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Divine Discontent

posted by Patrick Tanguay   May 03, 2018

The always pertinent Ben Thompson considers Apple and Amazon (plus Facebook and Google) and how they each focus on customers. He starts by wondering which of these companies has the best chance at hitting the one trillion market cap first. Focusing on the first two, he offers this interesting comparison.

I mean it when I say these companies are the complete opposite: Apple sells products it makes; Amazon sells products made by anyone and everyone. Apple brags about focus; Amazon calls itself “The Everything Store.” Apple is a product company that struggles at services; Amazon is a services company that struggles at product. Apple has the highest margins and profits in the world; Amazon brags that other’s margin is their opportunity, and until recently, barely registered any profits at all. And, underlying all of this, Apple is an extreme example of a functional organization, and Amazon an extreme example of a divisional one.

Two very different business operating in very different ways.

Both, taken together, are a reminder that there is no one right organizational structure, product focus, or development cycle: what matters is that they all fit together, with a business model to match. That is where Apple and Amazon are arguable more alike than not: both are incredibly aligned in all aspects of their business. What makes them truly similar, though, is the end goal of that alignment: the customer experience.

I’ll skip over much of his section on disruption and Clayton Christensen but if you don’t already know about his take on the matter, have a look at his thorough analysis of Apple vs the disruption theory. Basically, the theory doesn’t account for user experience and Apple manages to not overshoot the price customers want to pay because it understands the value its superior user experience provides.

Apple seems to have mostly saturated the high end, slowly adding switchers even as existing iPhone users hold on to their phones longer; what is not happening, though, is what disruption predicts: Apple isn’t losing customers to low-cost competitors for having “overshot” and overpriced its phones. It seems my thesis was right: a superior experience can never be too good — or perhaps I didn’t go far enough. (Emphasis mine.)

Thompson then looks at Amazon’s focus on custom experience, including an important aspect which Bezos explained in his most recent letter to shareholders.

One thing I love about customers is that they are divinely discontent. Their expectations are never static — they go up. It’s human nature. We didn’t ascend from our hunter-gatherer days by being satisfied. People have a voracious appetite for a better way, and yesterday’s ‘wow’ quickly becomes today’s ‘ordinary’. […] (Emphasis mine.)
What is amazing today is table stakes tomorrow, and, perhaps surprisingly, that makes for a tremendous business opportunity: if your company is predicated on delivering the best possible experience for consumers, then your company will never achieve its goal.

By focusing on user experience, Amazon is constantly aiming higher and never overshooting what customers want to pay, thus making itself very hard to disrupt.

He closes with Facebook and Google who are focused on advertisers, which makes them less (end)user focused and less popular.

Both, though, are disadvantaged to an extent because their means of making money operate orthogonally to a great user experience; both are protected by the fact would-be competitors inevitably have the same business model.