1.
THE CASE
Why Amazon Is Winning

2.
In all of our research and trendwatching,
Amazon is one of the most fascinating
organisations we have ever seen.
It employs unique strategies according
to highly regarded philosophies, which
has lead it to unprecedented success.
We believe every organisation, large or
small, has much to learn from Amazon.
In The Amazon Case, we’ll give you
insights in how Amazon works
and why it is so successful.
CASE BROUGHT TO YOU BY:
Dado Van Peteghem
dado.vanpeteghem@duvalunion.com
@dadovanpeteghem
Sam Wouters
sam.wouters@duvalunion.com
@sdwouters
Jo Caudron
jo.caudron@duvalunion.com
@jcaudron

3.
A BRIEF OVERVIEW OF

4.
First office in Seattle
From humble
beginnings
in the 90s

5.
A successful IPO in 1997

6.
10 years of rapid business expansion

7.
2x Walmart
Becoming twice as valuable as Walmart

8.
Amazon’s US e-commerce market share
0%
5%
10%
15%
20%
25%
30%
35%
Category Axis
2010 2011 2012 2013 2014 2015 2016
34%
33%
32%
31%
27%
25%
21%
To e-commerce Market Domination

9.
PHILOSOPHIES
All while following the same

10.
“Because of our emphasis on the long term,
we may make decisions and weigh tradeoffs
differently than some companies.”
~Jeff Bezos in his 1997 letter
to Amazon's shareholders
Read the full letter

11.
Amazon has been investing ALL of
its profits in expansion for decades

12.
Jeff Bezos on running a
350K-employee company
with a start-up mindset

13.
~Jeff Bezos, CEO of Amazon
#1 Set the bar high in hiring
This has been, and will continue to be, the single
most important element of Amazon.com's success.
You can work long, hard, or smart, but at
Amazon you can’t choose two out of three.

14.
#2 True customer obsession
Staying a startup requires you to experiment patiently, accept
failures, plant seeds, protect saplings, and double down when
you see customer delight. A customer-obsessed culture best
creates the conditions where all of that can happen.
~Jeff Bezos, CEO of Amazon

15.
#3 Proactivity to create trust
When we’re at our best, we don’t wait for external pressures.
We are internally driven to improve our services, adding
benefits and features, before we have to. We lower prices,
increase value for customers and invent before we have to.
~Jeff Bezos, CEO of Amazon

16.
#4 Resist proxies
As companies get larger and more complex, they focus
on doing the processes right instead of the outcomes.
The process is not the thing. It’s always worth asking,
do we own the process or does the process own us?
~Jeff Bezos, CEO of Amazon

17.
#5 Embrace external trends
If you fight trends, you’re probably fighting the future.
If you embrace them, you will have a tailwind.
We’re in the middle of an obvious one right now:
machine learning and artificial intelligence.
~Jeff Bezos, CEO of Amazon

18.
#6 High-velocity decision-making
The team at Amazon keeps its decision-making velocity high.
Speed matters in business – plus its a more fun environment.
1. Never use a one-size-fits-all decision-making process.
2. Make most decisions with ~70% of the info you wish you had.
3. Quickly recognise and correct bad decisions.
4. “Disagree and commit” if you trust the people but not the idea.
5. Recognise true misalignment early and escalate it immediately.
~Jeff Bezos, CEO of Amazon

19.
"You need to be making big, noticeable failures.
The great thing is that, when you take this
approach, a small number of winners pay for
dozens, hundreds of failures, and so every
single important thing we've done has taken a lot
of risk, risk-taking, perseverance, guts, and some
have worked out. Most of them have not. That has
to happen at every scale level all the way down."
High-velocity decision-making
comes with failure
~Jeff Bezos, CEO of Amazon

20.
Some of Amazon’s
costly failures
-$170M -$60M-$231M

21.
And its recent Big Bets
Buying WholeFoods
for $13.7B
Offering $9B
for Slack
Buying souq.com
for $650M

22.
And much, much more…
Acquisitions Investments

23.
Before we get into the strategic part, here’s a
picture of Amazon’s new office in Seattle to
feed your inner instant-gratification monkey.

24.
STRATEGY
Amazon rarely explains its short-term
tactics or its long-term strategic vision.
It values surprise.

25.
The Strategic Foundation
STRATEGICALLY, WE ARE MOST INTERESTED
IN THE FOUNDATION THAT WAS LAID HERE.

26.
To keep performance high and
innovation in a continuous loop,
Amazon is deploying an
Externalisation Strategy

27.
Services this strategy is used on
Artificial IntelligenceIT Infrastructure
Freight logistics Video Conferencing
3rd party marketplace
Data security
marketplace

28.
Internal
Services
Amazon’s Externalisation Strategy
INTERNAL
EXTERNAL
AMAZON

29.
Amazon has been pushing its
internal services to the edge of
the organisation for 15 years.
We identified 9 strategic
reasons to do this.
Amazon’s Externalisation Strategy
INTERNAL
EXTERNAL
AMAZON
Internal
Services

30.
Amazon’s Externalisation Strategy
INTERNAL
EXTERNAL
AMAZON#1 Additional revenue:
Creating additional
revenue streams.
Internal
Services

31.
Most obvious
to everyone
Amazon’s Externalisation Strategy
INTERNAL
EXTERNAL
AMAZON
#2 Expansion:
To different markets,
using the same strategy.
#1 Additional revenue:
Creating additional
revenue streams.
Internal
Services

32.
Pressure from
both internal &
external clients
Amazon’s Externalisation Strategy
INTERNAL
EXTERNAL
AMAZON
#3 Increased accountability:
Revenue targets result in no
dormant internal services.
Internal
Services

33.
Amazon’s Externalisation Strategy
INTERNAL
EXTERNAL
AMAZON
#4 Benchmarking:
If the market doesn’t want our service,
we aren’t using the best tools internally.
Internal
Services

34.
Amazon’s Externalisation Strategy
INTERNAL
EXTERNAL
AMAZON
#5 Innovation:
Insights from the market on
how to improve the service.
Internal
Services

35.
Amazon’s Externalisation Strategy
INTERNAL
EXTERNAL
AMAZON
#6 Capacity optimisation:
Optimally using excess
capacity left by internal use.
Internal
Services

36.
Amazon’s Externalisation Strategy
INTERNAL
EXTERNAL
AMAZON
#7 Leverage with partners:
Higher volumes lead to
better deals with partners.
Internal
Services

37.
Amazon’s Externalisation Strategy
INTERNAL
EXTERNAL
AMAZON
#8 Challenging competition:
Incumbents are forced to
keep innovating.
Internal
Services

38.
INTERNAL
Amazon’s Externalisation Strategy
EXTERNAL
AMAZON
#9 Removing growth barriers:
Even if the competition innovates, it may
not be enough and slow down growth.
Internal
Services

39.
Amazon’s Externalisation Strategy
EXTERNAL
INTERNAL
AMAZON#1 Additional revenue:
Creating additional
revenue streams.
#2 Expansion:
To different markets,
using the same strategy.
#3 Increased accountability:
Revenue targets result in no
dormant internal services.
#4 Benchmarking:
If the market doesn’t want our service,
we aren’t using the best tools internally.
#5 Innovation:
Insights from the market on
how to improve the service.
#7 Leverage with partners:
Higher volumes lead to
better deals with partners.
#8 Challenging competition:
Incumbents are forced to
keep innovating.
#6 Capacity optimisation:
Optimally using excess
capacity left by internal use.
#9 Removing growth barriers:
Even if the competition innovates, it may
not be enough and slow down growth.
Internal
Services

40.
Let’s look at one service in detail
marketplace
What happened when Amazon pushed its own
sales-platform to the edge of the organisation?

41.
Amazon began to offer fulfillment services,
which completely unburdened 3rd parties.
How Amazon won over 3rd parties

42.
In 2005, Amazon introduced its $99 / year Prime membership,
with free 2-day shipping for millions of (3rd party) items.
How Amazon won over customers

43.
Strategy applied to its 3rd party marketplace
#1 Additional revenue
#2 Expansion
#3 Increased accountability
#4 Benchmarking
#5 Innovation
#7 Leverage with partners
#8 Challenging competition
#6 Capacity optimisation
#9 Removing growth barriers
Additional revenue stream by taking a cut from
3rd party sales, regardless of their profitability.
Amazon can offer goods in markets it doesn’t sell itself
through millions of sellers, benefitting prime members.
3rd parties began using the platform,
increasing volume and the need.
If 3rd parties stick with other marketplaces,
Amazon needs to up its game.
More users on the platform leads to
more data and feedback to improve it.
Amazon gets to use the excess capacity
that isn’t filled up by its own sales.
Higher shipping volumes lead to more leverage
and better deals with logistics partners.
Incumbent logistic partners are forced
to innovate to remain relevant for Amazon.
Competing marketplaces and logistic partners can be
barriers in Amazon’s growth, so it needs back-up plan.

44.
Third-party sales on the marketplace
0%
20%
40%
60%
80%
100%
Category Axis
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
50%50%
46%
42%
40%40%
38%
35%
30%30%
26%
30%30%
28%
Now good for $23B ~17% of Amazon’s revenue

45.
Amazon revenue breakdown
marketplace

46.
The strategy applied to AWS
Amazon wants to be
the biggest shop
Builds the best
online infrastructure
“invents” the
commercial cloud
Disrupts the entire storage
and server industry
> > >

47.
Imagine they apply this
to Amazon Food Services?
Amazon
starts selling
Fresh Food
Builds the best
distribution
infrastructure
“Invents” the
commercial
“fresh cloud”
Disrupts the entire
distribution and
food retail
> > >

48.
So Amazon is winning
in the front…
Channel & Destination

49.
and like a Trojan Horse
in the back…
(Infrastructure & Distribution)

50.
No other organisation can do this
right now, because Amazon is the
only one with the full value chain.
This is Why Amazon Always Wins.

51.
Amazon is a digital-first company,
which does not mean digital-only.
It needs to be present in the physical
world too, for sales and distribution.

52.
Amazon getting into your home

53.
Amazon’s physical locations

54.
Amazon buys for $13.7B
And its most recent addition…
Full post at slate.com

55.
LOGISTICS
Goods need to be taken to-
and from all of these places

56.
We can’t explain to you how all of this works,
but it looks like it was made by someone
who knows what they’re doing, doesn’t it?

57.
Amazon has 45.000 Kiva robots
operating (in) its warehouses

58.
Amazon mostly relies on
partners for delivery

59.
And its network of
flexworkers

60.
Amazon is also investing in
its own logistic solutions

61.
For rapid fresh-food delivery & more

62.
Amazon invested $1.5B in its
own 40-plane air cargo hub

63.
Next up: 45.000 drones for 2-hour delivery?

64.
Delivery from flying warehouses?
Dropped by parachute?
Delivery by self-
driving pods?
patents

65.
What will you do with
all this knowledge?
That’s just what we found,
Amazon is doing way more.
The big question is,

66.
1. Work out your long term “North Star” strategy instead of just focusing on the short term.
2. Think about the steps you can take to become a digital-first organisation.
3. Set a high standard in hiring, you transform your organisation through people, not technology.
4. Externalise your internal strengths and services for any of the 9 reasons Amazon does.
5. Don’t wait for external pressure to improve, start innovating proactively.
6. Embrace external trends, don’t waste your energy fighting the inevitable.
7. Engage in high-velocity decision-making at all levels. You will fail a lot, but learn more.
8. Don’t try to fully copy Amazon or you will be a cook, not a chef. Create your own path.
8 Takeaways
And above all, start today!

67.
Sold in 50+
countries!
Want to run your organisation the way
Amazon does? Start with our book.
Buy the book

68.
CASE BROUGHT TO YOU BY:
Dado Van Peteghem
dado.vanpeteghem@duvalunion.com
@dadovanpeteghem
Sam Wouters
sam.wouters@duvalunion.com
@sdwouters
Jo is a founding partner at DUC with over 20 years of
experience in the digital world. He helped many large
organisations transform through our methodologies,
described in the Digital Transformation book.
Sam is a consultant and speaker on Blockchains & AI.
He helped write the Digital Transformation Book.
Dado is a founding partner at DUC. He has helped
dozens of large organisations transform through his
pragmatic approach. He is co-author of the Digital
Transformation book and an entrepreneur.
Jo Caudron
jo.caudron@duvalunion.com
@jcaudron

69.
Duval Union Consulting
We help organisations transform and become future-proof.
duvalunionconsulting.com

70.
THE CASE
Why Amazon Is Winning