A recent headline in the Wall Street Journal ‘Amazon to Open First Brick-and-Mortar Site – The New York City Location to Handle Same-Day-Delivery Inventory, Product Returns’ raises some interesting questions. Is this a smart move or simply poor strategy and a sign of lost direction? How can you form a view and more importantly, if it is bad strategy, how do you learn from it so you don’t make the same mistake in your business?
In succinct language, strategy is how you choose to Compete. It is how you intend to deliver more value to your customers than any competitor in your chosen marketplace. A marketplace that is dynamic and ever evolving. Your strategy is expressed as how you will position yourself but that positioning is again dynamic and often emergent as you seize unexpected outcomes. This is where two key organisational traits anchor your strategy, being Competitively Fit and having a clearly defined Competitive Posture.
Being Competitively Fit is all about having built and crafted a business (an organisation) that is adaptable and is always stepping out from its competitors, evolving and reinventing itself as its market and customers themselves evolve. Competitively fit organisations are always improving their competitive posture. Having a succinct competitive posture is reflected through your business knowing how to compete (win) in its marketplace founded in its unique strengths and ability to deliver customer value. However, the cornerstone is the Purpose for which the business exists, and regretfully very few business leaders seem to connect with and understand the relevance of purpose to the success of their business.
Purpose is the reason for your existence as a business and is expressed in the need within the community that you seek to fulfil. Profit and market value are some of the benefits that emerge from doing this better than anyone else but they should not be the reason for your existence. A well-expressed purpose underpins long-term growth, profitability and competitive strength. A vision is not necessarily the same as purpose.
Businesses that pursue directions that are not consistent with the purpose for which they exist and not consistent with their competitive posture often run the risk of losing direction and with it, their competitive strength.
Reflecting on Amazon’s move to Bricks and Mortar and extracting some relevant messages from their 2012 Annual Report:
- Vision statement: ‘We seek to be Earth’s most customer-centric company for four primary customer sets: consumers, sellers, enterprises, and content creators’.
- ‘We believe that the principal competitive factors in our retail businesses include selection, price, and convenience, including fast and reliable fulfillment. Additional competitive factors for our seller and enterprise services include the quality, speed, and reliability of our services and tools’.
- ‘Obsess Over Customers: From the beginning, our focus has been on offering our customers compelling value … we set out to offer customers something they simply could not get any other way …We brought them much more selection than was possible in a physical store … and presented it in a useful, easy- to-search, and easy-to-browse format in a store open 365 days a year, 24 hours a day. We maintained a dogged focus on improving the shopping experience’ … (extract from 1997 Annual report repeated in 2012 report)
And noting the commentary in the Wall Street Journal:
- … ‘would mark an attempt by Amazon to connect with customers in the physical world …’
- … ‘the Manhattan location is meant primarily to be a place for customers to pick up orders they’ve made online, but will also serve as a distribution center for couriers …’
So how does opening a physical store in Manhattan fit consistently with Amazon’s:
- Vision of being the Earth’s most customer-centric store for four primary customer sets?
- Being able to sustain selection, price and convenience for its customers equivalent to its existing offering, even for those located physically close to its proposed store?
- Delivering customers something they simply could not get anyway else?
I’m unclear how the opening of a physical store will:
- Enhance and not confuse the brand, and
- Improve the consumer experience and therefore strengthen the relationship with its other three customer sets.
It maybe about operational efficiency and tied to convenience for customers but is it only adding another layer of complexity, cost and confusion to Amazon’s existing business model?
The reasoning is not yet clear and therefore no judgments should be made. It will be interesting to observe the strategy as it emerges and understand whether Amazon is truly competitively fit or maybe beginning to struggle to find the next level of customer value.
