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How Amazon Wins By Utilizing Other People’s Work


How Amazon Wins By Utilizing Other People's Work

Original ideas are in short supply. However, anyone can fill a toolbox with existing great ideas and learn how to apply the right ones at the right moments. When I was a consulting partner at Arthur Andersen, I knew someone else had created a methodology, tool, proposal, or analysis that could get me going. I just needed to know how to find it.

As Jim Collins has pointed out in his book Good To Great, best beats first. “The pattern of the second (or third or fourth) market entrant’s prevailing over the early trailblazers shows up throughout the entire history of technological and economic change,” Collins wrote in 2000, listing IBM, Boeing, American Express, and Disneyland as proof for his theory.

Why? Because the first to market doesn’t always get it right. The products that follow directly behind tend to get everything the pioneer did, without the expensive mistakes. If you’ve ever climbed up a hill through deep snow, you know it’s a lot easier to be number 2 than to be the guy post-holing up the slope.

While Collins’s theory operates on a macro-organizational scale, it also applies in many ways to granular operations within an organization. Even Amazon can’t automate a majority of business activity. One of my favorite strategies for dealing with this fact is the utilization of other people’s work (OPW). In many cases, the best way to scale an unavoidable residue of manual labor is to enable and motivate other people to do it.

For work that is repeatable and poised to grow significantly or experience dramatic spikes, find ways to get other people to do it for you. By finding ways to get others to be key contributors in a core capability while protecting your brand and the customer experience, you will transform the underlying technology and operating philosophy.

Other People’s Work And The Mechanical Turk

Consider just two of the many tasks that must be done when building an e-commerce website with a virtually infinite array of products: (1) evaluating the quality of product images and (2) writing clear and accurate product descriptions. Neither can be handled effectively by a computer. Instead of hiring a vast army of people to perform these small but essential and practically endless tasks, Amazon handed that task over to its customers and partners. It created a product image management tool that collected customer feedback, allowed customers to compare images, and enabled them to report offensive or irrelevant content. It worked extremely well.

Before long, Amazon was using OPW to manage other processes that couldn’t be automated. Customer reviews, which were controversial when Amazon first introduced them, are probably the best-known example of OPW. It allows thousands of Amazon customers to handle the task of describing, rating, and categorizing products for the benefit of millions of other users.

With the right approach, almost every company can find opportunities for OPW. Many of my current clients are finding that letting vendors, customers, or business partners carry out activities for which they have greater motivation and better expertise can be a powerful step toward transforming their businesses while dramatically cutting costs.

Eventually, Amazon’s basic OPW concept was retooled into a platform for others to use named Amazon Mechanical Turk. It’s an online marketplace that provides businesses access to an on-demand, scalable, flexible army of freelancers they can hire to tackle small, manual tasks. Countless companies use this platform daily to leverage a worldwide employment base, and of course, Amazon makes money every time they do.

Today, companies like Uber and Airbnb have taken the concept of OPW a step further. In addition to using other people’s work, they also use these people’s assets—namely, their cars and their homes.

OPW And The Third-Party Selling Platform

When I joined Amazon with a mandate to create its third-party selling platform, the dominant third-party selling marketplace was eBay. eBay’s mentality was very laissez-faire; they simply connected buyers with sellers, taking little accountability for customer experience or trust between merchants and shoppers. If you searched for a specific model of camera, you might get pages and pages of individual listings that offered no help in understanding how the items or the offers to sell compared. (Incidentally, eBay has since significantly changed and improved in many of these areas, primarily due to the pressure from the success of Amazon Marketplace.)

By contrast, we defined three main design principles that were important to us in building our third-party marketplace business:

  1. Present the customer with a single item accompanied by an easy-to-compare list of offers to sell that item. We called this design principle “item authority.” Create a single definition of the item, which would allow multiple sellers, including Amazon, to make offers to sell the item. We wanted to create a marketplace where sellers would be competing for the order in a way that worked to the customer’s benefit.
  1. Make it possible for customers to trust our third-party sellers as much as they trusted Amazon itself. We operationalized the concept of “seller trust” in several ways.
  1. Provide great seller tools, including multiple selling methods and rich data to help merchants operate their businesses at Amazon. For small sellers, simple tools were needed. For more sophisticated high-volume sellers, different types of integrated capabilities should be provided. Documentation, operational metrics, testing environments, and professional service partners should be developed to help sellers be successful while keeping the Amazon team small.

Obviously, this was an ambitious program that required a highly complex integration between sellers and Amazon. It was clear to me that Amazon simply didn’t have the human resources to manually govern a platform like this at scale. We had to make the third-party marketplace self-service. We had to provide simple-to-use, highly intuitive tools for sellers, as well as a system that would somehow cull subpar sellers from the marketplace in order to keep customer trust high.

We quickly realized that the only way to accomplish all this was by taking a page from the OPW book. Fortunately, Jeff Bezos smiles upon projects designed to scale a business on a self-service platform.

Amazon continues to use OPW as a “first principle” or fundamental concept in building strategy. For example, Amazon Flex, which has independent drivers picking up packages for delivery at Amazon fulfillment centers, is OPW at its core. Amazon Flex is akin to Uber for package delivery. An independent person with a car signs up to deliver for Amazon. This driver arrives at an Amazon fulfillment center, gets assigned orders to deliver, and puts the boxes in his or her car. Drivers use the Flex application to navigate and confirm delivery of the packages to customers’ doorsteps. This independent agent model allows Amazon to have yet another last-mile-delivery option for their retail business.

What are your capabilities that need an OPW strategy? Simply hiring contractors is one way, but it typically does not provide the leverage, economic advantage, or scalability that technology does to equip a flexible workforce that has the right incentives to do the work. Don’t forget that you are still responsible for quality and results, and part of what your technology needs to do is build great metrics and tracking to ensure quality.

One of Bezos’s favorite techniques to accomplish this is the forcing function—a set of guidelines, restrictions, or commitments that force a desirable outcome without having to manage all the details of making it happen.

Questions To Consider

1. What manual activities in your business could benefit from an OPW strategy?

2. Could you build the right tools to create and manage small pieces of well-defined work? Would this provide improvements even if the work were done externally?

3. How do you create flexibility for the spikes in your business? What digital strategy could help?

Contributed to Branding Strategy Insider by: John Rossman. Excerpted from his book, Think Like Amazon, 50 1/2 Ideas To Become A Digital Leader (McGraw-Hill)

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