Friday, October 24, 2014

Is Amazon Trying To Do Too Much?

Amazon released its quarterly earnings yesterday and the results were poor.  Expectations have been high for the company, but revenue growth was low and losses are adding up.  On the financial front, troubling signs remain.  So what is the problem?

From an outsider prospective, Amazon may simply have an identity problem. Their success as an e-commerce and retail disruptor continues to propel them, but at low profit margins.  But they have ventured outside their e-commerce world as a technology/consumer electronics company (Kindle e-readers, Fire tablets and smartphones), a content creation company (Audible, Amazon Studios), and a content distribution company (streaming via Amazon Prime).  They have acquired numerous companies and have grown both domestically and internationally.  But in their race for both breadth and depth, Amazon may have been unable to focus on a few particular businesses as their attention is forced to take a more wide-angle view.  is it time to simplify?

Such a strategic move is not unique.  Microsoft is going through such a re-focus now with an eye centered on more cloud-based businesses.  Netflix pulled away from the dvd business to concentrate more fully on streaming.  Amazon remains an amazing online business that has helped consumers to find and receive almost any good they need from around the world.  But should phones and tablet be also a part of their DNA?  The content creation and distribution game is a lucrative one as any studio or network will tell you; one year you have the must-see show or movie, the next year, you have miscalculated and lose millions on bad picks. 

According to the NY Times, "Amazon’s story for several years has been that it is growing furiously, investing heavily and postponing profits until the halcyon days just around the corner when it will sell all things to all people all the time."  But always waiting for tomorrow is not necessarily a good thing.  It must be mixed with a live for today mentality; otherwise, one moment it is in front of us and the next it is behind us and we never had the chance to be in that moment. 

Unlike brick and mortar companies like Sears and Barnes and Noble, Amazon has more good days ahead of it.  Their quarterly results are a wake-up call, but they have the right assets to continue to prosper moving ahead.  My advice is to simplify and streamline to focus on doing what is most important.  As Jim Collins refers to in his book, Good To Great, have a hedgehog approach to doing a few key things well and get everyone on that bus to strive for greatness.