Even Amazon Encounters Risk & Uncertainty

While a case could be made that all of Amazon and its subsequent projects are created under the option to expand or even grow, even an incredibly successful and dominating company like Amazon has to assess levels of risk and uncertainty when introducing a new project to their consumers.  Let’s take a look at some of their recent launches and assess what type of flexibility was applied as well as how successfully the risk or uncertainty was measured.

First, let’s assess Amazon’s recent venture into the streaming and entertainment production industry with Amazon Prime Video.  With predecessors like Netflix and Hulu, Amazon Prime Video was launched under relatively low risk and low uncertainty.  With the streaming industry already somewhat defined, Amazon was able to understand that consumers were willing to pay a specific price for an alternative option to their cable provider.  Additionally, Netflix was the first streaming service to develop their own scripted production, House of Cards.  Amazon also ventured into this industry after Netflix with low uncertainty and low risk and customers reacted very strongly to the streaming service’s entertainment production.  While Amazon Prime Video has been very successful, it seems that one of the keys to its success is that it was built with the option to expand due to relatively low risk and uncertainty measured within the industry.

Conversely, let’s assess one of Amazon’s biggest failures to date, the Amazon Fire phone.  Introduced only a few years ago, Amazon hoped to extend its consumers’ loyalty by offering a phone to further engrain Amazon in their lives.  While this too was potentially introduced with the option to grow into different phone models with different capabilities for specific consumer needs, Amazon did not properly assess the risk and uncertainty with this smartphone introduction.  Apple and Samsung dominated this industry space and, unfortunately, consumers did not want to pay a similar price for what they felt was an inferior or irrelevant product.  It appeared that Amazon had created this phone with themselves in mind, instead of their customer.  The smartphone eventually fizzled out of the industry and Amazon has not returned to this space since.  While this was an incredibly expensive failure, Amazon learned to focus on their core competencies and always keep their customer and the center of what they create.

It’s important to understand that even companies like Amazon that appear to make all of the right decisions even sometimes take a misstep.  When those missteps occur, companies must understand what went wrong, what risk or uncertainty was not properly measured and learn from the mistakes.  Learning from the missteps only helps ensure that the risk and uncertainty might be measured more carefully with the next project.