How Amazon Innovates: Lessons in Strategy for Microsoft and Others

2/25/10Follow @gthuang

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college or business school who hadn’t logged time at other companies—so they didn’t have ingrained habits, ideas, or other corporate baggage. They could be indoctrinated in the Amazon Way. That these employees tended to be workaholics didn’t hurt. And somehow that culture has persisted to today. (Several current Amazon employees told me it’s common to work nights and weekends, especially before the holiday season.)

Interestingly, Bezos didn’t always follow best business practices or operations advice, according to one former senior exec. That led to some decisions being “poorly made” in the early days—I took this to mean things like handling relationships with partners, and gearing up for the company’s IPO in 1997. In some ways, it sounds like Amazon succeeded in spite of its operational missteps. What helped was Bezos’s vision and a lot of hard work from people to fulfill it. And of course, the company’s timing was excellent, getting established at the start of the dot-com bubble. Indeed, the rise of Amazon has coincided almost perfectly with the rise of the Web, e-commerce, and online recommendations; seemingly overnight, consumers have become willing (and they often prefer) to buy things online, share payment information, and give their opinions on certain trusted sites.

One obvious comparison with Microsoft is how Bezos stacks up against Bill Gates and Steve Ballmer in terms of leadership. “When I was at Amazon, I saw Jeff directly involved in driving a huge amount of innovation, largely by coming up with ideas on his own and getting the organization to implement them. He’s often involved in the smallest details,” says Josh Petersen of Seattle’s Robot Co-op, who has worked at both Amazon and Microsoft. (Disclosure: Robot Co-op is a subsidiary of Amazon.)

As for Gates, Petersen says, “I only met him once, but I was struck by how insightful he was about the product he was reviewing and how ready he was to toss questions to the team and delve into details…But I had the impression the job of the product team was to develop something and bounce it off Gates, whereas Bezos would generally be more intimately involved in the process rather than playing the role of exterior arbiter.” (The question remains how Bezos has the bandwidth to be that much more hands-on than Gates, or presumably Ballmer. But it speaks to the top-down culture at Amazon.)

Others see the way the companies’ respective product lines are set up as a key difference. Amazon is “selling other people’s products, or more specifically, figuring out the best ways to sell other people’s products,” says Brent Frei of Bellevue, WA-based Smartsheet, a former Microsoftie. “Kindle is a means to sell other people’s books. Mechanical Turk is a way to improve data around selling other people’s stuff. They rarely have a product line that is competing with another product line that prevents innovation.”

That’s as compared to Microsoft, which has a culture of internal … Next Page »

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com or call him at 617-252-7323. Follow @gthuang

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