Growth IQ

by Tiffani Bova

  There have been four significant product launches, which have driven huge change within two industries ripe for disruption: First was book publishing. Second was IT services. The third was a Blue Ocean strategy, with “voice” leading the way. The fourth was taking subscription services to retail shopping: Amazon Prime.

  IT services were in the middle of a transformation in 2002 when Amazon pushed itself into the fast-growing cloud services business with its introduction of Amazon S3, now known as Amazon Web Services (AWS), as “a simple storage service that offers software developers a highly scalable, reliable, and low-latency data storage infrastructure at very low costs.” In its first quarter of 2018, Amazon generated $5.44 billion in sales, up 40 percent, and AWS remains its profit engine even though it only accounts for only 10 percent of the company’s total revenue.

  Following up with Amazon Prime, which gave customers access to free two-day delivery for a recurring annual fee—since its launch in 2005, it has exceeded 100 million paid members globally in more than 8,000 cities and towns. The program has recently been extended to its business customers, called “Business Prime Shipping.”

  The next happened in 2007 when it introduced Kindle, the electronic reader, thus not only offering its own platform for special digital versions of its physical books to make delivery even faster than traditional bookstores, but also an accompanying platform for authors to circumvent traditional book publishing. Ten years later, ebook sales are on fire, literally kindled. Amazon’s U.S. customers read four times more digital books than physical books, and in India, the ratio is ten to one.

  In recent years, Amazon has expanded its dedicated hardware/software offerings to include home “assistants” Echo and Alexa, which represent alternatives to traditional Web searches (and thus Apple and Google). According to Mary Meeker, partner at venture capital firm Kleiner Perkins Caufield & Byers, voice is becoming more popular than typing in online search. Twenty percent of mobile searches were made using voice in 2016.

  In all four of these examples, Amazon needed to pursue Growth Path 8: Partnerships and Growth Path 9: Co-opetition, to see massive adoption and success in combination. The universe of products and services surrounding all these product introductions has enabled the company to pursue Growth Path 4: Product Expansion. As it introduced more subscription-based products, it now had the opportunity to pursue Growth Path 2: Customer Base Penetration, up-selling and cross-selling customers who chose to buy one-off purchases, which until now had characterized its business—even with the addition of millions of retail products. Yet with the benefits that recurring revenue brings the business, it also opens the door to Growth Path 7: Churn, which until then had been a hard metric to track.

  Now, with tens of millions of loyal users, Amazon continued to work on improving, expanding, and accelerating its delivery systems (Optimize Sales). For years it has used UPS and Federal Express, but now even those carriers were being strained by the sheer volume of Amazon deliveries. In 2013 it signed a Partnership agreement with the U.S. Postal Service (which benefited that perpetually troubled institution—and even was rumored to be experimenting with delivery by drones).

  Until this point, Amazon was primarily a U.S. operation, with a presence in Europe and other developed parts of the world. Now, in 2014, Amazon set out to expand its global markets, starting with a $5 billion development investment in India—Growth Path 3: Market Acceleration.

  In April 2018, Amazon launched the “International Shopping” experience within the Amazon Shopping app, making the shopping experience on mobile devices even better and more convenient for customers who live outside the United States. The International Shopping experience offers shopping in five languages, including English, Spanish, Simplified Chinese, German, and Brazilian Portuguese, with the ability to shop in twenty-five currencies and ship more than fifty-five million products to over a hundred countries around the world.

  Just a year later, having captured a sizable portion of capital goods sales and distribution in the United States, Amazon set out again on Growth Path 4: Product Expansion. This time it was to reverse the history of the company by turning away from the virtual world back into bricks and mortar—into consumer disposables (Amazon Go convenience stores), and most shocking, fresh food, with the purchase in 2017 of Whole Foods.

  Meanwhile, Amazon continues to grow its core business. It already had thousands of small manufacturers and retailers using Amazon as their primary retail channel. Now, the company set out after bigger games through Growth Paths 8 and 9. That is, through Partnerships, when possible, and with bigger, and more established firms, through Co-opetition. Among the latter were Kohl’s and Nike, the latter having once promised that it would never sell products through Amazon. By 2016, even it had seen the writing on the wall. In 2017 it struck a deal with Sears to sell Kenmore appliances and followed that up with DieHard batteries and tires. And in 2018 Amazon and Best Buy entered a partnership to sell Smart TVs.

  Amazon today is a juggernaut that has had few equals in business history. In 2015 it even surpassed Walmart as the most valuable retailer in the United States. Traffic on its website approaches one billion visitors per month. In November 2017, Jeff Bezos’s personal wealth surpassed $100 billion.

  What’s next? The only growth path that the company hasn’t pursued is Growth Path 10: Unconventional Strategies, though you can make the case that its blistering pace through the other nine growth paths is itself an unconventional approach. However, it is interesting to note that Jeff Bezos tweeted a “request for ideas.”

  He wrote: “I’m thinking about a philanthropy strategy that is the opposite of how I mostly spend my time—working on the long term. . . . But I’m thinking I want much of my philanthropic activity to be helping people in the here and now—short term—at the intersection of urgent need and lasting impact. If you have ideas, just reply to this tweet with the idea (and if you think this approach is wrong, would love to hear that too.)”

  And so, it would seem, Amazon has pursued all ten possible growth paths in little more than two decades. Given that precedent, one can only wait in anticipation for what the company will do in the next two decades. Amazon is the very embodiment of Growth IQ.

  Amazon, Inc.

  2016 Letter to Shareholders

  April 12, 2017

  “Jeff, what does Day 2 look like?”

  That’s a question I just got at our most recent all-hands meeting. I’ve been reminding people that it’s Day 1 for a couple of decades. I work in an Amazon building named Day 1, and when I moved buildings, I took the name with me. I spend time thinking about this topic.

  “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.”

  To be sure, this kind of decline would happen in extreme slow motion. An established company might harvest Day 2 for decades, but the final result would still come.

  I’m interested in the question, how do you fend off Day 2? What are the techniques and tactics? How do you keep the vitality of Day 1, even inside a large organization?

  Such a question can’t have a simple answer. There will be many elements, multiple paths, and many traps. I don’t know the whole answer, but I may know bits of it. Here’s a starter pack of essentials for Day 1 defense: customer obsession, a skeptical view of proxies, the eager adoption of external trends, and high-velocity decision making.

  ACKNOWLEDGMENTS

  ‘A’OHE PU’U KI’EKI’E KE HO’A’O ‘IA E PI’I

  No cliff is so tall it cannot be climbed.

  THEY SAY A JOURNEY OF ten thousand miles begins with a single step, or, in my case, a single whisper. Welcome to step 3,107 of my Growth IQ journey. The journey of writing this book began in 2013 while I was speaking at an event. I found myself on stage with a number of bestselling authors and people who I had admired over the years. It was at that mom
ent that someone said to me, “Hey . . . why don’t you have a book?” That one single question I took as my first sign, my first whisper. Then it happened again, and again and again. By that point it was a loud scream in my head that I couldn’t quiet down. So I did what I had always done when I faced a professional crossroads: I reached out to my amazing network (my tribe) and asked what they thought. But I didn’t just reach out to anyone. I reached out to those who had set a high bar for me to aspire to achieve.

  I stand on the shoulders of giants: The first call was to Seth Godin. We had been acquaintances since 2000 and shared the stage a number of times. Without hesitation, Seth was quick to respond, sharing some great advice. Then I reached out to Dan Pink, Josh Linkner, Nancy Duarte, Naomi Simson, Guy Kawasaki, Whitney Johnson, Geoffrey Moore, and so many others who were willing to share their invaluable wisdom with me. And I can’t forget my full-circle moment. From writing one of the first business books I ever read (In Search of Excellence), to giving me a quote for my book, Tom Peters, I’m so glad we met. I am humbled and forever grateful to each of you for your willingness to support me and this book. Thank you!

  My Team: Getting a book like this done is never just the hard work of the author—it takes a village.

  First, Mark Fortier. With his amazing lineup of clients, business authors, and thinkers, I knew he was who I wanted as my publicist. He just didn’t know it yet. After I relentlessly hounded him, he at last gave me fifteen minutes, which turned into an hour, which turned into him becoming the most pivotal person on this journey for me. I am forever grateful to you, Mark!

  My literary agent, Jim Levine, who is the best agent a book author could ask for. He can leap NYC subway turnstiles in a single bound, while holding on to his briefcase and getting me on the right train (really) to meet publishers without missing a beat. Beyond his transportation creativity, he was masterful in getting to the heart of the book I was contemplating. His guidance was just what I needed to structure my thought process, and, more important, protected me from my own self-doubt. Thank you, Jim!

  Penguin Portfolio: To the Dream Team of Adrian Zackheim, Will Weisser, Margot Stamas, Taylor Edwards, and especially Kaushik Viswanath, for your patience, guidance, and the amazing editing with such an aggressive publishing schedule. To the graphics team who made my book brilliantly come to life on every page—thank you!

  My Collaboration Team: I’m sure each of you had no idea what you were getting into when you started working with me. But make no mistake . . . all of you helped me find my voice and create something we all can be proud of. Peter Smith, what can I say? You are a star in my life’s constellation. Mike Malone, you were patient, understanding, and a calming force in all the madness. Brian Solon, the best editor a tired road warrior could ask for. It didn’t matter what time of day or night I dropped off the hundreds of pages of edits on your doorstep, you greeted me with a smile. Who says writing the old-fashioned way with pen and paper is dead? Not us! And finally, Tanmay Vora, who used his amazing talent to create the perfect sketch notes to visually bring my stories to life. All of you made this possible, so, thank you!

  Work: My colleagues and friends at Gartner for teaching me what it meant to get compelling and sometimes complicated thoughts down on paper in an engaging way, especially Hank Barnes and Christine Adams. You challenged me to bring my A-game no matter the circumstances. I learned so much from each of you and you should recognize many of these lessons as ones we learned together. Salesforce for being a #DreamJob—what an amazing company to be part of. Each and every day I am inspired by what the entire Salesforce Ohana, especially our customers, can accomplish when we are all focused on the same goals. And, of course, Marc Benioff, for being a CEO that has taught me that “doing well by doing good” is what it’s really all about. Mahalo!

  My Tribe: For those who were supporting me behind the scenes. I feel so lucky to be surrounded by people who never thought for a minute that I couldn’t do this. There are so many I could thank, but I hope you know who you are. I appreciate each and every one of you and the role you have played in this book and my life.

  My Family: Finally, I am so grateful my parents left Boston in 1957 and moved to Hawaii, where I was born and raised. I couldn’t have asked for a better place to call home. My mother who has always been my rock and lifelong teacher even if she didn’t know it. She showed me that strength comes from within, you just have to find it. My grandfather, who visited me from Boston each year for three months, for fifteen years, until he passed away. During that time, he took me on trips around the world and exposed me to different cultures and ideas, shaping my perspective of humanity and spurring my curiosity. He was my hero and my best friend—I just wish he could have seen me grow up. To my father, I’m so glad we were able to reconnect, play some golf, and spend time together before you were gone. IDLR, for your enduring love and support. You never hesitated to pick me up when I slipped on a banana peel, when I doubted myself, didn’t think I could get it done, or felt defeated by the process. This book would not have been possible without you.

  Me Ke Aloha Pumehana.

  NOTES

  THE ONE THING IS—IT’S NEVER JUST ONE THING

  “it’s a combination of many things”: Jeff Bezos, Amazon 2018 letter to shareholders, www.sec.gov.

  “Be prepared to spot”: Valentina Zarya, “15 Powerful Women Share the Best Career Advice They’ve Ever Received,” Fortune, October 2, 2017, http://fortune.com/2017/10/02/most-powerful-women-advice/.

  “Success is a lousy teacher”: Bill Gates, The Road Ahead (New York: Viking, 1995), p. 50.

  87 percent of all companies: Matthew S. Olson and Derek van Bever, Stall Points: Most Companies Stop Growing—Yours Doesn’t Have To (New Haven, CT: Yale University Press, 2008).

  85 percent of the executives surveyed: Chris Zook and James Allen, “Barriers and Pathways to Sustainable Growth: Harnessing the Power of the Founder’s Mentality,” Bain.com, Bain & Company, Insights, July 20, 2016, www.bain.com/publications/articles/founders-mentality-barriers-and-pathways-to-sustainable-growth.aspx.

  “Growth is never by mere chance,”: Attributed to James Cash Penney. Original source unknown.

  “Follow effective action with quiet reflection”: “High Time for ‘Think Time,’” Drucker Institute, February 16, 2011, www.druckerinstitute.com/2011/02/high-time-for-think-time.

  PATH 1 CUSTOMER EXPERIENCE

  “start with the customer experience”: Biz Carson, “Steve Jobs’ Reaction to This Insult Shows Why He Was Such a Great CEO,” Business Insider, October 22, 2015, www.businessinsider.com/steve-jobs-reaction-to-insult-2015-10.

  three thousand business-to-business (B2B) companies: B2B Customer Experience: Winning in the Moments That Matter, KPMG Report, May 2017, https://home.kpmg.com/content/dam/kpmg/uk/pdf/2017/05/b2b-customer-experience-report.pdf.

  Sixty-eight percent of C-suite executives: “Incumbents Strike Back,” report, IBM Institute for Business Value, February 2018.

  spend more for a better customer experience: Vala Afshar, “50 Important Customer Experience Stats for Business Leaders,” Huffington Post, October 15, 2015, www.huffingtonpost.com/vala-afshar/50-important-customer-exp_b_8295772.html.

  how customers feel: Marc Beaujean, Jonathan Davidson, and Stacey Madge, “The ‘Moment of Truth’ in Customer Service,” McKinsey Quarterly, February 2006, www.mckinsey.com/business-functions/organization/our-insights/the-moment-of-truth-in-customer-service.

  revenues 4–8 percent above their market: Frédéric Debruyne and Andreas Dullweber, “The Five Disciplines of Customer Experience Leaders,” Bain.com, Bain & Company, Insights, April 8, 2015, www.bain.com/publications/articles/the-five-disciplines-of-customer-experience-leaders.aspx.

  spend an average of 13 percent more : “Good Service Is Good Business: American Consumers Willing to Spend More with Companies That Get Service Right, According to American Express Survey,” American E
xpress, May 3, 2011, http://about.americanexpress.com/news/pr/2011/csbar.aspx.

  customer service is a draw: Ibid.

  “Gillette has lost U.S. market share”: Robert Hetu, “Product Is No Longer King,” Gartner Blog Network, January 3, 2018, https://blogs.gartner.com/robert-hetu/product-no-longer-king/; and “Gillette, Bleeding Market Share, Cuts Prices of Razors,” FoxBusiness.com, April 4, 2017, www.foxbusiness.com/markets/2017/04/04/gillette-bleeding-market-share-cuts-prices-razors.html.

  Gartner predicts that: “Gartner Reveals Top Predictions for IT Organizations and Users for 2016 and Beyond,” Gartner.com, Newsroom, press release, October 6, 2015, www.gartner.com/newsroom/id/3143718.

  Zappos campus to attend: “School of WOW Customer Service Training,” ZapposInsights.com, www.zapposinsights.com/training/schoolofwow?gclid=EAIaIQobChMIuOGdr7C12AIVXrbACh0_SgBcEAAYASAAEgK0cPD_BwE.

  “Whatever you do, do it well”: Attributed to Walt Disney. Original source unknown.

  “In today’s retail environment”: “SEPHORA Pioneers New Retail Innovation with Launch of First Small-Format Concept Store,” Business Wire, July 17, 2017, https://finance.yahoo.com/news/sephora-pioneers-retail-innovation-launch-110000943.html.

  More than a hundred stores: Jennifer Calfas, “T.J. Maxx and 5 Other Stores That May Actually Survive the Death of Retail,” Time.com, Money, June 29, 2017, http://time.com/money/4835442/retail-apocalypse-tj-maxx-zara-dollar-general.

  43 percent of consumers: TimeTrade, The State of Retail Report 2017, TimeTrade.com, https://www.timetrade.com/resource/state-retail-report-2017.