Bezos explains how Amazon expanded from books into music, video, Kindle, and AWS using two strategies: identifying customer needs and building skills to meet them, or leveraging existing technical capabilities for new markets. He says startups should begin extremely focused and that senior leaders must use judgment about when to expand.
Chapters
I would definitely advise a small startup company to be as narrow and as focused as is possible to be. If you look at the original Amazon business plan, there was no hint of anything other than books in it. And it was not on my radar. I was thinking I wanted to build an online bookstore. That was it. And you know, it worked way better than I thought it would. And we launched music and that worked better than I thought it would. And we launched videos. I think it's so long ago I can really remember. I think it was actually VHS tapes. Is that possible? And that worked better than we thought it would. And then I sent email to customers, picked about a thousand customers, and I said, besides the things we sell today, books, music and video, what would you like to see us sell? And the list came back incredibly long tail. It was almost like whatever was on their mind at the moment. It was like, I wish you sold windshield wipers for my car. And I was like, really? Windshield wipers? That wasn't done the business plan. But that's an interesting idea. So it's been kind of one foot in front of the other. We expand into new areas in two ways. One is from a customer need. We will work from a customer need to the skills that we need. And the other one is skills forward from a skill set we have to a new set of customers. So Kendall is an example of a customer need. If you go back and have 10 years, we had no hardware team. We had to hire somebody to lead our hardware group and then build a hardware team and build some institutional competence at IT and so on. That's a customer need backwards approach. And in skills forward, a great example of that is Amazon Web Services. We had the skills to do aws. We had probably more distributed computing expertise than anybody else in the world because of the transactions. Transaction systems are so complicated and hard to build. And we had a service oriented architecture of great complexity probably before anybody else. Because we were doing that, we could kind of see the future a little bit and decided to build aws, which has turned into a huge business in its own right. Business is very situational. Rules of thumb are good, but they have to be applied to the right situation. So sometimes the old maxim that you should stick to the knitting is correct. But sometimes the adage that you should stick to the knitting is wrong. And a senior leader's job is to figure out in which situation are you.
