Identity leads to action. A company with a strong identity, when backed by the ability to deliver, tends to win. Few identities are clearer and more specific than that of Amazon. “Start with customers, and work backwards,” intoned Jeff Bezos. “Listen to customers, but don’t just listen to customers—also invent on their behalf.”
The results bear this out. Amazon is reporting its quarterly results on Thursday, and it is expected to report a 39% increase in revenue to more than $100 billion for the first quarter. It would be the second quarter in a row that Amazon raked in record high revenues. And that would be Bezos’s crowning achievement as the CEO. His lieutenant, Andy Jassy, will take over starting this summer.
The choice was unusual but could prove wise. Jassy isn’t steeped in Amazon’s retail operations, which has always accounted for the lion’s share of the company’s sales. Jassy instead had created Amazon Web Services (AWS), a cloud computing division and a business-to-business operation, unlike Amazon.com. He then grew it into the largest cloud provider in the world. Today, AWS powers everything from Netflix and Spotify and Airbnb to the Central Intelligence Agency and the Democratic National Committee.
This is the result of the unconventional path of Jassy’s career. Jassy joined Amazon straight out of Harvard Business School in 1997 and never left. Yet he was never stuck with the mainstream business. He was on the fringe running AWS. In other words, he has been an “inside outsider.”
Amazon Needs an Identity Update
A body of knowledge from Harvard Business School has demonstrated company performance is significantly better when insiders become CEO. And inside outsiders produce the best results. They are people from the inside the company who somehow have maintained enough detachment from traditions and ideology, according to Professor Joe Bower. He writes that a successful CEO from inside needs to look at the corporate inheritance as if they are an outsider who has just bought the company.
It’s this context that makes Andy Jassy a great bet.
The whole tech sector faces an identity crisis. It suffers from a trust issue. And it’s hard to think of an industry that has squandered public goodwill faster than Silicon Valley. Less than a decade ago most people still believed in the startup romance. Under the romantic spell of sunny California, college dropouts would dream up new products to help change the world.
Startups do change the world. But they also turn into attention merchants, selling our gazes to advertisers. They are expanding like kudzu that engulfs one sector after the next. First newspapers, then book publishing, then brick-and-mortar stores, and now health care.
What happened is the likeability of tech giants sank. My research team has assessed public sentiment using published information. Big data style. We’ve downloaded everything written in standard bearers of business news. That included The Wall Street Journal, CNBC, and Financial Times, along with corporate press releases.
We fed ten years of data into an algorithm. We wanted to see how the general population has come to understand the tech sector. We also added the banking industry for comparison.
The picture looks grim. As much hatred as there was for Wall Street bankers and the top 1%, finance has slowly improved its image. Big tech is turning into the new epitome of greed.
Is it a wonder with the almost-weekly tech hearings in Capitol Hill? Lawmakers felt emboldened to parade tech CEOs on behalf of “the people.” More urgently for Amazon is that it needs a turnaround on its perceived image. It cannot save the sector, but it must at least try to save itself.
A Subtle but Resolute Update on Who We Are
The founder imprint of Jeff Bezos is everywhere. Amazon has done everything imaginable to lower prices for customers while at the same time increasing selection and enhancing the buying experience. It has done so with online shopping, book publishing (Kindle), music and movie streaming (Prime), and now, health care (Care).
But it’s not so great when you are trying to sell things through Amazon, as I’ve argued before.
Amazon’s Marketplace hosts millions of small-business sellers. These are third-party merchants who rely on Amazon to fulfill their orders. They still need to do most of the work: market research, making and sourcing products, and taking individual financial risks.
But Amazon competes against these merchants. It looks at sales information and then launches its own private labels to sell popular products. Amazon’s versions are, of course, cheaper.
Here is the crux of Amazon’s image problem: The world sees Amazon as a marketplace exploiting small merchants. Amazon’s singular focus on paying consumers is no longer enough. Its brutish handling of small merchants is an obstacle to fairness. It violates our sense of proper market competition.
What’s been built around Amazon’s core identity now requires an update. The Amazonians need to recalibrate their compass to guide their day-to-day actions. Otherwise, our society won’t tolerate them.
AWS has the right outlook.
From Customer Obsessed to Nursing Partners
AWS powers a huge bulk of websites, but not by hoarding data. Quite the opposite. It committed unparalleled resources to building developer tools and making access easy through standard APIs. Unless you are Facebook or Google, it’s easier to use Amazon to run your global data center operations.
It also helps that Andy Jassy is embraced because of his response to social justice issues. He’s been outspoken in the Black Lives Matter movement and LGBTQ issues. He banned social media platform Parler following the US Capitol riot.
Meanwhile, he’s known inside Amazon for holding the same intensity as Jeff Bezos. Jassy’s exhaustive attention to detail and hands-on approach, his penchant for back-to-back meetings, have all become legendary within the company for the heir apparent. People believe he “embodies the culture of Amazon,” and according to a former Amazon executive, he has adopted a lot of Bezos’s personality.
And the beauty of a lifer working on a fringe business is this: AWS values collaboration with developers more than control. This is no surprise. AWS can’t afford to have third-party developers fleeing to Microsoft Azure or Google Cloud. Without new apps and functions, AWS will lose. Unlike at Amazon.com, where the company controls everything from product curation to fulfillment logistics, AWS relies far more on others.
Jassy understands all this. He saw the importance of implementing proper governance. AWS must be clear on where to go and where not to go. In technological terms, it limits itself to making building blocks without climbing the technology stack too high. Jassy saw that other failing players are ones that “built too high in the stack.” Rather, they should have, like AWS, let third-party developers “stitch [the building blocks] together however they saw fit.” Because the higher AWS climbs, the more it will encroach on the turf of these players. An app store should never compete against an app developer. The same logic applies to AWS in cloud computing.
It’s exactly this sense of fairness rooted in AWS that will allow Jassy to view Amazon.com with enough detachment. The bargaining power with A.I. developers on AWS is not the same as with a merchant selling plastic casing on Amazon.com. While being an Amazon lifer, he comes with an alternative school of experience that he is likely to champion a new outlook from within. Picking Jassy could well be the wisest decision of Bezos’s entire career.
Thanks for reading—and be well.
P.S. CEO succession is fraught with danger. What’s your observation on successful transitions and failures? In your mind, what are the key drivers related to CEO succession? Join the discussion below.