Welcome to the jungle

By Ben Thompson

The Amazon rainforest contains the largest collection of living plant and animal species on the planet – and like its jungle namesake, the world’s largest ecommerce platform holds a similar wealth of weird and wonderful specimens just waiting to be discovered. As well as everyday items such as clothing, music and consumer electronics, the internet explorer can also find a huge range of rarer treasures. Want to reduce your carbon footprint? How about a 400W self-assembly wind turbine to help get you started. Looking for that unusual gift? Check out the original Andy Warhol screenprints in the ‘Everything Else’ department. Fancy getting married? Try the 10x18-foot wooden wedding chapel, complete with front porch and steeple (sorry, bride not included). Shopping has never been this easy.

Yet while some may still think of Amazon as simply an online retailer, the reality is very different. From its bookseller origins, the company has grown to become one of the world's biggest technology organisations, a platform that attracted over 615 million visitors last year and on which more than one million active retail partners do business worldwide. An increasing number of diverse businesses are built on the Amazon.com platform - including the online operations for Target, Lacoste, Marks & Spencer and Timex Corporation - and the company's relentless focus on innovation helps Amazon maintain its status as a high-tech pioneer. From new hardware development to the definition of new business models, from building ultra-reliable storage services to a massively scalable computing cloud, from pervasive monitoring and performance control to revolutionary efficient software architectures, Amazon is recognised as being on the bleeding edge of technology development.

"We have three different businesses," explains the company's CTO Werner Vogels. "One is the retail business, and that's the one that people are most familiar with. Then there's the seller business, which consists of three major streams - the seller-only Amazon website, the enterprise services business where companies launch ecommerce operations on top of our platform, and services such as Fulfilment by Amazon that enable businesses to take advantage of one of the most advanced fulfilment networks in the world. And then there's the developer business. For all of those, we take the same approach: we want to be the world's most customer-centric company."

For Vogels, this means focusing on continuous interaction with the customer-base - generating what he calls a 'feedback loop' - to ensure that the services Amazon provides are the right fit for its customers. "We have a process that we call 'working from the customer backwards' to develop new technologies, where we start with what the customer needs and then work backwards from that point to make sure that the technology we implement really does what we want it to from a customer standpoint," he explains.

Plotting a path

Take Amazon's popular and much-copied product review system, for example. The site had reviews from the outset, and the idea of letting the market decide what's hot and what's not has played a key role in helping to make the company such a trusted seller - even non-customers admit to checking out the user reviews before eventually buying elsewhere. But as other retailers jumped on the user review bandwagon, Vogels and his team decided to take the concept a stage further. By adding a simple button asking 'Was this review helpful to you?', Amazon prioritised the most relevant reviews - those that had helped customers make a decision over whether or not to buy a particular product, both positive and negative - and provided a simple way for customers themselves to regulate the quality of the reviews. A recent article in Business Insider suggests the move has had significant business benefits. In 2008, Amazon brought in $19 billion, of which 70 percent came from media products such as books, movies and music - products that also make the best use of the reviews feature. The study suggests that promoting the most helpful reviews has increased sales in these categories by 20 percent (one out of every five customers decides to complete the purchase because of the strength of the reviews) - adding a projected $2.7 billion to Amazon's top line.

It is often said that the best innovations are the ones that seem so obvious. And while Vogels is at pains to stress that such developments don't just happen without a considerable degree of effort, he does concede that all Amazon's technology improvements start from a very uncomplicated concept. "You have to find ways in which your customers can be more efficient at what they want to do," he explains. "We have a number of high-level goals around how quickly customers can find items, how easily they can browse, how they can check out and how they can purchase things, and making that as efficient as possible for our customers is key for us."

If you focus on the customer, continues Vogel, you take the long-term view. "You're not looking at the next quarterly success; you're looking at how you can make sure that Amazon is the world's most customer-centric company over the long-term, and how you can innovate on behalf of the customer to make sure that the things you do really matter. In this sense, everything from reviews to web services can be thought of as supporting tools for doing the right thing for the customer. In terms of technology, it means seeing whether we can take a more cost-effective approach or have better scalability and better reliability, or whether can we help our customers make sure they make the right purchasing decisions."

Of course, efficiency is one measurement of success, but there is also a more intangible quality that must be achieved for such a platform to be loved by its user-base: ultimately, it must also provide an enjoyable experience. "Customers are very vocal with what they appreciate and what they don't," he continues. "So while our customer service is known for being excellent, customers also have the power and the tools to actually give feedback directly to the technology teams. In terms of innovation, we make sure that all these small experiments that are going on all the time with new technologies, with new customer-facing functionality, can be continuously measured."

Measuring value

Amazon has taken a number of steps to ensure any improvements to the platform add real, measurable customer value, and has built a large infrastructure to ensure it can monitor and assess the impact of changes to the site.  For instance, all Vogel's teams have been given the instruction to innovate continuously on behalf of the customer, constantly looking at where improvements can be made. What makes a particular service a best seller? Is it better information, better presentation or different sources? "Our goal for customers is that they can find what they are looking for as fast as possible, in the most efficient way, in the minimum number of steps," he explains.

Vogels maintains that this is only possible via constant monitoring of the customer experience. Consider the following example. A customer wishes to download a movie to watch on the long Seattle-NYC flight, and sends Amazon an email with a question about its video-on-demand service. Not only does the service team answer within the hour, they also include a link to indicate whether the answer solves the question or not. Choosing 'yes' takes the customer to a 'Thanks for your feedback' message, which not coincidently puts them back onto the Amazon site and contains a further link to provide additional feedback. If you respond 'no' to the original question, you are taken to a similar page to rephrase the question. This simple feedback mechanism provides a number of important benefits. First, it demonstrates Amazon actually cares whether the user's problem is resolved satisfactorily; it allows the customer to easily submit another question if not satisfactorily resolved; it allows you to quantify the performance of the service department; it identifies areas where better answers are needed; and finally it helps identify tricky problems that can be corrected.

Such attention to the minutiae of customer service interactions helps the company refine its offerings and continuously improve. And while conceding that the management team makes most of the long-term big technology bets, Vogels insists that many of the ideas actually come up through the organisation. "Amazon is very flat in terms of its organisational structure and we have a tremendous focus on innovation, so we've got all sorts of paths in which key information and ideas can travel to those who actually make the decisions," he says. "I think most of the technologies as you see them in Amazon - whether it is reviews, whether it is Listmania, whether it is Gold Box - have come out of the grassroots."

Such a meritocratic hierarchy, where the best ideas rise to the top, is essential to the company's reputation as an innovator. Encouraging ideas that add value is a philosophy that is nurtured right through the company culture, from the C-suite down to the recruitment of new hires, as Vogel elaborates. "In terms of our personnel, we look for a very particular individual: they need to be able to think in the way that the customer thinks," he says. "It's very important to have a culture where everybody understands what the core values of the company are. New starters are often surprised at how important focusing on the customer is to us and how good Amazon is at doing that. So having a core value throughout the company that everybody signs up to is essential."

The importance of teamwork

The other essential trait that Amazon tries to instil in all staff is the ability to collaborate effectively - something that is particularly important in the technology function, which by its nature involves small teams focused on specific projects. "Our development teams talk to each other all the time," says Vogels. "Even though we work in very small teams, Amazon itself is a very large technology operation and it is essential that everyone cooperates and collaborates all the time."

According to Vogels, teamwork is key to delivering fully rounded ideas that really work for the customer - whether that customer is internal or external. Coming from a background in academia (prior to joining Amazon in 2004, he spent a decade as a research scientist in the Computer Science Department at Cornell University looking at scalable reliable enterprise systems), Vogels admits to being energised by the way business organisations approach the issue of R&D. "In academia there's a real focus on individual achievement," he says. "Although there is some collaboration among faculty and there are student teams working together, the work is still rather individual, as is the reward structure. In industry, however, building real technology is a multi-disciplinary activity. First of all, you need good engineers and program managers to build something that really works. But there are also legal implications, there's an impact on tax, there's impact on PR, on marketing - all of those functions make up a team, and you can only build and deliver a product to your customers as a team."

It is a challenge Vogels relishes. "I think you can have brilliant ideas, but taking them from the idea phase to the stage where they really mean something for your customers is much more challenging than I anticipated when I was still in academia," he continues. "I did some start-up work alongside my academic work, but even so the path going from idea to actual implementation is a long journey, and when you have to operate at the scale of Amazon that's a whole different story again. Suddenly, issues like reliability, performance, availability and cost-effectiveness play a major role in all of the decisions you make along the way."

And in contrast to Google, which famously encourages developers to spend 20 percent of their time on individual projects outside their day-today responsibilities, the team ethos rules at Amazon. The motivation comes out of the idea that the things that you do have a direct impact on the customer. "Doing things that matter to people is tremendously motivating, and so most of our engineers and program managers - and indeed everyone else that is working on our products - find tremendous reward in making sure that our customers have a better experience. We often have meetings where we start off with a 'customer voice' - a success story, even sometimes a negative story, of a customer's experience of buying on Amazon - and use those stories to drive our services to become better."

Once again, it all comes back to the customer. "We don't just want to be the most customer-centric company on the web; we want to be the most customer-centric company on the planet, period," concludes Vogels. "I think that if you look 10 years from now, you'll see that many of the innovations Amazon has implemented have had a tremendous impact on how customer-centricity is viewed."

Amazon's logotype is an arrow leading from A to Z, representing customer satisfaction (it forms a smile) and the goal to have every product in the alphabet. "If your catalogue becomes larger, more customers will come to your site, which makes it more interesting for sellers," explains Vogels. "That means more sellers come to your site, which means your catalogue grows. It's what we call a flywheel, and the more energy you put into innovation in the flywheel, the better you're actually able to execute."

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Amazon.com fast facts

Founded: 1994

Headquarters: Seattle, Washington

Area served: Worldwide

CEO/Chairman: Jeffrey Bezos

Revenue: $19.16 billion

Operating income: $842 million

Net income: $645 million

Employees: 20,500

Website: Amazon.com