The following article is from the Central European Business Review by Hu Yong
What can entrepreneurs learn from Bezos' experience? Seek lesser-known insights. Get into emerging industries early. Most importantly, work hard to solve problems in big markets.
Whenever the economy faces another powerful earthquake, there are always some prophets who perceive the slight trembling of the earth's crust before all others, and act accordingly, and such actions seem so reckless and even foolish. Cornelius Vanderbilt, who runs the ferryboat, glimpsed the wonders of railroads and spun away quickly, eventually becoming a generation of railroad titans; Thomas Watson Jr., who foresaw its omnipresence when people didn't know what computers were, created IBM, the long-time hegemon of the information industry.
▮ Prophet before the arrival of the earthquake
Jeff Bezos encountered the web, or, rather, e-commerce. The Amazon.com he founded is the largest store on the web and has the potential to become the largest retail empire ever built, where people can find anything they want. Bezos has contributed more than anyone when it comes to making the web a safe place to shop. As a result, at the age of 35, he was named the 1999 Time Man.
Who is this historical figure that this influential figure most admires? One was Thomas Edison, a brilliant inventor and an unwise businessman; the other was Walter Disney, a fairly good inventor and an excellent businessman. Bezos admires not Disney's films but its theme parks, and he has visited Disneyland many times. What impressed Bezos most was Disney's powerful foresight. "He knew what kind of dream country he wanted to build, and then organized a group of really good people to build it." Everyone thought his idea wouldn't work out, and Disney took the trouble to lend $400 million from the bank. In the end, he succeeded. ”
Like Disney, Bezos's entrepreneurial story is now a myth. He quit his job from Wall Street and went online, writing amazon bookstore business plans on a legendary trip to the West, working day and night in a rented garage in Seattle, starting out as an online bookstore and expanding all the way to a variety of other e-commerce products and services, including video and audio streaming, cloud computing, and artificial intelligence. Currently, Amazon is the world's largest Internet company by revenue, and through Amazon Web Services (AWS), it is also the world's largest provider of cloud infrastructure and artificial intelligence services.
In 1999, when Bezos was named Time's Person of the Year, online shopping was just beginning to catch on. At the time, Bezos was the fourth youngest of all the most influential people in Time history, preceded by Charles Lindbergh (who was 25 years old when he was rated in 1927, the first to fly across the Atlantic), an explorer; Queen Elizabeth II (26 when she was named in 1952); and Martin, a famous black activist in the United States Luther King, 34 when he was named in 1963), was a revolutionary. As the "father of e-commerce", Bezos is a combination of explorers, kings and revolutionaries, but he pioneered and ruled a virtual territory.
▮ Solve big problems in big markets
The story of Bezos resigning to start a business fully reflects his personality. The richest man in the world turned out to be a part-time worker at a hedge fund on Wall Street. It was 1994, and Bezos had graduated from college for 8 years, and although his job in the financial bank was very profitable, he lacked a sense of personal realization.
He soon discovered something that gave him a sense of urgency: a report predicting that the Internet would grow rapidly. "Web usage is growing at a rate of 2300% per year. I've never seen or heard of such rapid growth, and I thought it would be exciting if I could build an online bookstore with millions of books," Bezos recalled in 2010 when he returned to his alma mater, Princeton, to speak.
He talked to his boss about the idea, who agreed it was a good idea, but warned that it was only a good idea for people who didn't have good jobs.
Bezos spent a few days considering his boss's advice, and he decided to try a mental exercise. "The best way to think is to project my life to 80." A fear that he might regret the rest of his life made him want to take the plunge. "I don't want to be 80 years old and quietly reflect on my life and list a bunch of regrets", so I need to "minimize personal regrets".
"After much deliberation, I took a less safe path to follow my passion. One can choose a 'relaxed' life or a 'service and adventure' life. By the age of 80, you'll be proud of the latter. ”
The premise of this principle of "minimizing regret" is to have unique insight. Bezos did not blindly enter online retail. He studied 20 retail markets he imagined would be disrupted by e-commerce, and finally set his sights on books: a massive $82 billion market with no apparent dominance, and products that were inexpensive and could be sold to anyone, anywhere.
▮ Inscribed in the history of calculations
In 2000, Amazon was just an e-commerce company facing scale challenges. These issues forced the company to build solid internal systems to cope with the high growth it experienced, which in the early stages consisted of only a few different tools and services. In the second half of 2003, faced with the fact that the humble infrastructure could not withstand the rapid traffic, Chris Pinkham and Benjamin Black submitted a paper to Bezos describing the vision of Amazon's retail computing infrastructure, which was fully standardized and automated, and would rely heavily on the Web to provide services such as storage. At the end of the paper, they mention the possibility of selling access to virtual servers and suggest that companies reap the benefits of new infrastructure investments.
Pinkham and Black present Bezos with a picture of the future: College students can start a company in their dorm rooms with Amazon's services. Bezos appreciated the idea, and AWS set sail. Three years later, Amazon introduced its "infrastructureas a service" (IaaS), a term that may not have been used until later), allowing any organization, enterprise, or developer to run applications on its technology architecture platform. From ideation to implementation success at AWS, Bezos once again proved his methodology: a strategy of daring to gamble, not being afraid of failure, and daring to challenge conventional wisdom, a strategy that led to the first modern cloud service, and it took years for competitors to respond. "We've been doing it for 7 years and we haven't met any competitors with the same ideas. It's unbelievable. Bezos came from the boast afterwards.
AWS engineer James Hamilton wrote a retrospective article in 2016 about the decade of struggles with Amazon's cloud services from 2006 to 2016. He commented on the disruptive nature of AWS:
"The first thing that changes the game is the low cost of the service. Even more shocking is that you only need a credit card to buy storage. There are no proposals that require financial approval, no request for proposals, no vendor selection process, no vendor negotiations, and no having to look around for data center space. It can be used after simple registration.
"At least as notably as low-cost and easy-to-configure, the service comes from Amazon, not from a traditional enterprise IT vendor. While those companies are chasing high profits and negotiating with them, sometimes even going through license review, Amazon is a completely different vendor, taking a different model, offering low-friction supply paths and fundamentally different prices, starting at low prices and constantly reducing prices, without gradually increasing costs over time. ”
In the early days of AWS research and development, Amazon was still a public company that had just made a profit for two years, and at the company's shareholder meeting, many shareholders objected to AWS's business: sell the storage and computing services used for their own operations to other companies? What does this have to do with e-commerce companies? However, Bezos, who firmly believes in the value of AWS, ignores it.
When AWS was officially released in 2006, most people still didn't understand it, and they thought it was another money-burning delusion of the madman Bezos. In a BusinessWeek cover story in October that year, "Jeff Bezos' Risky Bet," a Wall Street analyst complained that the AWS line of business could be seen as a sign that Amazon was not going the right way. Even Tim O'Reilly, an industry analyst who recognized Bezos's strategic ambitions early on, believes that Amazon has little chance of winning the future confrontation with Microsoft and Google.
After a decade of sharpening its sword, AWS has grown into the world's most successful cloud infrastructure company, winning more than 30 percent of the market, surpassing its three closest competitors, Microsoft, IBM, and Google combined (and maintaining considerable profits). In 2018, Amazon's market share rose further to 40%, followed by Microsoft (17%), Google (8%) and Alibaba (5%).
However, cloud services are still in their infancy, according to Gartner statistics, in 2015-2020, the global cloud computing market penetration rate will increase year by year, from 4.3% to 13.2%, by 2021, the global cloud computing penetration rate will rise to 15.3%. According to IDC's latest "Global and China Public Cloud Service Market (2020) Tracking" report, the overall global public cloud service market size (IaaS/PaaS/SaaS) reached US$312.4 billion in 2020, an increase of 24.1% year-on-year.
With the strong growth of AWS business, Amazon's stock price has risen all the way, and on September 5, 2018, the market value even surpassed its once outstretched Microsoft and Google, catching up with Apple and becoming the second company in the world to break the trillion market value. In April 2021, Brent Thill, a well-known technology analyst, said that "driven by cloud computing and advertising, Amazon's market value will grow by 70% in the next 3 years, meaning that by 2024, the company will reach $3 trillion, which does not take into account the possibility of its entry into the medical, home security, smart home devices and entertainment sectors." ”
Amazon used to be a side-door (retail companies do cloud services?) You'd laugh at it back then), now take it to an Internet computing giant. There's hardly a single startup that doesn't run on AWS, and it's also critical to the digital operations of large companies from General Electric to Netflix, which runs all of its streaming video on Amazon. Once again, Bezos saw what no one had ever seen, and it turned out that what he saw was the future of computing. AWS can already be engraved in history along with hp, IBM, Microsoft, Google, Facebook and other companies that created computing businesses.
▮ How Amazon works
A visitor asked Bezos what his timeless experience with business success was. Bezos replied: Amazon has always adhered to three big ideas since its inception: (1) putting customers first; (2) inventing; and (3) thinking on different time scales.
Bezos said the three ideas—customer-centric, long-term thinking, and a passion for invention—are closely linked and together make up the way Amazon works.
The core principle is to focus on the customer, not to focus on the competitors. The principle is described on Amazon's website: "When we innovate and build, we always take the customer as the starting point and work backwards. Although we may focus on competitors, we are obsessed with our customers. The fascination with our customers is our source of energy, and we always want to do our best for our customers. At every meeting, in every decision we make, there's one important person who isn't there: our clients. We must vigorously advocate our ideas and earn their trust, which will drive our relentless pursuit of improving the customer experience. ”
If we are to be customer-centric, we must make the promotion of invention and innovation the key to our business model. Engaging in invention means that a lot of experimentation is required, and failure is almost always accompanied by it. To do this, businesses need to be able to withstand the blow and accept failure as part of the process. Such a thing can only happen when a business is thinking and operating on a long-term basis.
"What we're really focused on is thinking long term, because a lot of inventions are ineffective," Bezos said. In our culture, we understand that even if we have some big business, new businesses start small. The biggest oak tree starts with an acorn, and if you want to do anything new, you have to be willing to let that acorn grow into a small sapling and then into a small tree, and maybe one day it will become a big independent business. ”