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The Amazon Effect: Work the Funnel, Bottom to Top

Updated: May 17, 2019

Each year, Jeff Bezos, the mastermind and business innovator behind Amazon shares a letter with his shareholders. These letters, dating back to 1997, serve as a goldmine of independent and innovative thinking for today’s business leaders. Our series, The Amazon Effect, focuses around these letters – and today we’re discussing the art of working from the bottom of the funnel, up. Let us explain.

In 2008, Bezos talked about how he and his team innovate by working backward - from the customer’s needs back to how they can develop something to provide for it.

This, in a lot of ways, is the polar opposite of conventional wisdom for businesses, which suggests that once you’re established you should operate from a skills-forward approach.

This approach says that you determine new areas of growth based on what you’re already good at. Bezos admits that operating under a skills-forward approach works for a lot of companies, and is appropriate often.

For example, let’s say you’re a good burger restaurant. When you’re considering expanding, using the skills-forward approach, you would consider what you already know how to do. Well, your cooks are very good frying burgers, so, it’s not a stretch to say that they wouldn’t also be able to create a nice chicken burger, or a grilled cheese sandwich, right?

That’s skills-forward: using current skills and compounding them to create new ones.

But logically, there are limitations to this approach. Let’s say, as much money as you’re making now as a short order lunch spot in your town, you realize that there’s a huge market in your area for happy hour drinks. Your employees could be great in the kitchen, but bartending is a completely different game.

Using the skills forward approach, you wouldn’t be able to get a foothold in this new market.

But, if you worked backwards from the customer’s needs, you’d be able to.

When discussing his working backward approach, Bezos mentioned the development of one of his crown jewels - the Amazon Kindle. At the time that it was being developed, Amazon had never created its own tech device before. This was a completely foreign concept to the company, that up until this point, had solely operated in the online retail space.

From a skills-forward standpoint, the conversation of them developing this device was a non-starter. They did not have the staff or the experience to pull something like this off. It would be expensive, and due to the lack of a foothold in the industry, the chances of it failing were a lot higher than if a company more well versed in this arena were to try it.

But, working backward from their customers, developing something like the Kindle was a no-brainer.

They already redefined the concept of selling books. They had a large customer base that associated book buying and selling directly with them. What can you create for these people to make it even easier to buy books from you? Develop a device that allows you to download a book at the touch of a finger.

It’s a simple concept, but one you only arrive at if you’re viewing things from the customer backward.

This isn’t to say that if you’re really good at making burgers that you should try to sell watches just because a lot of people in the area like them. But, if Bezos has a golden rule, it is to always focus on the customer first. Working backward from their needs leaves you open to far more opportunity than simply applying existing skills forward.

In our series, “The Amazon Effect” we’ll delve further into Bezos’ yearly letters to shareholders and how they can help you and your small business. Keep checking back for more.

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