What does it take to create a new industry and keep the lead in the face of formidable competitors? The formula is easy to describe and hard to do:

  1. Visionary leadership. Companies that create industries are led by CEOs with the right vision for how the future will evolve and what it would take to win there.
  2. Deep insight into customer needs. Companies that turn the vision into a real business must have a deep understanding of what customers need and which of those needs is most important and widely shared.
  3. Superior technology and processes. To take the lead and stay ahead, such companies must have better technology, talent, and business processes than their rivals so they can build and service products that meet those customer needs more quickly than rivals.

In 2006, Amazon launched AWS which now leads the $180 billion cloud services industry and with 34 percent cloud infrastructure market share was way ahead of Microsoft Azure's 14 percent in the second quarter of 2018, according to Synergy Research.

Here are the five competitive advantages that keep AWS ahead in the cloud.

1. Eat your own dog food.

If you are trying to build a new industry, it really helps if you are a pioneer. If you are successful in the business you're pioneering, chances are good that you'll create new opportunities and threats for everyone else. And you'll have to solve a new set of problems just to keep your core business going.

If you can do that well -- as Amazon did when it built and refined its systems for operating an e-commerce business at scale -- you will be in a strong position to sell your solution to other companies.

How so? Since Amazon.com launched in 1994, it needed a way to take and fulfill customer orders. Over the ensuing years, companies came to Amazon to ask how they could use Amazon's back office systems to operate their online businesses, Jeff Barr, AWS chief evangelist explained to me in a July 30 interview. By that point, Amazon believed that it excelled at "operating massive scale technology infrastructure and datacenters."

2. Hire hundreds of CEOs.

As I argued in my 1997 book The Technology Leaders, a company's ability to hire and motivate entrepreneurial leaders confers a huge advantage over rivals who can't pull it off. After all, if all decisions must be made by the CEO, it will take too long for those decisions to be made -- and chances are good that the CEO who makes those decisions will be wrong.

Now that AWS is a multi-billion dollar business, Amazon CEO Jeff Bezos can't keep it in the lead without help. So it hires what it calls builders -- people with CEO-like skills -- for each of its AWS services. "On our development team we hire hundreds of CEOs. They each own their own destiny. We show them an opportunity and they pick it up, study it, and build a business around it," said Barr.

3. Listen to customers and build what they need quickly.

Is it better to listen to customers and launch solutions to their problems quickly and get feedback than to dream up new products in the lab. Amazon implements the features that it thinks will have the most business value. As Barr explained, "We get something out there and iterate based on their feedback. As Bezos says, 'Our customers are delightfully dissatisfied, they always want something more.'"

Do customers see AWS the same way as Amazon sees itself? One customer said he thought AWS was the clear choice for his business. On July 31, Al Smith, chief technology officer of iCIMs, a recruiting software company that works with AWS and Azure, said, "AWS does it better, faster, and more flexibly. Amazon's direct [go-to-market strategy] makes it easier for me to get direct access to its leaders and roadmaps, it introduces new products faster."

4. Cut prices and let customers know how to save the most money.

If you can convince customers that you are trying to save them money and give them better products, they will trust you and remain loyal.

Amazon -- which had reduced prices 66 times as of July 2018 -- takes this idea farther than most. "We'll look at customers' utilization of our resources, and if they're low or idle, we'll reach out to them and say, maybe you don't want to spend this money right now. Over the last couple years, we've sent out 2.6 million notifications that have led to actual annualized savings of $350 million a year from the Trusted Advisor service. That is in addition to the savings from the price cuts," according to Barr.

5. Monitor results weekly.

Amazon keeps close tabs on how things are going every week. As Barr explained, "We review thousands of metrics during our weekly business reviews. To keep our business growing at 50 percent a year, we need our general managers to meet demanding weekly goals. If they do not meet a goal, the general manager must explain to [AWS head] Andy Jassy why and what they are doing to get back on track."

While Microsoft is a formidable rival, AWS is still in the lead and based on these five competitive advantages is likely to stay there.

Published on: Aug 2, 2018
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.