Case Study: Amazon’s Product Development Process
How Amazon Came to Be
Amazon began as an online bookstore in 1995, where the website found itself hosting over a million titles and served customers from 45 countries (Amazon, 1995). Today, Amazon has evolved to offering more than an online book marketplace and has expanded to different segments: North America, International and Amazon Web Services (AWS).
North America refers to retail sales of consumer products and subscriptions focused in this area both in online and physical stores. International refers to the same activities but in the scope outside of North America. The AWS segment are those that involve compute, storage, database and other services for different institutions (Amazon, 2023).
Building Amazon’s Portfolio
Amazon has quite the mix of product and service offerings which can be further categorized by the following: online stores, physical stores, third-party seller services, subscription services, advertising services, and AWS.
Maintaining this type of mix, requires a keen eye for trends and addressing user needs to alleviate pain points. This was apparent when Amazon expanded from hosting products in their online marketplace from books and today, to a large variety of items on top of it. A company as large as Amazon is able to succeed because they have created products that worked well alongside their other existing offerings. Take for example the Kindle, where they provided a low-cost entry level device for the purpose of reading books. Amazon then provided platforms to buy ebooks to load in a Kindle device. Then they further expanded to offering audio books through Audible.
Another instance of Amazon providing touchpoints for consumers to engage in their products is their online marketplace. In their marketplace, they were able to generate revenue by providing ad spaces for brands or merchants to increase their visibility. To improve the customer experience when it comes to delivery, Amazon offered a subscription service called Prime to provide faster and free deliveries. Their subscription services not only end with their marketplace, but they offer streaming and digital services with Prime Video, Prime Gaming, and Amazon Music Prime. Amazon’s Business-to-Consumer (B2C) model has allowed the company to grow into such a valuable brand. However, one of their largest revenue generators exists with their Business-to-Business (B2B) products and services, third-party seller services and AWS.
When it comes to AWS or Amazon Web Services, they offer services to make it possible to build on the web from cloud computing to database storage. With their array of services, modern websites and startups build their products off Amazon Web Services where each of their products can be integrated, may it be a small or large scale project.
Dissecting Amazon’s Growth
Amazon’s growth strategy can be attributed to the company’s approach to building products and services where it starts with the customer first. Their customer-centric approach over a product focus approach allowed them to connect their products and services seamlessly to one another. Moreover, the company’s attitude towards innovation allowed for Amazon to venture into new markets. This was apparent when Amazon made a strategic acquisition of Whole Foods which was criticized to be counterintuitive at first since Amazon has been dominating the online space, thus it made more sense to invest in that. However, this acquisition allowed them to look into integrating the online and physical shopping experience (Harvard Business Review, 2023).
Towards Innovation with Research and Development
Amazon’s mission is “to be the Earth’s most customer-centric company.” They are able to fulfill this by their culture of innovation wherein they build products that address customer needs and then invent products or services on their behalf.
The company organizes for innovation with the following:
A mechanism is present to provide structure to invent and iterate products in Amazon, and their main mechanism is “working backwards” which consists of the press release, FAQ and visuals. This mechanism allows the company’s perspective to shift towards a customer perspective driven to answer the question of why will this customer buy the product and what compels them to do so (Amazon Web Services, 2022).
Working backwards consists of the press release (PR), frequently asked questions (FAQs), and the visuals. The press release is a one page document that communicates what the product or service is about, the problem faced by the customer, the proposed solution and the intended customer experience. After the distribution and discussion of the PR document, all the questions are then consolidated into a FAQ document where it addresses the hard questions by the customer and internal team. This feedback is then expressed through visuals where the fidelity is often associated with how developed the idea is (e.g. high-fidelity visuals are provided when PR and FAQs document have gone through significant feedback) (AWS Events, 2021).
In terms of research, Amazon is devoted and continuously developing their products with the customer in mind, thus practicing “customer-obsessed science” with the following research areas (Amazon Science, 2024):
- Automated Reasoning
- Cloud and Systems
- Computer Vision
- Conversational AI
- Economics
- Information and Knowledge Management
- Machine Learning
- Operations Research and Optimization
- Quantum Technologies
- Robotics
- Search and Information Retrieval
- Security, Privacy, and Abuse Prevention
- Sustainability
These mechanisms are created in order to invent and iterate within the company, and more importantly to create conversations between teams. Amazon’s approach to innovation has enabled the company to grow from an online bookstore to a major global entity by diversifying its offerings and focusing on customer needs.
Their expansion into various markets from retail to cloud computing, highlights a strategy of broadening its reach while innovating across sectors. Although there are products and services that were discontinued in the past, their mechanism for innovation allows them to fail and build again in the spirit of iteration and invention. The company’s emphasis on customer-centric product development and its investment in research and development are key to integrating services to meet diverse consumer demands which led them to be one of the most valuable companies in the world.
References
Amazon. (1995, October 3). Worlds-Largest-Bookseller-Opens-on-the-Web. Press release archive. https://press.aboutamazon.com/1995/10/worlds-largest-bookseller-opens-on-the-web
Amazon. (2021, February 9). What's it like to work at Amazon? About Amazon. https://www.aboutamazon.com/news/workplace/an-insider-look-at-amazons-culture-and-processes
Amazon. (2023, February 2). Annual Report 2022. Amazon. https://s2.q4cdn.com/299287126/files/doc_financials/2023/ar/Amazon-2022-Annual-Report.pdf
Amazon Science. (2024). Research areas. Amazon Science. https://www.amazon.science/research-areas
Amazon Web Services. (2022, June 1). AWS Culture of Innovation | Amazon Web Services. YouTube. https://www.youtube.com/watch?v=WAoGwv5KYbc
AWS Events. (2021, February 6). AWS re:Invent 2020: Working backwards: Amazon’s approach to innovation. YouTube. https://www.youtube.com/watch?v=aFdpBqmDpzM
Harvard Business Review. (2023, July 5). Inside Amazon's Growth Strategy. Harvard Business Review. https://hbr.org/podcast/2023/07/inside-amazons-growth-strategy