Amazon is on its way to being a $3 trillion company. So says Chamath Palihapitiya, a venture capitalist and early Facebook employee.

Palihapitiya said Amazon will be worth $3 trillion in 10 years and its retail business unit won't be the biggest factor in driving the shares to that value. If true, it would largely be due to the business philosophy of Jeff Bezos.

Despite a highly competitive marketplace, Amazon continues to hold its own. How does Jeff Bezos do this? What are the factors responsible for the organization's dominance in the marketplace? 

1. They focus on the customer.

Many companies talk about customer focus but Amazon walks the talk. Its customer obsession is unparalleled. It led to the establishment of Amazon Web Services (AWS), a business that is worth over $10 billion now.

A CNBC article says, "AWS was designed to solve the problems with too-expensive in-house application hosting and open-source products that weren't robust enough to easily support fast-growing or already-large companies."

Amazon's culture of listening to customers, instead of competitors has enabled it to get ahead of the market as it's able to think for itself, instead of blindly following what other brands are doing.

"Many companies," Bezos once said, "describe themselves as customer-focused, but few walk the walk. Most big technology companies are competitor focused. They see what others are doing, and then work to fast follow."

If you want to stay a step ahead of your competitors, focus on your customers first. Doing so can have benefits well beyond competitive advantage. I've seen this in action--back in March, I wrote about how LiveChat was been able to grow to over 19,000 customers through obsessive customer focus rather than marketing.

2. Take risks.

Despite monumental failures, Amazon willingly takes risks.

Although investors are calling for him to curb spending, Bezos believes avoiding failure is the wrong strategy. He says it would be a bigger problem if a company stopped taking risks.

He made this observation at Business Insider's Ignition conference in December 2014.

"A few big successes compensate for dozens and dozens of things that didn't work," he said, pointing to Amazon's gains from its Kindle tablet, data center business and third-party online marketplace. "Bold bets ... pay for a lot of failures. I've made billions of dollars of failures at Amazon.com."

It does not matter the mistakes you make while taking risks. What matters are the breakthroughs you record from a few of the things you're willing to try.

Last year, I convinced the development team at my company to stop what they were doing to work on a crazy marketing idea. While the end result didn't fully live up to expectations, the experiment drove our team to discover a new revenue opportunity. That's still a win.

3. Give workers a stake in the company.

In A Stake in the Outcome, authors Jack Stack and Bo Burlingham say creating a culture of ownership enables organizations "to tap into the most underutilized resource in business today--namely, the enthusiasm, intelligence, and creativity of working people everywhere."

Amazon leverages this to fight off competition in the marketplace. It is obsessed with its internal customers (employees) alongside the external. It uses stock options in hiring.

Bezos once said:

"We will continue to focus on hiring and retaining versatile and talented employees, and continue to weight their compensation to stock options rather than cash. We know our success will be largely affected by our ability to attract and retain a motivated employee base, each of whom must think like, and therefore must actually be, an owner.'' 

Whether it's stock, bonuses or profit sharing, giving workers a stake in the success of your company motivates and empowers them to put in their best.

4. Differentiate or die.

Author Jack Trout writes in Differentiate or Die that differentiation lies at the heart of successful marketing. He outlines the many ways you can differentiate and carve out your own image in a crowded marketplace. He also warns how difficult it is to achieve differentiation by being creative, cheap, customer-oriented, or quality-driven; things that your competitors can do as well.

Dr. Tony Grundy, a lecturer at Henley Business School, says Amazon is worth studying not just because of its competitive scope, but also because of its differentiation strategy.

A differentiation strategy is where the product or service is either perceived to be, or is, of superior customer value and has a definite price premium. A cost leadership strategy is where the price may be similar or usually lower than the competition, but costs are certainly lower.

The International School of Management Excellence says cost leadership, customer differentiation, and focus strategies have helped Amazon to enhance its competitive advantage.

To fend off competition, you've got to differentiate and stand out in the marketplace, like Amazon.

Published on: Nov 21, 2017
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