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Why I think Amazon will be the first trillion dollar company

November 5, 2017

 

I’ve been making this prediction for a while now and I thought why not blog it so I get it on the record. If I’m right I get bragging rights and if I’m wrong .. who cares!

 

Seriously though my reason for making this prediction is, I hope, to provide a different viewpoint - one that I don't see made that often. 

 

Operating Models and the Industrial Age

The concept of an operating model is relatively new for me. As an IT guy operating systems have been more my thing. But not any more. Software is changing the fabric of organisations so it something we need, as business technology strategists, to understand. 

 

Basically, my take on it is that it is a catch-all phrase for how an organisation structures itself to deliver on its business model. And there you have a big clue to what I think is the most important part of any operating mode. The organisation structure. And more specifically how accountabilities and responsibilities are managed in the organisation. 

 

The most common operating model out there is where the value delivery process i.e. vision, design, build, market, sell and support is divided into enterprise organisational silos that report, through a management hierarchy, to a senior executive team.

 

It’s worked for ever - so what’s the problem? For one, I don’t think Amazon is organised that way. OK - they look like they have a fairly normal org structure from the outside but I don’t think it is. Now some would argue that what I am going to focus on is more corporate culture than structure but I don’t think it is that simple. 

 

Have they created a blueprint for a Service Oriented Operating Model?

I believe that the biggest predictor of success in a world dominated by software enhanced business models is the underlying organisational communication fabric. Software, at the same time, increases organisation complexity and overall potential. The challenge is harnessing that potential given the inherent process complexity. This is what I think traditional hierarchical org structures are not good at. 

 

What is a good approach to managing a bunch of highly complex processes then? Any ideas?

 

How about how we structure software itself? What is the fundamental design pattern used to organise software? How about the "black box with interfaces" pattern? Aka object oriented??Aka SOA? Aka microservices?

 

What would it look like if this design was used in an operating model design? How about Amazon? We have seen how Amazon seems to be able to successful expose its internal parts and allow them to become major businesses in their own rights - AWS is the most obvious example. How do they do this? 

 

From what I’ve heard and read deep in the Amazon culture is the idea that meetings between teams are seen as a failure of the teams involved to properly communicate how to engage with each other. Bezos believes that all teams should make it really clear how to engage with them to derive value. Basically, how Bezos did this was that, way back in 2002, he decreed that all teams stay small and that all communications between teams be via APIs. As Walter Chen says in his blog article:

 

Bezos’s 2002 decree had a profound impact on how software and teams were organized. It went something like this:

 

  1. All teams will henceforth expose their data and functionality through service interfaces.

  2. Teams must communicate with each other through these interfaces.

  3. There will be no other form of interprocess communication allowed: no direct linking, no direct reads of another team’s data store, no shared-memory model, no back-doors whatsoever. The only communication allowed is via service interface calls over the network.

  4. It doesn’t matter what technology they use. HTTP, Corba, Pubsub, custom protocols — doesn’t matter.

  5. All service interfaces, without exception, must be designed from the ground up to be externalizable. That is to say, the team must plan and design to be able to expose the interface to developers in the outside world. No exceptions.

 

via Stevey’s Google Platforms Rant

 

 

That’s what is different. It’s not just a gimmick. I believe it is the master stroke that will take them to that trillion dollar valuation.  

 

We’ll see what happens. 

 

PS I was prompted to write this when I read this nice Medium article by Mchael K. Spencer the other day. He is also very bullish about Amazon though he focuses on different factors than I am going to do here He’s written a lot more on them too but I’ve yet to delve into that content yet - I will do that soon hopefully as Amazon is so interesting. In fact, I think so interesting that I think it is a company that may provide a blueprint for a “Digital Age operating model”. More on that another day though. 

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