Amazon (at last) most valuable company ... because data is not the new oil

It had been coming for a while, and now it is a reality: shortly after New Year Amazon surpassed the giant trio of Microsoft, Google and Apple and is now the largest publicly traded company in the world. This is typical of Amazon’s smart and sustained strategy, as well as of its founder Jef Bezos, but this number one position also gives a more in-depth picture of the power relations in the digital economy.

Amazon is the ultimate Hyperscale/Microcare company. The operations are hyperscaleable, but at the same time focus is still on the individual consume. The company really concentrates on a good user experience and full services.

"Our success is driven by a long-term vision of what consumers want and do. We are not really focused on quarterly results, but on how well we retain our customers. The reason they leave us is more important than the new features or products that our competitors launch."
(Interview with the Dutch COO of Amazon by Werner Vogels, De Morgen, 21 October 2016)

The power of the subsidiary

This combination of customer intimacy and cost efficiency (‘customer intimacy at scale’) can only be achieved at an operational level by making smart use of technology, and this is state-of-the-art at the Seattle-based company thanks to a strategy hack. It leases its own technology-stack functionality to third parties through its AWS (Amazon Web Service) activities. Amazon’s e-commerce activities make little profit, but generate quite a lot of cash for the company thanks to the period between being paid (immediately, when consumers order) and making their own payments (to suppliers, after a few months). This free working capital finances - at least originally - the investments in the cloud infrastructure of its subsidiary AWS.

AWS is one of the major producers of the oil of this era, i.e. online software (either digital, or as-a-service) functionality. AWS offers online IT functionality, from the most basic, such as data storage rental, to the most advanced type, such as using machine learning on your data, in a pay-as-you-go model. In other words, you only pay for the time and intensity of the service used.

Double win

If data were to be the new oil, the top producers of digital data, i.e. Google (data about service and product searches), Facebook (data about personal preferences) or Apple (data about mobile use), would be on the list of most valuable companies. Data is important to offer a customer-oriented service, but sometimes it is only a detour to ‘the real thing’, the seamless fulfilment of the needs and wishes of the customer.

Amazon shares this prized place of key producer of the commodity of this era with Microsoft (Azure Platform) and Google. This trio provides most other companies with the building blocks to develop and optimise their digital transformation.

A double win for Amazon: on the one hand in the field of services to consumers, where it is often the disruptor, and on the other hand in the field of services to companies, where it facilitates the disruption in their industry. The one enhancing the other. Where Amazon’s disruption strikes, industry peers are forced to engage technology stack similar to Amazon, available from AWS or other providers.   

What is the impact of digital acceleration on your organisation and industry? Maybe it is a good idea to invest in a deeper understanding of the basic mechanisms. Just an idea to curl up in the settee on cold winter days to get up-to-date in this matter. And we are happy to get you started: 'Hyperscale and Microcare, the Digital Business Cookbook' is out now and available on the website of Die Keure.

This blog is based on an article that has been published on Bloovi.

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