Why is Amazon worth more than all of its “direct” rivals combined?
It’s fascinating how Amazon, an eCommerce retailer, is more valuable than all of its retail rivals altogether. How is this possible? Amazon’s innovation culture, and ability to create a strong business model portfolio, allows the company to expand into many areas. Amazon Web Services (AWS) --a completely different cloud computing service--is projected to generate $12 billion in revenue alone. AWS’ operating margin in 2016 was 25%, compared to Amazon’s company-wide operating margin of just 3.2%.
Now look at all the incumbents that are up against Amazon. These rival retailers are struggling to become successful at eCommerce (meanwhile Amazon is innovating back into physical stores). The traditional retailers are still primarily focused on one core retail business model making it difficult for them to stay relevant or branch out into areas of potential growth.
Take a cue from Amazon: an innovation culture that expands from its core eCommerce model toward a broad business model portfolio stretching from logistics to cloud computing to AI to voice control and even original content creation. While these might seem like unconnected entities, there are strong synergies within each--the most notable being that innovation is part of the organizational DNA. That’s how innovators leave incumbents scratching their heads.