Results Count ... everything else is conversation.: Amazon again? How do they keep doing that!

"Innovation distinguishes between a leader and a follower"

From "drone delivery" to "anticipatory shipping", Amazon continues to be the darling of retail, grabbing both retail and mainstream media headlines. How do they keep coming up with all these breakthroughs? The mystique and success of Amazon might best be captured in one word: INNOVATION. While delivery drones were "sexy", most missed Amazon's innovative ability to create a breakthrough of selling college textbooks and used books online. Here is a both a classic and pragmatic case study on total category disruption through innovation.

A "Vulcan mind meld" - Anticipating what you want before you order it

According to a WSJ article, Amazon has filed a patent for what it calls "anticipatory shipping". Three things strike me about this. One, it takes real innovation to be able to conceive of how to use "big data" to anticipate what consumers will order in the future. Two, it takes fortitude and guts to actually ship products to regions before there aren't any hard orders. And three, I didn't know that you could obtain a patent for an idea and sketches for something like "anticipatory shipping".

According to Amazon, they are now at a point where they know us well enough as consumers that they can start shipping certain items even before orders are placed. This comes from the fact that Amazon is the king of copious amounts of "BIG data", and the master of developing algorithms on how to use that data. Anticipatory shipping is yet another Amazon innovation to streamline its supply chain, in order to take out costs and shorten delivery time. It is a classic example of the kind of innovation one could expect from Amazon as an industry leader in ecommerce, infrastructure and distribution.

Innovation as a state of mind, art, culture … and competitiveness

While delivery drones are a bit of a pipe dream, the anticipatory shipping is the real deal for the kinds of "big system innovations," which makes Amazon such a fierce competitor across so many product categories. Make no mistake, Amazon has its own challenges in order to survive. If you watch any Bezos interviews, he talks constantly about the long term view and fending off future competition through innovation.

What makes Amazon so unique is that innovation is at the genetic core of their culture, and the fabric of how they run their business. In the schema of retailing, online is relatively new. It was built from the ground up, with new systems designed to test and trail everything. Amazon innovation was built upon comparative A vs. B style of testing pages, copy, ads and the success of products themselves. This iterative innovation mindset creates countless opportunities that most traditional retailers miss.

Classic Amazonian Innovation: Selling textbooks & used books online

As a "regular" Amazon customer, it is not surprising to get emails from them. What is sometimes surprising is how they figure out their algorithms to send you emails with products and services that fit your interests and past purchases. They don't always get it right, but they are amazingly consistent in outbound reach with personalized offers. I can't remember the last time I received an email from Best Buy or Walmart.

But, I have to tell you my jaw dropped when I opened this last email from Amazon:

Ok…so my kids are now out of college. I may have been out of the loop on the Amazon college textbook business. But, I certainly wasn't aware of the college textbook rental business. And, of course when you see the ad, eTextbooks makes perfect sense with the Amazon Kindle distribution network.

"Innovation distinguishes between a leader and a follower." Steve Jobs

Without specifically referring to Amazon, Steve Jobs may have described the core of their success. Amazon doesn't approach any category from the classic sense of "selling products" like traditional retailers. Amazon constantly looks at how they can innovate and exploit their strengths … especially those in distribution to the end consumer.

The used college textbooks and rentals may have been missed by most (myself included). But, the college textbook ad in my email is an absolute pinnacle example of Amazon's ability to innovate in a very traditional "dull" category … and totally disrupt traditional business "followers". If you have ever been a parent helping to pay for college books costing hundreds of dollars a semester, you have to be jumping up and down telling your student to get online and rent. If you are a college bookstore, this Amazon ad could be your tombstone.

The trouble with being a follower, scraps are few, and margins are thin

It is getting very hard to be a "follower" and thrive these days, especially in retail. Innovators like Amazon and other ecommerce players are utterly and completely changing the game:

They have the widest and deepest assortment ("long tail")
They have the most efficient supply chains
They have optimized delivery … in as little as 24 hours
They sell huge volumes … and can change prices hourly or even quicker
They don't have to make money on everything they sell!

The real "elephant in the room" for traditional retailers is the last point: Amazon is an innovative consumer distribution company that does not have to make money on every product. Bricks and mortar stores have a heritage legacy and mindset that is "product centric". So, when traffic and sales increasingly shift to ecommerce, retail followers tend to go back to what they know … competing on selection and price. Racing Amazon to the bottom on price is a sure death sentence if you are competing in areas where they don't need to make a profit. Just ask the college bookstores.

Before Amazon … there was Walmart. There is still Walmart.

Walmart is still the largest retail company, and second largest business on the planet. Before Amazon, every retailer had to figure out how to survive when Walmart opened a store across the street. Today's retailers are still figuring out how to compete with Walmart stores, and the new omni-channel Walmart.

Sam Walton is credited a statement that is perhaps the best advice for today's retailers:

"If you want to compete with Walmart, do something we are not doing".

That pretty good advice for competing with both Walmart and Amazon. Retailers that are not taking a risk in pursuing innovation that differentiates their service, are taking a huge risk in becoming the "followers' that get left behind as consumers follow the leaders.

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