Jeff Bezos started Amazon as an online seller of books, with funding from friends and family, in 1994 and took the company public in 1997.
Amazon CEO Jeff Bezos released the '2018 letter to shareholders' last week. In the letter, Bezos talks about various business units of Amazon, and posits that “the size of your failed experiments” should scale with growing business.
Bezos started Amazon as an online seller of books, with funding from friends and family, in 1994 and took the company public in 1997. Amazon has since gone on to become an international giant in ecommerce, cloud computing, and artificial intelligence.
In the latest installment of the annual letter, first released in 1997 and regarded a must-read by business professionals, Bezos writes, “If the size of your failures isn’t growing, you’re not going to be inventing at a size that can actually move the needle.”
The multi-billionaire further adds that his ecommerce giants will be experimenting at scales befitting its size and possible failures of those experiments will be proportionate to the company’s massive size.
“Amazon will be experimenting at the right scale for a company of our size if we occasionally have multibillion-dollar failures.”
Bezos became a multi-millionaire with Amazon’s $54 million initial public offering (IPO) in 1994. His personal fortune has since soared upwards of $150 billion, making him the richest man in the world.
In the letter, Bezos writes that his company will make mistakes despite exercising necessary caution, but one winning bet can more than make up for multiple losses.
"Of course, we won’t undertake such experiments cavalierly. We will work hard to make them good bets, but not all good bets will ultimately pay out. This kind of large-scale risk-taking is part of the service we as a large company can provide to our customers and to society. The good news for shareowners is that a single big winning bet can more than cover the cost of many losers," he writes.
Bezos goes on to echo the sentiments of the late Steve Jobs when it comes to market research. The Apple co-founder famously claimed: “People don't know what they want until you show it to them. That's why I never rely on market research."
The Amazon CEO writes: “No customer was asking for Echo. This was definitely us wandering. Market research doesn’t help. If you had gone to a customer in 2013 and said 'Would you like a black, always-on cylinder in your kitchen about the size of a Pringles can that you can talk to and ask questions that also turns on your lights and plays music?' I guarantee you they’d have looked at you strangely and said No, thank you.
“Since that first-generation Echo, customers have purchased more than 100 million Alexa-enabled devices."
Amazon’s Alexa-enabled Echo has gone on to cannibalise the smart speaker market, accounting for 70 percent of sales in the US.
First Published: IST