Alexa, what’s Amazon up to now?
“Much of what we do with machine learning happens beneath the surface . . . quietly but meaningfully improving core operations.”
Core operation: Web Services
I explored this briefly before when looking at Amazon Web Services. Here, Amazon founder Jeff Bezos is applying Principle 6 – Universality, producing a service to sell derived from a core operation that has been propelling the company’s own operations.
“Finally, after years of setbacks and internal rancor, Amazon was unquestionably a technology company, what Bezos had always imagined it to be.”Brad Stone, The Everything Store
Core operation: Fulfillment
Fulfillment by Amazon allows vendors to ship product to Amazon warehouses. For a fee Amazon will sell these products through its own website and delivery the product at Amazon speed. The warehouses, the tracking of items, the fast retrieval and shipping are all core competencies that, now developed by Amazon, can be sold at a profit to other companies.
In 2016 alone, Amazon registered over 70 patents related to its logistics network. Goods on Amazon’s site placed there by outside companies now accounts for 49% of Amazon’s shipments.
Core operation: Artificial Intelligence
In his 2017 letter to shareholders, Bezos pointed to the utility of AI. Amazon already relies on artificial intelligence for demand forecasting, product search ranking, product and deals recommendations, merchandising placements, fraud detection, translations, and much more.
These same features could benefit other businesses as well.
Amazon is clearly at the vanguard of several core operations which have utility to other companies. This puts them in an excellent position to monetize those core operations. It’s part of Jeff Bezos’ “flywheel” or virtuous circle, where producing leading edge services produces revenue which in turn allow Amazon to build leading edge services.
A useful line of thinking is to examine what your company’s operations are and whether they could make a profit in the “outside world”. If yes, then Universality could be applied and these could form a profit center.
If no, then should you devote more energy to them to bolster your competitive position? Or outsource them, acknowledging that these are not core operations, freeing up energy to devote to other operations? Principle 2 – Taking Out