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US$100 billion sales later, why Amazon still embraces failure

James Henderson | April 13, 2016
To invent, companies have to experiment, Bezos says

“We all know that if you swing for the fences, you’re going to strike out a lot, but you’re also going to hit some home runs.”

As Bezos explained however, the difference between baseball and business is that baseball has a truncated outcome distribution.

“When you swing, no matter how well you connect with the ball, the most runs you can get is four,” he wrote.

“In business, every once in a while, when you step up to the plate, you can score 1,000 runs.

“This long-tailed distribution of returns is why it’s important to be bold. Big winners pay for so many experiments.”

AWS

In looking back at 21 years of business, having founded the company in July 1994, Bezos believes AWS, Marketplace and Prime are all examples of “bold bets” at Amazon that worked.

“We’re fortunate to have those three big pillars,” he wrote.

As Bezos recalled, just over 10 years ago, AWS started in the U.S. with its first major service, a “simple storage service”.

Today, AWS is bigger than Amazon.com was at 10 years old, growing at a faster rate, and - most noteworthy in Bezos’ view - “the pace of innovation continues to accelerate” - with 722 significant new features and services in 2015, a 40 percent increase over 2014.

“Many characterised AWS as a bold - and unusual - bet when we started,” Bezos wrote. “‘What does this have to do with selling books?’ We could have stuck to the knitting. I’m glad we didn’t. Or did we?

“Maybe the knitting has as much to do with our approach as the arena. AWS is customer obsessed, inventive and experimental, long-term oriented, and cares deeply about operational excellence.”

Given 10 years and many iterations, Bezos said that approach has allowed AWS to rapidly expand into the world’s most widely adopted cloud service.

“Many companies describe themselves as customer-focused, but few walk the walk,” Bezos wrote. “Most big technology companies are competitor focused. They see what others are doing, and then work to fast follow.”

At present, Bezos said AWS is “already good enough today” to attract more than one million customers, and in looking ahead to the future, he remained confident that the service is “only going to get better from here”.

 

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