How Amazon Innovates: Lessons in Strategy for Microsoft and Others

2/25/10Follow @gthuang

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groceries (and other goods) currently offered only in Seattle. If the service can be expanded to other geographies, it would be a shrewd way to extend the psychological connection between Amazon and its customers right up to their front door—almost in real time. (It also wouldn’t hurt that the company’s fleet of grocery trucks could be like rolling billboards on every highway and arterial in the country.)

In the HBR interview, Bezos also reflected broadly on how he has adapted to Amazon’s growth. “When you start out, it’s a one-person thing, at least on the first day, and you’re not only figuring out what to do but actually doing it,” he said. “At a certain point the company gets bigger, and you get to where you’re mostly figuring out what to do but not how it’s done. Eventually you get to the point where you’re mostly figuring out who is going to do it, not even what to do. So one way to think about this is as a transition of questions, from ‘How?’ to ‘What?’ to ‘Who?’”

So, to answer my own question, it seems like Amazon has remained innovative by focusing on its customers much more than its competition; having visionary and disciplined leadership that sets the tone for every employee and product; avoiding too much internal product competition; and trying a variety of long-term experiments, but killing them off quickly if consumers don’t respond.

How does this relate to a company like Microsoft in the long run? Some would argue that the Redmond firm has gotten worse in each of these areas as it has continued to grow, especially in the past decade. It seems inevitable, with the world’s transition to Web software, that a company built on desktop software would become less relevant. And its size is a distinct disadvantage, regardless of what former IBM CEO Lou Gerstner once said about how elephants can be nimble enough to dance. Yet most observers aren’t counting Microsoft out, as it still has time to reinvent itself and find new ways to capitalize on its strengths in operating systems and business software.

Meanwhile, Amazon’s real growth—and the real challenges stemming from that growth—may be just beginning. It would do well to watch and learn from the giants that came before.

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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