Summary:

• Amazon’s development consistently leads to and enables Jeff Bezos’ Space project.
• Amazon & Blue Origin duet constitutes a key to forming a strategic advantage of Amazon itself in this Space conquering project.

The goal of the series is to clarify perspectives of strategy making in XXI century. To sum up the line of thought discussed previously, the dynamism of VUCA (Volatility, Uncertainty, Complexity, Ambiguity) makes nowadays difficult to purse a steadfast strategy. Even the Too Big to Fail or the Big Tech companies do not have comfortable assurances of strategic advantage. Still, folk from business cannot resist striving for seemingly impossible. Here is the case of Amazon’s strategy for achieving an unbeatable strategic advantage.

The news has recently broken out – Jeff Bezos is stepping down as CEO of Amazon. The official reason is that Jeff is going to concentrate on the development of his Space-oriented Blue Origin company. The unofficial one – it is the fulfilment of his long-life dream, a maturely conceived mission to save humanity.

My argument here is that Blue Origin is the key to achieving Amazon’s strategic advantage. Jeff owns both companies. Moreover, Jeff has been selling billions of dollars in Amazon stock to help finance Blue Origin. This has enabled Blue Origin to follow a methodical, long-term plan without needing to generate much revenue in the short term. Just as Elon Musk’s Space X ventures into the Space robustly to win over contracts from NASA and survive, Jeff prefers a rather secure way. Just as Blue Origin’s motto proclaims: Gradatim Ferociter (step by step, ferociously).

After twenty years of patient development the strategy pays out. In May 2020, Blue Origin was awarded $1 billion from NASA to produce initial designs for a human-landing system for the Artemis 3 mission, which aims to land humans on the moon in 2024. Moreover, NASA also greenlighted Blue Origin for future Earth observation missions, planetary expeditions, and satellite launches with its New Glenn rocket.

As there is no reason to doubt strategic consistency of Jeff, it is certain that there must be a place for Amazon itself in the Jeff’s space mission. Which is …? Indeed, a billion-worth question …

In the beginning, there was this boy who, at his grandpa’s estate, was reading ferociously science fiction books about conquering the Space. Then, there was a Princeton university graduate in electrical engineering and computer science, who kept his cherished dream of Space conqueror as the hidden powerful motive behind his daring business undertakings.

Finally, in May 1997, Amazon went public as eCommerce company. It started with books – these customary carriers of knowledge. In the next stage of its development, Amazon expanded its product line with kinds of goods for comfortable human existence such as DVDs, CDs, software, also beauty and health products, gourmet food, groceries, jewellery, toys, consumer electronics, etc.

Further development embraced (i) a direct delivery with Amazon Fresh, (ii) the acquisition of the retailer Whole Foods Market with over 400 stores, (iii) innovative chain of groceries Amazon Go. With the expansion of markets and volume trades, there came a need for own logistics company, namely, Amazon Maritime. More to that, in order to increase appeal of the brand, the enterprise of content developing came to the fore (Amazon Studio, Amazon Publishing, Amazon Games, etc.), consistently, enforced with distribution channels, namely, Prime Video, Amazon Music, Twitch, and other subsidiaries: Kindle e-readers, Fire tablets, Fire TV, and Echo devices.

Tech innovation is intrinsic to eCommerce business. As early as 2002, Amazon Web Services was launched with the perspective to create Amazon’s retail computing infrastructure. Now AWS occupies a dominant 32% of all cloud computing market in 2020 Q4 (Source: Canalys estimates, February 2021) with revenue of $12.7 billion for Q4 2020, compared to $9.95 billion for Q4 2019 (Source: ParkMyCloud). It is well ahead of its rivals: Microsoft’s Azure with 20% of market share, Google’ss Cloud – 7%, Alibaba’s Cloud – 6%.

To generate innovative technologies for search and advertising, in 2003 Amazon established A9.com company. Later, in 2015, with the goal of the future – AI, machine learning, deep learning, etc. – AWS acquired Annapurna Labs, an Israel-based microelectronics company.

Then came the grand endeavour to conquer the Space: Kuiper Systems and Blue Origin projects. The first one aims at delivering fast, affordable broadband through a constellation of 3,236 low Earth orbit satellites. The latter (though not an Amazon’s subsidiary, but of the same owner) is destined to pursue the glorious vision for humanity as presented by Jeff Bezos himself on May 9, 2019. Jeff underpins the necessity of the human conquest of space with the increasing number of humans, hence, significant energy shortages and immense pollution problems. Certainly, as he himself acknowledges, it is a vision for the next generations to achieve as the vision engulfs gigantic space colonies with 1 million people living on them. The difference between Jeff’s vision and Musks’ life-on-Mars project is practical. According to Jeff, vicinity to the earth enables ‘normal’ communication with one-day trip from the space colony to Earth. Compare with the 7 months long trip to Mars!

Here lies the key to the establishment of Amazon’s strategic advantage. It comes with the question: how is the space colonies going to be built? As a matter of fact, U.S. private companies, such as Space X and Blue Origin, is already leading the space race. It is not going to change as the private initiative has already accumulated a necessary acumen and know-how to enable projects of such a scale. NASA might assume a role of collaborator and supervisor of national interest in the project. For now, there is a fundamental need to create a basic infrastructure of the space industry to enable all kinds of companies to join the Project.

Here is the crux, strategic advantage will be established in the process of creation of such an infrastructure OWNED by Amazon and Blue Origin, likely, supervised and participated in by the U.S. Government.

Remember, Amazon did not start from scratch. There was an infrastructure already in place: transportation, electronic payment systems, telecommunication, it all existed already. As to the space industry, there is no infrastructure for all-embracing space projects. Doubtless, Jeff intends to be at the centre of the process with Blue Origin and Amazon inclusively as both companies will constitute a complete value chain for such a project of scale.

As Jeff says, ‘We are going to build a road to space’.

Here is an actual prove of the process in question. Amazon Web Services is already providing ground infrastructure for companies to process and analyse data from satellites and is now looking to attract new customers by offering more customized services such as cloud-based satellite operations and mission control. Moreover, AWS is now developing a new service for startups that would be akin to full-service consulting, using partner companies to help startups accelerate their entrance into the space market. As Clinton Crosier, director of aerospace and satellite solutions at AWS, puts it: “AWS is moving into space in a very big way”. “We built a team of experts from across every facet of the space industry: from satellite and spacecraft design to launch operations to on-orbit operations and satellite command and control to space exploration.” (Source: spacenews.com, February 9, 2021)

Amazon stands to Blue Origin as a reliable rear-garde to an audacious avant-garde. Amazon – Blue Origin duet is a kind of riverbed for many big and small boats to cluster and follow the stream. It sounds like a sure strategic advantage in the human endeavour of conquering the space.

Gradatim Ferociter!

Mindaugas Kubilius

Summary:

• We have firmly entered the age of the “now economy” when immediacy and responsiveness to unexpected consumer demands can make or break a supply chain strategy. Elastic logistics is crucial to finding supply chain solutions in 2021.
• Millennials live in the regime – klick & receive with an immediate effect. eCommerce should smoothly function in the regime – LOGISTICS IS EXTENSION OF INTERNET.
• The Green trend is on the way to revolutionize consumption culture, for example, a demand for green holistic experiences, which opens up new strategic perspectives for eCommerce & Logistics development.

Everyone is entitled to have a dream. Even a pandemic cannot compel to stop dreaming. Human nature is the ultimate force. So, what does a typical business leader dream about despite uncertainties of our time? An ordinary answer goes like this: sustainable growth, breakthrough technologies, new heights of profitability, etc. Timeless wisdom (business scholars including) abundantly proves the case that not just tangible gains, but the blissful sense of victory is the real prize for a restless soul. Victory makes one‘s life fulfilling, and, at the same time, provides with a renewed potential to aspire to new heights with even more uplifted sense of self-fulfillment.

This state of enduring victory is called strategic victory. A victory beyond any doubt, beyond any enemy’s reach. It is a decisive destruction of the enemy without any possibility of resurgence or revanche. Invincible! In the vein, strategic victory necessitates strategic advantage.

It just these – rather military – notions are not popular in business. Strategic advantage is something which is exceedingly difficult to sustain in the ever-changing market. Instead, we tend to use the concept of competitive advantage. Because it is more real: we compete and struggle daily, and … never win decisively.

Still, we cannot resist the exigencies of human nature to never dream and strive for strategic advantage. Up in arms! Let us attempt to look at a plausibility of strategic advantage in business from the perspective of our time. Take the Big Four. Could we say that Alphabet (the parent company of Google), Amazon, Facebook, and Apple have succeeded in creating a strategic advantage?

In respect to Amazon, has the dominant market leader in eCommerce with 50% of all online sales going through the platform secured strategic advantage? Recent developments in eCommerce doubtlessly tend to endorse a firm ‘yes’. The survey “COVID-19 and E-commerce” by UNCTAD (United Nations Conference on Trade and Development) and NetComm Suisse eCommerce Association Experience of the COVID-19 pandemic has shown how changed online shopping behaviors. According to the survey of about 3,700 consumers in nine emerging and developed economies, online purchases have increased by 6 to 10 percentage points across most product categories. Companies that put eCommerce at the heart of their business strategies are prepared for the post-COVID-19 era. According to Carlo Terreni, President, NetComm Suisse eCommerce Association, “In the post-COVID-19 world, the unparalleled growth of e-commerce will disrupt national and international retail frameworks.”

Amazon growth for 2020 proves the case. Amazon’s market capitalization by the end of Q2 of 2020 gained $570 billion, with $5.2 billion in quarterly profit in Q2, and was the largest ever in its 26-year history. It broke that record again in Q3 with $6.3 billion in quarterly profit, up 200% year-over-year. At that time (2020 August) the company was worth more than $1.7 trillion, making it the second-most valuable company in the U.S., trailing only Apple. The company is now worth $1.49 trillion. That makes Amazon one of the largest companies in the world, trailing only Microsoft (worth $1.54 trillion), and Apple – worth $1.61 trillion (Source: Forbes / VentureBeat / CNBC).

Well, does it mean that Amazon has finally fulfilled the dream – THE strategic advantage? Is Jeff Bezos a king among other kings (a sort of primus inter pares) who has surpassed the first trillion of company’s net worth? The truth is that any businesses, despite its size in the rapidly changing and dynamic world, cannot rely on a static competitive advantage anymore. There are some other dragons out there in eCommerce. To name just couple of them: Alibaba with the market capitalisation of $720.36 billion, Jingdong Mall with $155.51 billion and raising (Source: companiesmarketcap.com, January 2021), etc.

Well, the numbers are tempting to conclude that Amazon is still far ahead of the Chinese dragons. However, behind the numbers there are reality factors ambushing a Big Fat Cat. The factors might be angry and daring. Remember, in the real-world black swans tend to slay dragons. The true question is this: what are dynamism and force of disruptive factors in eCommerce? Let us list some of them.

Economy NOW & Elastic logistics. It seems that comfortable days of fixed supply and demand are behind us. We have firmly entered the age of the “now economy” when immediacy and responsiveness to unexpected consumer demands can make or break a supply chain strategy. According to Harvard Business Review (September–October 2020), an absence of supply chain flexibility would be the most vulnerable to damage from sudden supply and demand re-configurations. In post-pandemic 2021 and beyond, supply chains need to be ready to expand or shrink capacity depending on an ever-changing demand of industry variables. This practice is called Elastic logistics, and it is crucial to finding supply chain solutions in 2021.

Urgency of delivery. According to World Economic Forum, 60% of the earth’s population will live in cities by 2030, 70% – by 2050. The recent pandemic has taught us one great lesson. It is SPEED. In the urban consumer’s mind, delivery speed must reciprocate speed of ordering, which, in turn, incites urgency of longing for a good already paid. Millennials live in the regime – klick & receive with an immediate effect. In the consumer’s mind, there is less and less difference between receiving information and getting service done. To put it simply, eCommerce is already functioning in consonance with the formula: LOGISTICS IS EXTENSION OF INTERNET. Therefore, to make a delivery as speedy as possible, the supply chain should become increasingly responsive and flexible.

Green packages. Green awareness, sustainable thinking have long become beacons of progressive humanity in our times. Covid experience has added safety awareness to the current factors, which currently revolutionize consumer behaviour. Consumer is becoming increasingly specific what brands constitute his welfare. He wants to be confident that acquired goods are safe & sane in all aspects. In turn, this constitutes a holistic approach to consuming, a kind of green packaging. With the climate change issue, Green Tech progressively goes global, at the same time, inciting scale changes in consumption culture. No doubt, the challenges will impact supply chains at all levels of distribution in recent future.

So, the urgent question is this: how should eCommerce companies respond to the factors?

It is clear that:

• eCommerce should cognise (use AI) & facilitate its clients (practice Elastic logistics)
• eCommerce should integrate supply chains and make them responsive & flexible
• eCommerce should respond to the changing consumer culture by proposing green holistic experiences via smart packaging of its product & services

Green trend & Localisation. To facilitate its clients, eCommerce should not only become AI-equipped, but also become close to producers with which clients are confident. In the perspective of the Green trend, food producers are likely to be the principal target in projecting green packages by eCommerce companies. Furthermore, the companies will go beyond the food industry to enlarge green holistic experiences. It is a matter of strategic development for the Green trend to incorporate other local brands into green packages.

I perfectly aware that this kind of ‘localisation’ trend is now not pressingly obvious. However, given the progressive enlargement of farmers‘ production spots in supermarkets and other signs of the green revolution, this trend could explode in a nearby future.

How is Amazon going to respond to this looming localisation trend and, thus, sustain its competitive advantage from the being BIG vantage point?

It is a one-million-dollar question, already creating a new strategic perspective for new LOCAL players in eCommerce and Logistics.

Mindaugas Kubilius

Next: Strategic challenges in XXI century (2): Amazon case

Summary:

• An urgency for answers leads to the urgent search for a reliable making of strategy in the dynamic  times.
• How to make a value creation process reliable in the constant changing circumstances?

Times are difficult and unpredictable. It cries out for new solutions – difficult and unpredictable ones, which means – highly insightful. I do not say „creative” on purpose. This popular „creative” might mistakenly mean good per se. However, it does not necessarily lead to „effective” and „real”. So, let us leave the „creative” aside. For now we need to get real. Or die in the uneven battle against the Forces: complex systems & dynamically changing environment.

We are getting increasingly accustomed to daily disruptions, deconstructions, onslaught of unseen factors. More to that, normally a well-established ordnung of business world is being shattered by a somehow unfamiliar symbiosis between progressive technologies & political agenda, looming collapse of global trading network as the geopolitical forces such as China, USA sequentially become political enemies, while liberal societies themselves are undergoing transformation.

Living according the rhythm of pandemic fluctuations, otherwise fixed habits of relaxed consumer societies fall prey to new social demands. Well, it is a different case in authoritarian states with disciplined societies and politically subdued „free market” economies. China is priding itself as doing just fine in all respects. It excels itself as the pattern of an exemplary state for the dynamic times. What is even more scary, technologies become tools to tighten controls in either world – free as well as authoritarian.

Let us put it expressively: the Capitolium of Free World Order is being attacked ferociously NOW.

Nowadays it is becoming increasingly difficult to understand what is „free“, „beneficial“, „true“, „ethical“, even „global“. This situation in business literature has long become known as VUCA: Volatility, Uncertainty, Complexity, Ambiguity. But never to such an extent!

An urgency for answers leads to the urgent search for a reliable making of strategy in the dynamic times. So, the question for leaders is this: how to make a value creation process reliable in the constant changing circumstances?

It has long become evident that the traditional strategy making, facing the complex and dynamic environment, has reached its limits. Nevertheless, many managers are still following the old approach, which, worthwhile for decades of stable environment, has become redundant. The problem is that it has become difficult to revolutionize ones’ entrenched habits of already deficient strategic thinking. However, the old good ways of strategy making does not hold against the pressure of the new complex realities.

To wrap up, complexity and dynamism of our times are constituted of multifaceted & multi-layer amalgam of new factors: from new disruptive technologies to unprecedented geopolitical transformations.

Now the question is: what constitutes a strategic advantage in the new world.

Next: Strategic challenges in XXI century (1): eCommerce & Logistics

Mindaugas Kubilius