The lessons amazon’s digital transformation can teach us
The world is changing much faster than their organizations, and every business, no matter what the sector, has been overwhelmed by the relentless accelerating pace of change. In order to innovate, move faster, operate more efficiently, break down bureaucracy, and integrate digital capabilities in everything they do, they need to know where to start and how to make those plans a reality. It has been well documented how Amazon grew from a bookshop experiment into a leading tech giant. Their success has been attributed to constantly reevaluating every aspect of how they do business, from how they tackle challenges to their business model. As of today, Amazon is offering 175 services through its cloud business, AWS, and employs over a million people.
In today’s world, digital technology is proliferating at an accelerated pace and creating a need for digital transformation. Digital technologies may help companies create new value, reduce risks, and optimize operations; however, they may also expose them to new competitors (by decreasing entry barriers) and alternative products or services.
Key Insights from Amazon’s Digital Transformation Journey
Amazon grew rapidly and many tasks were repeated multiple times across different groups and departments. One of the measures taken by former CEO Rick Dalzell and Amazon founder Jeff Bezos to combat this problem was to implement “two-pizza teams,” i.e., teams small enough to be fed on two (large) pizzas. This resulted in fewer moving parts within each team and fewer connections to maintain for employees to do their jobs.
The idea of “working backward” is another philosophy ingrained across Amazon’s operations. The team begins by identifying a customer problem. Then, using data on customer behavior, they work backward to identify the best solution. In contrast, most new products or services are developed by starting with an idea and then testing them. Creating a “press release” is the first step in the process of getting an idea out to the world. Press releases are generally written so that marketers can announce the problems that the idea solves or what benefits it brings to customers.
From the products and services Amazon provides to its customers to how the business is run, data, artificial intelligence, and cloud computing are important enablers. Continually enhancing these tools will help Amazon remain competitive, as well as benefit its customers.
Drivers of Digital Transformation
Established enterprises are feeling the effects of digital transformation especially as they remake their legacy operating and business models. Utilizing digital technologies can help a business create and capture more value as well as expand into new markets or industries and create a competitive advantage. Since Nokia’s humble beginnings as a single paper mill 155 years ago, the company has reinvented itself several times. Studies show that in 1958, companies listed on the S&P 500 were on average in business for 61 years, a figure which has since fallen to 18 years by 2011 and is now less than 7 years. This reminds me of what Nokia CEO said in 2016 “We didn’t do anything wrong, but somehow, we lost”.
In addition to private sector organizations, the public sector can also gain from digital transformation by improving the way citizens experience government services. In the same way, a digital native born-in-the-cloud business that is particularly dependent on the quality and speed of its innovation cannot afford to stand still and must consistently transform itself.
Due to its warehouse system and order fulfillment, Amazon.com can offer extremely low prices despite the increased competition. It remains the number one B2C money-making ecommerce site in the world. The high customer satisfaction and Amazon’s wide product selection make it easy to understand why Amazon.com sells more than three times as many products as its closest competitor.
References
Mark Schwartz, 2021. Digital Transformation: Hype or a Strategic Necessity?Available at: https://aws.amazon.com/blogs/enterprise-strategy/digital-transformation-hype-or-a-strategic-necessity
[Accessed 27th February 2022]
Mark Schwartz, 2021. Digital Transformation: Hype or a Strategic Necessity?Available at: https://aws.amazon.com/blogs/enterprise-strategy/digital-transformation-hype-or-a-strategic-necessity
[Accessed 27th February 2022]
AltexSoft Inc, 2019. Digital Transformation in Retail: How Starbucks, IKEA, Walmart, and Sephora Revolutionize Industry.
Available at: https://www.altexsoft.com/blog/business/digital-transformation-stories-how-starbucks-ikea-walmart-and-sephora-revolutionize-retail-industry/?utm_source=MediumCom&utm_medium=referral
[Accessed 28th February 2022]
