It's funny how little business changes. Before the late 90's Internet Gold Rush, management writers often preached the benefits of staying focused on core competencies. The theory behind this was that firms that spent resources on non-core functions would be a) wasting resources and b) competing with firms who specialized in those functions. If you need something done, find the lowest-cost/best-capable vendor and go with it. If you're trying to fill a Very Important Core Function, make sure an in-house team fits that description.
The "core competencies" dogma is so trite now that the phrase itself is a staple of office comedy. But now it seems even stodgy Web 1.0 companies are getting the religion. Amazon will pitch its new shipping services as totally innovative, pushing into new territory, etc. Totally wrong. Amazon has priorities that look something like this:
- Vast selection of goods ("Earth's biggest store!")
- Great Web shopping experience
- Excellent customer support: fullfillment, returns, etc
But break down #2 and you get a list like:
- Great usability & design.
- Top programming staff.
- Excellence in server operations (high availability, efficiency, etc.)
And suddenly, it becomes obvious that becoming world-class in some of their first- or second-tier goals will provide other business opportunities. If they have a great fulfillment operation, why not sell access to it to others? If they are able to get their cost for running a server or storing a GB below the retail/wholesale price in the market, it makes sense to resell this service. Over time, having external customers can provide even more incentive for the in-house teams to stay competitive. And naturally, the additional revenue could eventually grow to be relevant to the company's financials.
Also fascinating is how even in the limited context of the second-tier breakdown above, the top-level priorities will even trickle down. Even for a developer-oriented service like S3, customer support is key to the success of the program. And without a great Web shopping experience (i.e. can developers find docs? is the API easy to use?), it will be a flop. Serving millions of consumers has helped the company develop an ear to developing high-volume technology products (previously only amazon.com). As they expand their developer offerings, this focus on high customer volume will ensure that they keep their products simple to use to minimize support costs.
Now, if only Microsoft would stick to developer tools and office tools and let the professionals ship OSes...
Seems to me that Amazon's new offerings are well aligned with their "core competencies."
Posted by: Anonymous | September 25, 2006 at 11:20 AM