productivity (Molla, Rani. 2016).
Most of the publicly traded companies in the world focus their energy on obtaining revenue and growth for their investors. Amazon recognizes that loyalty to your brand will generate more revenue in the long run. This is a company that famously focuses on providing receptive customer service and a great user-friendly marketplace. They do everything possible to maintain their customers happy and increase their customer base.
As a plan to increase its online business, Amazon decided to venture with the creation of an artificial intelligence device that works as a voice assistant. A device called Amazon Echo is a voice assistant that became one of the most important core competency projects for Amazon. This is a well-known project famous for its artificial Intelligence voice called Alexa. An innovative product that creates another connection to reach its marketplace and improve the customer experience.
Consequently, making its marketplace a more desirable platform for the investors as well. This situation strengthens the company’s strategic position as a major technology business influencer in the global markets and becoming an important source of sustainable competitive advantage. Not surprisingly, Amazon’s Echo family of smart speakers has been one of the hottest products on the internet over the holidays. According to CIRP, Echo owners shop using Amazon’s voice assistant and spent approximately $1,700 annually. (Vena, D. 2018).
Industry Dynamics
The internet has changed the way companies do business around the world. Rapid changes in technological innovation opened the markets to every company willing to compete for a customer based. Therefore, the internet has become a battleground with hundreds of companies competing to sell their products or services.
The internet ranking system commonly known as search engines plays a key role in the eCommerce business. Certainly, because they are in charge of deciding which website will first be displayed in front of a potential customer. All major search engines such as Google, Bing, and Yahoo have an algorithm that displays the most relevant search results.
First of all, in order to attract customers to your online store. Web designers have to follow a dynamic set of rules set by search engines. This is the search engine algorithm that forces a website owner to provide relevant content in order to appear in the search results. These set of rules are called SEO or Search Engine Optimization. (Google staff, 2019, para. 2).
The popularity of a brand name plays a very important role. Therefore, Amazon uses its popularity to promote other products and services. In addition, to the free marketing that comes from its popularity. They also created a loyalty program called Amazon Prime, a program that incentive its members to keep coming back for more. According to Jeff Bezos, Amazon founder, and CEO. In 2018, Amazon Prime exceeded over 100 million paid subscribers worldwide. (Siegel, R. 2018 para. 1). This is a clear signal that they will keep dominating the dynamics of the retail industry.
While many eCommerce shops are booming, it’s unlikely to replace all physical stores. The convenience of having the product at the time you buy it and not having to wait until it arrives gives local business a great advantage toward its online competitors. This convenience largely varies from sector to sector. Buying technology and accessories are commonly purchase online, while grocery shopping presents another challenge for online retails that benefit the local shops.
However, Amazon is not only focusing on the eCommerce part of the business. In order to compete with the brick-and-mortar stores faster delivery times needs to be implemented. Amazon will continue to work with existing delivery partners, including UPS and FedEx in order to create a seamless transaction. The goal is to deliver the product in less than twenty-four hours. As Amazon’s business continues to grow, in addition to the larger delivery companies partnering with independent drivers will help the packages get delivered to the customer on time.
This is called the-last-mile, the process that delivers the product in between major shipping companies and the customer. The last-mile project also applies to deliver the product between Amazon warehouses and its local customers. Fulfilling Amazon with the last piece of the puzzle to create a fast and satisfactory transaction.
Technology Sourcing and Internal Innovation
One of the most noteworthy parts of Amazon’s plan to become the dominant company in the retail business is to build on t infrastructure around its online store. It seems like Amazon’s innovative mentality is helping them build this infrastructure around places not seen before. This innovation is produced or both as an internal business tool as well as profitable products and services.
As the plan to increase the innovative capabilities of the organization, Amazon, First of all, an Amazon goal is to achieve efficiency through the use of technology and innovation. This has been a top priority since the beginning of the company.
Amazon’s new products and services are launched almost every day, products that increase Amazon’s technological sourcing. Fire TV is Amazon’s response to its competitors such as Roku, Apple TV, and Google devices. This product is quickly accounted for over 30% of streaming video services. (Investopedia Staff, 06/2015).
Another important source of technology is perhaps the greatest asset. AWS expanded the scope of what the meaning of the everything store. It made Amazon a major challenger for other tech companies. In addition to entering a new industry, it provides innovators a great alternative to the giant tech companies. (Stone, B. 2013 ch 7).
Product Development Strategy
As a result of Jeff Bezos’s innovative mentality, the company’s product development strategy focuses on building a bridge to its online marketplace. The company puts a great emphasis on selling its products at cost value. A plan that allowed them to create a strong customer base. Consequently, it helps Amazon advertise their product directly to its customer base.
Walmart became the biggest retailer company in the United States by transforming its business into the nation’s largest grocer. In 1998, 14% of Walmart’s sales in the United States came from its grocery business. Amazon decided to try to compete against Walmart in the grocery industry with a $13.7 billion acquisition of the Whole Foods stores. Amazon bought an opportunity at challenging Walmart in the $800 billion grocery business.
Selling groceries online has been one of the greatest challenges for any eCommerce company. The grocery industry, reports up to twenty percent of the retail monetary transaction. These reports show that only two percent of those sales take place in an online store. This is still an open opportunity for Amazon’s new acquisition combine with a well-known innovative capability (Kowitt, 2018 para 7).
Amazon’s innovation is the key element for the efficiency they develop to run its business. This efficiency is translated to all departments of the company including warehousing network. Making this company, one of the biggest players in the game. Amazon’s acquisition and innovations represent the development strategy and a big push to improve its fulfillment infrastructure.
According to the curbed.com report, Amazon’s strategy is to built warehouses within twenty miles of the United States population. With this growing network of warehouses, Amazon position itself to speed up and reshape the eCommerce industry while putting more pressure on the local retail stores. (Sisson, P. 2017 para 12).
Strategy to protect innovations
The world’s patent systems were designed to encourage innovation. These Intellectual Property systems grant inventors the exclusive right to their inventions. A system that excludes competitors from trying to profiting from their invention. Amazon has taken advantage of all the benefits that come within the innovation protective laws.
These patents are not one time for life deals, its protection lasts only as long as the patent remains valid. In the United States, most patent protection periods last for up to twenty years from the patent filing date. Once a patent expired, the general public and your competitors have the right to make, use, or sell similar products.
According to The Free Dictionary, there are three common types of patents in the United States. These three patents are directed to protect the design, plants and the last one focus on utility or business process patents. These patens providing different industries with the ability to protect their innovation.
The design patents are granted to the designer of the invention in order to protect a unique appearance or design of a product. The plant patent is an intellectual property right granted for the production of new and unique plant distinct variety or characteristics from being copied, sold or used by others. Utility patents are perhaps the most popular, it applies to machines, chemicals, and business processes (Patents, 2008).
One of the most important design patents that Amazon filed a few years ago. It’s a design focus in reduce shopping cart abandonment. Amazon filed to obtain a patent for one-click shopping. A new buying design process designed to speed up the buying process. It focuses on creating that seamless customer’s experience that allowed buying anything on its marketplace without re-entering their billing, payment or shipping information.
Finally, and most noteworthy a patent is also known to be one of the few assets that can increase its value over time. Consequently, it also increases the value of the business who file for the patent. These assets should be considered by banks as valuable assets and a fundamental part of your business.
There are many different ways to financially benefit from a patent. As I stated before, your patent should be considered to be an asset of your company and you may decide to sell it and obtain a for monetary remuneration. You may also license your patent to multiple companies for a percentage of the sale price.
As of last year, Amazon had over six thousand patents issued by the United States, Europe and the rest of the World Intellectual Property Organization. As we all know, it’s not about the numbers of patents that count. In reality, having the best quality patents that help enable and increase the company’s business model (Bosa, D., 01/2018).
While many of Amazon’s patents may never see the light of day, the company innovative mentality has a very long list of remarkable successes in terms of developing and protecting its core patented technology. A rate of success that will benefit the company in the long run, if maintained. A strategy that empowered its business strategy by allowing them to stay ahead of their competitors.
In conclusion, from a company that overcame its humble beginnings as an innovative bookstore. To one of the largest companies that dominate many industries. Above all and to the extent that the company’s success has caused a number of brick-and-mortar stores. While this was happening, it also helped many other new entrepreneurs to join a renovated retail industry. Love it or hate it, Amazon innovation has had a huge impact on the retail industry and on many aspects of our lives.
Most of the publicly traded companies focus its resources on reaching the next quarter estimates and keeping its investors happy. On the contrary, Amazon’s primary goals are to keep a loyal customer base happy while they keep building an infrastructure that will benefit them in the long run.
Reference
Berg, Natalie. Knights, Miya (2019). How the world’s most relentless retailer will continue to revolutionize commerce.
Stone, Brad. (10/2013). The Everything Store: Jeff Bezos and the Age of Amazon.
Google Staff (2019) Search Engine Optimization (SEO) Starter Guide from https://support.google.com/webmasters/answer/7451184?hl=en
Bosa, D. (01/2018) Amazon’s latest patents are focused on video, augmented reality, and the connected home. Retrieved from https://www.cnbc.com/2018/01/12/amazon-patent-strategy-video-ar-connected-home.html
Patents. (2008) West’s Encyclopedia of American Law, edition 2. Retrieved from https://legal-dictionary.thefreedictionary.com/Patents
Molla, Rani (04/2018) Amazon spent nearly $23 billion on R&D last year. Retrieved from https://www.vox.com/2018/4/9/17204004/amazon-research-development-rd
Vena, Danny (01/2018) Amazon dominated e-commerce sales in 2017, The Motley Fool Retrieved from https://www.fool.com/investing/2018/01/12/amazon-dominated-e-commerce-sales-in-2017.aspx
Siegel, Rachel (04/2018) The Amazon stat long kept under wraps is revealed: Prime has over 100 million subscribers, Washington Post. Retrieved from https://www.washingtonpost.com/news/business/wp/2018/04/18/the-amazon-stat-long-kept-under-wraps-is-revealed-prime-has-over-100-million-subscribers
Kowitt, Beth (05/2018) How Amazon is using Whole Foods in a bid for total retail domination, Fortune. Retrieved from http://fortune.com/longform/amazon-groceries-fortune-500/
Sisson, Patrick (2017) How Amazon’s ‘invisible’ hand can shape your city, Curbed, Retrieved from https://www.curbed.com/2017/5/2/15509316/amazon-prime-retail-urban-planning
Investopedia (06/2015) 5 Amazing Technologies Developed By Amazon. Retrieved from https://www.investopedia.com/articles/markets/062215/5-amazing-technologies-developed-amazon.asp
Victor Hugo Solis
Master’s Degree in Information Security, a Bachelor’s Degree in Database Administration, and experience as a WordPress Web Designer & Developer.
