This peek under the hood of Amazon.com is fascinating and slightly scary:
This all said, I believe that Amazon is the most defensible company on earth, and we haven’t even begun to grasp the scale of its dominance over competitors. Amazon’s lead will only grow over the coming decade, and I don’t think there is much that any other retailer can do to stop it.
The reason isn’t the bullet-point moats that are talked about in headlines, and it isn’t the culture of innovation or Bezos’s vision as CEO (though I do think Amazon’s culture is incredible and Bezos is the most impressive CEO out there). It’s the fact that each piece of Amazon is being built with a service-oriented architecture, and Amazon is using that architecture to successively turn every single piece of the company into a separate platform — and thus opening each piece to outside competition. […]
The most obvious example of Amazon’s SOA structure is Amazon Web Services (Steve Yegge wrote a great rant about the beginnings of this back in 2011). Because of the timing of Amazon’s unparalleled scaling — hypergrowth in the early 2000s, before enterprise-class SaaS was widely available — Amazon had to build their own technology infrastructure. The financial genius of turning this infrastructure into an external product (AWS) has been well-covered — the windfalls have been enormous, to the tune of a $14 billion annual run rate. But the revenue bonanza is a footnote compared to the overlooked organizational insight that Amazon discovered: By carving out an operational piece of the company as a platform, they could future-proof the company against inefficiency and technological stagnation.
Clever: Amazon exposes its own internal tools and systems to market competition. That way, the company’s operations are gradually perfected by the invisible hand of the market. Another way of putting it is that Amazon offers its own innards to the consumer. The company is the product. Very “meta.”
Assuming this is indeed a conscious, deliberate strategy, has any company tried this before?
Where this may be heading:
It seems obvious to me that Amazon will move into small-parcel shipping (UPS/FedEx/USPS) within the next five years. They are thumbing through their income statement and picking off the largest categories to “productize” — first technology (AWS), then fulfillment (FBA), then COGS (the actual products themselves via Amazon’s various private label programs), and next shipping. They’ve already started operating their own fleet of 40 cargo planes and thousands of tractor-trailers. They’ve built out dozens of parcel-sorting centers to reduce the fees they pay to existing small parcel carriers. And it’s a natural fit for their services model — they have tremendous internal demand and their existing services customers are perfect early adopters.