Tuesday, September 25, 2007

Strategic endurance

In rapid succession, I encountered two strong claims for basing strategic decisions on old ideas. Not old in the sense of stale or out of date. But old in the sense of enduring.

The first was a great interview with Jeff Bezos in the October HBR (just arrived today so no link yet), in which Bezos discussed the approach to strategy at Amazon.

There are a number of good bits here, not least his observations that 1) Critics and analysts have frequently attacked Amazons' new developments as distractions or potentially destructive to the core business, from relentlessly lowering prices to Amazon prime. 2) And Bezos' own empirical observation that most new "seeds" (what he calls new ideas in the interview) take 5-7 years to have a meaningful impact on the economics of the company.

So how do they do it? Not, it turns out, by chasing the latest thing but by focusing on what probably won't change. In Amazon’s case, that means focusing on what Bezos calls consumer ingishts. In other words, what consumer's want and are likley to keep wanting from Amazon: selection, price and fast delivery.

"If you base your strategy first and foremost on more transitory things--who your competitors are, what kind of technologies are available, and so on--those things are going to change so rapidly that you are going to have to change your strategy pretty rapidly too."

Another key factor in this world of increasing transparency was Bezos' deciding to align yourself with the customer, even if it pisses off your partners.

"But when the intellectual conversation gets too hard because of these potential cannibalization issues, we take a simpleminded approach.... Well, what's better for the customer."
Of course, these decisions are easier (or possible) when you have Amazon's leverage, a point Bezos acknowledges. But it’s a competitive advantage they’ve developed through years of hard work, creating efficiencies in their operations.

Perhaps most interesting from a planner in the digital age perspective are his descriptions on what Amazon really does. It emerges in his response to another early critic of their revolutionary decision to include negative reviews on their site.
“I would get letter from publishers saying, ‘Why do you allow negative reviews on your website? Why don’t you just show the positive reviews?’ One letter said, ‘Maybe you don't understand your business. You make money when you sell things.’ But I thought to myself: we don't make money when we sell things. We make money when we help customers make purchase decisions."

The second was the radio. But I'm out of time so I'll save it for tomorrow.

1 comment:

Robert said...

There's an interesting parallel to military strategy, at least as proposed and practiced by George C. Marshall. Most of the combatants in WW II, and especially the British and Germans, created incredibly detailed and plans that were rendered useless the moment battle was struck. They also conjured up complicated tactical plans that, once again, required every step to follow on course to ensure success.

Marshall, however, believed in the essential confusion in battle, albeit while also beliving you could anticipate this confusion, and plan to be flexible. While at the Infranty School at Fort Benning in the late 1920s, he helped formulate the concept of the holding attack - divide your force in three, use one third to advance and hold the enemy, while a second third probes for weakness on the flanks, and the last third remains as a reserve to either shore up the holding force, or to exploit any breakthough by the probing force. (there's a more complete descirption of this in Geoffry Perrett's We've got a War to Win.) This one strategy - and tactical plan informed virtually every U.S. engagement in WW II, from the platoon level up to Army Groups. That's focus.