危 wēi  danger

Founded in 1994 by Jeff Bezos as a result of his ‘regret minimisation framework’ – an effort to fend off regret for not staking a claim in the Internet gold rush – Amazon has grown to be America’s largest online retailer, with nearly three times the internet sales of its runner up, Staples, Inc. Amazon’s growth has been fueled by continuous innovation of both its retail offer (including moving from books into broader categories and opening up its platform to third-party vendors) and its core technology. Its investment in the latter, mounting to billions of dollars, led it to begin exploring web services in order to help it manage peaks in demand on its website in 2002.  Amazon saw the value in this approach, adopted it internally and continued to build its competence in the area – eventually launching Amazon Web Services in 2006 with a data-storage service, called S3.  However, at the time there was significant concern from industry commentators that the launch was a strategic mistake with key resources, both time and money, likely to be diverted from the retail side of the business.

机 jī opportunity

However, the move made complete sense to Amazon, which above all else viewed itself as a technology company. It continued to develop its web services offer and has since added additional web based services, including online database, content delivery, and secure payment services – each of these services was born from investment in Amazon.com. The company has also been creative in how it has taken its new services to market, for example in December 2009 it launched a spot market to sell off excess capacity on its EC2 platform which allows enterprises, developers and hosting companies to bid for and buy capacity at prices set by demand and availability.  Although web services represented less than 3% of Amazon’s total revenue as of 2008, the bandwidth (number of bits per unit time) consumed by its Web services division has surpassed the demand from its better known retail websites as of 2007. The offer has helped continuous development of the Amazon platform and has given the company a foothold in some significant emergent markets.

How About…

• Appraising your internal capabilities for those that might seed completely new offers?
• Using auction-based pricing in order to price exactly at customers’ willingness to pay?

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