Jeff Bezos may be a visionary, but when it comes to his business, it seems he also has a bit of a murderous streak. He won't let competitors beat him, even if it means killing his core business.
Brad Stone's new book, The Everything Store, describes how Bezos developed this strategy after reading another book called The Innovator's Dilemma by Harvard professor Clayton Christensen. In it, the professor explained why big companies fail: They avoid disruptive change even though it might save them. "Sears, for example, failed to move from department stores to discount retailing," writes Stone. "IBM couldn't shift from mainframe to minicomputers."
One day, Bezos marched into Steve Kessel's office and gave an order: "I want you to proceed as if your goal is to put everyone selling physical books out of a job," he said. Kessel's role up until then had been assuaging book publishers so that they'd feel comfortable selling their used books on Amazon. Now those days were over.
It was obvious to Bezos that if Amazon didn't go digital, then Apple and Google would. Already, Apple had introduced the iPod, which was upending the music business. "We didn't want to be Kodak," said Amazon's senior vice president Diego Piacentini in a speech at Stanford's Graduate School of Business years later. Added director John Doerr: "We were freaking out over what the iPod had done to Amazon's music business. We feared that there would be another kind of device from Apple or someone else that would go after the core business: books."
After the office chat, Bezos sent Kessel "on a fact-finding mission to Silicon Valley," where he met with "hardware experts from Apple and Palm and with executives from the famed industrial design firm IDEO." Kessel learned what it would take to build an MP3 player and an "Internet-connected set-top box. He also learned what Amazon needed in order to build an e-book reader that would eventually become the Kindle.
This year, Morgan Stanley estimates that Amazon will hit sales of $4.5 billion in Kindle devices, a 26 percent increase from 2012. Kindle sales are predicted to top $5 billion next year.