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March 22, 2016

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Customer Obsession via Product Management

by Ravi Kalakota

“Consumers have elevated expectations based on everything they are doing their everyday world. What they see from Uber, they expect everywhere.”

We’ve entered an era when brands are racing to modernize, re-architect so they can to personalize experiences for their customers. The pace of change and digitalization of our world is accelerating.

Who are the most customer obsessed companies?  AmazonPicWhat are elements of a customer obsessed company? What role does world-class product management play in staying customer obsessed?

Amazon is definitely one of them. Google is another. Both firms are admired for their relentless innovation, experimentation and execution. So I did some research into what makes them unique.

Bezos focus has been the same for 20 years: “Start with the customer and work backwards.”

Google’s #1: Focus on the user and all else will follow. According to their philosophy…

“Since the beginning, we’ve focused on providing the best user experience possible. Whether we’re designing a new Internet browser or a new tweak to the look of the homepage, we take great care to ensure that they will ultimately serve you, rather than our own internal goal or bottom line. Our homepage interface is clear and simple, and pages load instantly. And when we build new tools and applications, we believe they should work so well you don’t have to consider how they might have been designed differently.”

Simple questions like ‘Where exactly is customer’s problem?’ and ‘What actions should we take to create value, convenience, and selection?’ are challenging for every organization. Most firms rely on McKinsey, Bain or BCG for this analysis. Doing this analysis with A/B testing, click-thrus, customer feedback and transaction data is the hallmark of Amazon product managers. I think that the product management structure of Amazon is their secret to success and differentiation.

The overall strategy of Amazon is shown here.  It’s not a secret for their competitors but something that is extremely difficult to execute globally at scale across multiple categories.

The diverse customer segments across our many businesses include:

  • Books, Music, Movies, Video Games and Consoles, Software, and Digital Downloads
  • Electronics and Computers, Home and Garden, Grocery, Health and Beauty, Toys, Kids and Baby, Clothing, Shoes and Jewelry, Sports and Outdoors, Tools, Auto and Industrial, and Digital Devices
  • Amazon Web Services

See my complementary post Retailers and the Paradox of Digital for competitor execution challenges.

Customer Obsession @ Amazon

Amazon’s mission is to be the earth’s most customer centric company.  Both when scoping a new initiative and in every day decisions, they start with the customer and work backwards.

Amazon is customer obsessed, not competitor obsessed.

If they can arrange things in such a way that their interests are aligned with the customers, then in the long term that will work out really well for customers and it will work out really well for Amazon.  This aspect of their culture is rare – They don’t focus on the optics of the next quarter like many companies do; They focus on what is going to be good for customers in the long-term.

So how does Amazon effectively serve all customer segments?  Amazon teams put relentless focus on improving value, selection, and convenience.  One thing they know for sure is that every year, customers will not want higher prices, less selection, or slower “delivery”/ speed than they have today.  So, their strategy is simple – to constantly improve in these areas.

Examples:  1) AWS has lowered prices 44 times since 2006; 2) Marketplace business has enabled selection that would otherwise been impossible to accommodate, further driving selection and customer experience.

Product Management @ Amazon.com – The secret sauce

Leadership strongly believes that “It’s Still Day 1! in digital transformation. So they are constantly pushing the product management team to innovate and deliver new products/features.

AmazonPic2

According to a product leader @ Amazon.com,  these are the six principles of product management followed:

  1. Identify your customer set and understand their needs. Know what competitors are offering, define your competitive advantage. Be cognizant of hot button issues.
  2. Develop your business plans and product requirements. At Amazon we use a ‘PR-FAQ’ mechanism. This ensures that customer focus remains paramount.
  3. Balance strategic thinking with tactical, detailed execution.
  4. Drive cross-functional projects to completion. Work across multiple teams to define roadmaps and alignment on delivery timelines.
  5. Measure results at every stage.
  6. Don’t stop at delivery. Drive continuous improvement. Keep raising the bar on customer experience.

This pervades the organization. Fulfillment center associates have been known to pull apart a loaded truck to correct an order for a customer.

At meetings people will leave a seat open at a conference table and highlight to all attendees that the empty seat is occupied by the most important person – their customer.

Summary

Amazon will be a tough competitor given its customer obsession. With a large and growing audience:

  • Amazon generates an average of 93 MM unique visitors a month.
  • 30% of online shoppers begin their product research on Amazon
  • Value, Selection & Convenience, Consistency -> Trust and Reliability

“Consumers ranked Amazon.com and FedEx no. 1 and no. 2 because of the high degree of trust and reliability they’ve come to expect from these brands.” – Eileen Campbell, global CEO of Millward Brown…. The Millward Brown Trust survey polled 20,000 U.S. consumers.

“Our biggest search competitor is Amazon, not Microsoft or Yahoo” – Eric Schmidt, Google

Additional References

  1. Largest digital company in the world… Amazon is on track to drive $140 Bln in annual sales in 2016.

Amazon.com Netsales

 

 

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