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How You Can Use Jeff Bezos' 3 Big Ideas

The Amazon founder recently explained his 3 principles for success. Here's how you can use them too.
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Running a start-up is hard work. There are so many things that could go wrong and so little time to make the right choices and get results before you run out of money. That’s why most start-ups fail.

But America loves an entrepreneurial success story so the very tiny sliver of start-ups that succeed get plenty of press attention. One of America’s greatest start-up success stories is Jeff Bezos. He is still running the start-up he launched 18 years ago. And Amazon is doing great-- with a market capitalization of $132 billion and revenues of $61 billion.

But what makes Bezos interesting for you is that despite his success, nothing is more interesting to him than facing down tough entrepreneurial challenges. Otherwise, he could have easily avoided the incredibly difficult business challenges he faces as the new owner of the Washington Post which he bought in August for $250 million.

On September 2, the Post reported that Bezos attributes Amazon’s success to three big ideas: Put the customer first; invent; and be patient. Let’s look at what these ideas have meant for Amazon and how you can use them for your start-up.

Put the Customer First

The idea of betting a business on customers has been around for decades - for example, a 1980s business best-seller, In Search of Excellence, talked about the importance of being close to the customer.

But in life, it’s all about how you put an idea into practice. And Amazon has made many big investments to assure that its customers came first. For example, in the 1990s, Amazon offered a great website with features like shopping carts, one-click buying so users did not have to type in all their credit card information each time, email confirmations, and post-shipping follow up.

But Amazon still had big problems with fulfilling orders properly because it did not own most of the warehouses from which it shipped the products people ordered online. So over many years, Amazon invested billions of dollars in warehouses and systems to boost the quality and efficiency of its order fulfillment process.

And thanks to its scale and efficiency, Amazon was able to purchase items in its inventory at a very low cost and rather than jack up its prices to make a big profit, it has passed most of the cost savings on to consumers - taking a very slim margin.

As an entrepreneur, putting the customer first means that you must accomplish an act of empathy - sharing the feelings of your potential customers and building your business around how to make them feel better.

When customers look at a start-up, they are afraid that it will go out of business. So you must pick the right customer problem to solve-;one that causes the customer pain and that no other companies are trying to solve.

And if you can do that once, you’ll get revenues that you must re-invest to solve new customer problems.

Invent

When it comes to invention, Bezos has shown he has what it takes.

For example, he decided to tackle the online grocery delivery business by starting AmazonFresh in 2007 in the Medina and Mercer Island neighborhoods of Seattle and by 2012 had spread to other Seattle communities. This June, the service rolled out to a limited number of Los Angeles zipcodes. 

For the success of AmazonFresh, Bezos depended on an inventive technology developed by Mick Mountz. Mountz had worked at the failed online grocer, WebVan, and used some of what he developed there to found a robotics company, Kiva Systems.

When I saw Kiva’s product in action several years ago, I was blown away. It consisted of huge Frisbee-shaped robots that could be steered via a grid of floor magnets. The robots picked up the warehouse rack containing the item in the customer order and delivered it to the operator. He picked the item from the rack; scanned its barcode to verify that it was correct; and put the item in a cardboard box with that customer’s shipping label.

In 2012, Amazon acquired Kiva for $775 million and uses it to help make AmazonFresh a success.

For your start-up, Bezos’ passion for invention should get you to think about new ways to do things to solve your customers’ problems. It should also make you realize, as he does, that sometimes other people can do a better job than you at inventing ground-breaking technologies. You should hire those people.

Be Patient

The AmazonFresh story also reveals something else about Bezos; he does not expect to get it right the first time. He has learned that building a successful new business does not come from one big idea. Rather success flows from learning.

For you that means when you put your mind to solving the problem facing your customer, you should do a series of frugal experiments. Start by talking to your potential customers and understanding how the failure of the market to solve their problem makes their life difficult. Build an inexpensive prototype quickly and get feedback. Use that feedback to try again.

And keep repeating that cycle until you find your way to an effective solution. That is part of how Bezos is going to try to make the Washington Post profitable.

Try all three of Bezos’ big ideas - Amazon has proven that they work. Your challenge is figuring out how to apply them to your start-up.

IMAGE: Getty
Last updated: Sep 9, 2013




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