To gain a comprehensive understanding of how technology can effectively automate and expand our businesses, we need not search beyond the example of Amazon. In this discussion, I aim to explore the key lessons that Amazon can impart regarding digital transformation.
When guiding clients through digital transformations, we consistently refer to case studies and examples illustrating how successful organizations have utilized technology to grow and automate their operations. Among these examples, Amazon stands out as a remarkable success story. Their utilization of technology and commitment to digital transformation have been unparalleled, contributing to their status as one of the fastest-growing companies in history.
Today, my objective is to delve into some of the valuable lessons we can learn from Amazon, particularly in their adept use of emerging technologies. These insights may prove invaluable as your business embarks on its own digital transformation journey.
Customer Experience
One of the initial lessons we can glean from Amazon’s technology initiatives is their unwavering commitment to enhancing the customer experience. When we consider the genesis of Amazon, we find it emerged as a pioneer in the e-commerce realm during the late 1990s. This was a time when people were still unfamiliar with website usage, and e-commerce was a relatively novel concept.
However, Amazon distinguished itself by offering a remarkable customer experience. This commitment to customer satisfaction not only characterized the company’s early days but also persisted as it continued to advance, expand, and evolve.
When we discuss “customer experience,” we refer to Amazon’s ability to simplify the purchasing process, facilitate product discovery, provide customer reviews to aid informed decision-making, offer sales rankings to gauge product popularity, and suggest items based on past purchasing behaviors. These strategies not only bolstered revenue generation but also fostered stronger, lasting customer relationships.
In the context of your digital transformation efforts, the key question arises: How can you enhance the customer experience within your organization? What measures can you undertake to ensure that technology serves as an enabler, rather than an impediment, in delivering a more positive customer experience? By addressing these questions, you can aspire to increase sales and revenue while fostering customer satisfaction.
Artificial Intelligence and Big Data
Another valuable lesson from Amazon that applies to digital transformations is their emphasis on Artificial Intelligence and Big Data. Amazon has established its foundation on collecting vast amounts of data from its customers. Subsequently, they employ algorithms and Artificial Intelligence to discern methods for providing enhanced products and recommendations to customers. Moreover, these data and analytics resources enable Amazon to ensure that customers locate their desired products precisely when they need them.
The utilization of Big Data and artificial intelligence also plays a crucial role in optimizing Amazon’s inventory management and supply chain operations. By effectively capturing data throughout their supply chain, they achieve greater efficiency. I will elaborate on Supply Chain management shortly.
What is particularly noteworthy about Amazon is their exceptional proficiency in artificial intelligence and Big Data. They have invested in enormous data centers to process the copious amounts of data they accumulate. This infrastructure allows them to scale and hyper-scale data management, artificial intelligence, machine learning, and various algorithms for the purpose of business growth and enhancing the customer experience.
Amazon’s expertise in this domain has led to the creation of Amazon Web Services (AWS), an arm of the company that originated from their core competency in data management, business intelligence, artificial intelligence, and related areas. This development underscores their prowess in data processing and computational power, which is now available as a third-party service for both B2B and B2C organizations.
In your own digital transformation endeavors, consider the role of artificial intelligence, Big Data, and analytics in harnessing the power of data through technologies such as artificial intelligence, machine learning, and robotic process automation (RPA), among others. These tools can be instrumental in maximizing the potential of your data resources.
Supply Chain Optimization
In the 1980s, Walmart, the prominent retailer, pioneered a novel approach to supply chain management, thereby spearheading the Supply Chain Management movement. However, it was Amazon that elevated this concept to an entirely new level in the late 1990s and into the 2000s. During this period, Amazon embarked on a journey to significantly enhance the efficiency and effectiveness of its global supply chain.
Amazon’s approach encompassed several key strategies. Firstly, they constructed massive warehouses capable of accommodating substantial inventory. These warehouses served as hubs for collecting vast amounts of data and customer information, facilitating the swift processing and dispatch of products. Over time, as Amazon expanded, their network of warehouses grew extensively.
Presently, in most major North American cities, Amazon operates large warehouses that enable rapid product delivery, often achieving overnight or same-day delivery due to their close proximity to customers.
Furthermore, Amazon pursued vertical integration of its supply chain by not only expanding its warehouse infrastructure but also by assuming control of its fleet management. Previously, Amazon rented mail trucks from the US Postal Service to supplement their delivery network. However, they gradually brought this aspect in-house, establishing and managing their fleet of delivery trucks. This vertical integration empowers Amazon to respond swiftly to customer demands and achieve remarkable speed in product delivery.
As we consider our digital initiatives within our respective organizations, we can draw inspiration from Amazon’s supply chain management practices. By optimizing and efficiently managing our supply chains, we can scale our operations, enhance the customer experience, and accelerate the growth of our companies beyond what would have been possible without such strategic focus.
Robotics
Amazon has leveraged emerging technologies, specifically robotics, to revolutionize its business operations. Although robotics is not an uncommon concept today, with many companies implementing it in manufacturing facilities and warehouses, Amazon’s scale and utilization of robotics are unparalleled.
Amazon employs robotics extensively for tasks such as picking, packing, and shipping products within its warehouses. They also employ robotics for inventory management, including the reception of inventory into the warehouses. Additionally, Amazon has explored the use of drones, which can be considered a form of robotics, for the delivery of products to end customers in the final leg of the delivery process.
Amazon’s mastery of robotics has led to the establishment of a separate division known as Amazon Robotics. Interestingly, Amazon Robotics, a former client of ours, now sells robotics technology to non-Amazon companies, assisting them in automating their own warehouses and manufacturing operations. This underscores Amazon’s profound expertise in the realm of robotics.
While robotics may or may not directly apply to your digital transformation efforts, it serves as a compelling example of thinking innovatively about the adoption of non-traditional or emerging technologies. Exploring high-value areas within the spectrum of emerging technologies can potentially yield transformative benefits for your business.
This strategic approach may offer a more prudent allocation of IT budgets, focusing resources on initiatives with a greater potential for business value, as opposed to investing in costly back-office systems or other endeavors that may yield fewer tangible benefits.
Ability To Scale
The final lesson from Amazon that I’d like to discuss today revolves around their remarkable ability to leverage technology for rapid and substantial company growth. Few companies have achieved such rapid and significant scaling as Amazon. Their ability to do so can be attributed to their business model, innovation in technology usage, and a relentless focus on scalability.
For years, Amazon operated at a loss because they made substantial investments in their business and concentrated on scaling. One noteworthy example from over a decade ago involved Jeff Bezos deciding to introduce Amazon Prime, despite opposition from the CFO. Amazon Prime, a subscription model with an annual fee, offered faster delivery to its members. At a mere $10 per year, the fee did not generate significant revenue, and in fact, Amazon was technically losing money on it.
However, Bezos believed that it would drive customer loyalty and lead to increased spending on Amazon, playing the long-term game. Despite the CFO’s reservations, Bezos proceeded with the idea, and it has since become a cornerstone of Amazon’s success.
These decisions reflect Amazon’s unwavering focus on scale and a willingness to think beyond short-term gains. They make long-term investments that ultimately benefit employees, shareholders, and consumers alike. It underscores the importance of using technology, process improvements, and supply chain optimization not just for the sake of innovation but to scale organizations, drive growth, and secure long-term prospects.
In summary, Amazon’s journey teaches us valuable lessons about digital transformation.
I would enjoy brainstorming ideas with you if you are looking to strategize an upcoming transformation or are looking at selecting an ERP system, so please feel free to contact me at eric.kimberling@thirdstage-consulting.com. I am happy to be a sounding board as you continue your digital transformation journey.
Be sure to download the newly released 2024 Digital Transformation Report to garner additional industry insight and project best practices.
