Eric Hellman published “Publishing’s Amazon-powered future“, a perceptive post about the things he feels most publishers miss about Amazon’s competitive strategy. I retweeted a link after it came out, and I wanted to revisit it here, as well.
Hellman’s work is always worth a full read, and I encourage you to take some time with his post. I’ll borrow his thoughts about Amazon:
“Amazon is fundamentally a company about scale. The common thread between (Amazon Web Services) and the internet book seller of 1995 is the identification of markets with large inefficiencies that could be eliminated by using the internet to amass scale. Amazon has alway been willing to lose money to achieve that scale. But this isn’t predatory in the sense that having achieved market dominance, they raise prices. Instead, it’s ruthless in that once scale is achieved, the resulting efficiencies can’t be matched by anyone else.”
“It seems clear that Amazon has identified the publishing industry as a target ripe for further forcible efficiency improvements. But the nightmare narrative being spun by the publishing echo chamber is tragically unaware of how Amazon works. Maybe it’s because publishers imagine that Amazon will do what they would do if they had Amazon’s market power. But Amazon won’t extort huge sums of money from powerless consumers. Instead, they will ruthlessly bring efficiency to every process involved in publishing. And then they’ll invite everyone to use their ruthlessly efficient services.”
This is the reason publishers can’t beat Amazon: they aren’t even playing the same game.
In researching “The opportunity in abundance“, I found an article that drew upon research that Martin Reeves and Mike Deimler had done for the Boston Consulting Group. The authors were trying to describe competitive strategy in an internet era, and they noted:
“Increasingly, industry structure is better characterized as competing webs or ecosystems of codependent companies than as a handful of competitors producing similar goods and services and working on a stable, distant and transactional basis with their suppliers and customers. In such an environment advantage will follow to those companies that can create effective strategies at the network or system level.”
In the presentation, I point to this as an example of how our complex supply chain gets fixed only by adopting new perspectives or approaches. Hellman adds another option: the inefficient get squeezed out of existence. His view seems more likely these days.