Amazon has undergone constant digital transformation, from its beginnings as a small mail-order bookstore in 1994, to a global organisation boasting $38 billion in revenue in 2017. How does it continue to stay ahead of the pack and harness the latest digital technologies to improve its own business processes?
Here are the top 5 tips manufacturing companies can learn from Amazon as they continue to digitally transform their business to remain competitive.
As a company continuously ranked at number 1 for numerous customer satisfaction Indexes, Amazon is incredibly customer-centric in both its technology and in the way it handles customer feedback.
Mike Bainbridge, chief digital technologist at Rackspace, sums up the approach:
“Look at the companies that have been successful; brands like Uber and Amazon, they have made it so easy for their customers to book taxis and buy goods, and it is all driven by technology. They know exactly what customers want … The key to this is to put yourself in your customer’s shoes, put your customer-centric business goals first, and deliver a seamless customer service."
Keep a customer-centric approach to any new technology implementation. Some things to consider when implementing digital transformation in a manufacturing context:
Learn more about the opportunities and risks by downloading the cheat sheet below:
Amazon’s entire business structure bypassed traditional retail distribution channels and went straight to suppliers – all using ‘digital technology’, AKA the internet and powerful software. This has given customers cheaper prices and the convenience of online shopping while opening up suppliers to international markets.
If that’s not technological disruption, then we don’t know what is.
As a company, Amazon has always been at the forefront of digital technologies to either expand its business offering (think Kindle or Amazon Web Services) or improve core business functions. For example, through its acquisition of warehouse robotics company Kiva, Amazon was able to optimise its warehousing systems to cut costs and increase its capability. In 2014, Amazon installed more than 15,000 robots in its US warehouses to prepare for the holiday season.
Be open-minded but strategic about digital transformation – not all manufacturing software solutions will do what they say they’ll do, and not all production environments will benefit from a new piece of software. Think in terms of future capabilities, business drivers and what your market is doing.
For example, a major soft drink manufacturer made their production information system available to the Consumer Complaint hotline telephone operators. This meant customer service representatives were able to link customer complaints to details about the production of that specific product, including production line, time, line leader and shift manager. This allows the company to react in real-time to product issues but also gives the manufacturing teams visibility into the value and impression they have created with their customer.
“Behind every successful brand is an agile business model driven by digital technology” – Mike Bainbridge, chief digital technologist at Rackspace.
Amazon has always experimented with new services to dominate new markets and displace other industry giants. Although it survived the dot-com crash in 2000, Amazon’s business model needed diversifying. In 2000, it launched Amazon Marketplace, the world’s first third-party reseller platform. But it didn’t stop there; in 2005, Amazon Prime was born. The membership offered free two-day shipping within the USA for an annual flat fee, and was so successful it spread to France, Italy, Germany, Japan, the United Kingdom, and Canada over the next eight years.
More recently, Amazon has established itself as a main player in web software and database management for businesses, with Amazon Web Services and DynamoDB, which has IoT capabilities.
But it wasn’t always smooth sailing. In the late 90s and early 2000s, this fast movement was chaotic - system outages caused facility shutdowns, inventory pile-up, and there was no preparation for new product categories.
We can learn from this too.
We’re not saying “go take risks in new markets”. The point here is the organisation must have the ability to move quickly should it decide to. There are three major parts to this:
“Culturally, a continuous focus on business model innovation keeps the company connected to its entrepreneurial roots — an advantage that should be coveted by even the largest of companies.” – Wired.com
From bookstore to second-hand goods, data services and grocery delivery, Amazon have continued to break into, and create new markets. No company can execute this amount of change without being responsive (see #3) and keeping its employees willing to move at the same speed.
Amazon boasts that its standards for employees are “unreasonably high”. Meanwhile, past employees have described experiences of having the exhilarating power to truly innovate, but within a highly competitive, punishing culture. “A lot of people who work there feel this tension: It’s the greatest place I hate to work,” says John Rossman, a former Amazon employee.
These stories tell us that being an Amazon employee isn’t a walk in the park, but that the workplace culture drives innovation and the best outcomes.
In addition, software is used to monitor individual performance, manage employee-employer relationships and drive resourcing decisions.
The New York Times sums it up: “Amazon is in the vanguard of where technology wants to take the modern office: more nimble and more productive, but harsher and less forgiving.”
Amazon’s infamous workplace culture allows it to “shoot for the moon” and win. Although this hardline approach isn’t appropriate for every workplace, there are some takeaways:
Some of Amazon’s lesser-known failed ventures include ‘Block View’ (the precursor to Google Street View) and an auction site that aimed to rival eBay.
These failed experiments were absorbed by the company’s enormous profit margins in other areas and it’s not likely many other companies could sustain these types of failures. However, it’s also unlikely Amazon would have had such enormous profit margins without the success of other experiments, such as its foray into ebooks, Kindle.
Amazon clearly aren’t deterred by failures, as shown by one of their latest ventures, the employee-less supermarket, Amazon Go. Reports say the beta version still has some pretty crucial flaws — time will tell whether this experiment pays off.
The lesson for digital transformation in manufacturing is simple: sometimes you need to experiment before investing all the capital into one solution.
Traditionally a manufacturing software implementation would start with the software product selection and then progress linearly.
But the explosion of the IIoT has opened up the market. We’re now seeing products and services entering the market that aren’t being created or offered by the traditional vendors. As a result, there has been a shift away from ‘proprietary only’ to more open-source solutions.
These open-source software models are free to implement and test before spending hundreds of thousands of dollars. AND these models give companies the opportunity to mix and match to suit their needs: it’s now much more possible to mix vendor software with open-source solutions.
No organisation should attempt to implement any technologies without this approach:
Think in terms of the customer’s user experience
Think in terms of the software’s flexibility, so systems can respond and grow quickly
Think about ‘technology success’ based on people and their use of it
Think in terms of small experiments to get the best outcomes
Finally, don’t be overwhelmed. Most CIOs and managers face the same problem: they’re so fixated on making sense of all the possibilities that they end up doing nothing.
“I think it’s always better to start experimenting and testing assumptions in order to get real feedback, instead of making huge PowerPoints,” Frank Piller of RWTH Aachen University said.
Wise words, Frank.
More and more manufacturers are realising the benefits of digitisation: that is, integrating their IT and operational software to achieve whole-of-business insights. We outline the opportunities and risks involved in such an endeavour in our free Cheat sheet: The opportunities and risks of integrating IT and OT manufacturing systems. Download it now.