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Business lessons from Amazon founder Jeff Bezos

ENTERPRISE
By Pauline Muindi | August 25th 2021
Jeff Bezos, founder of Blue Origin and CEO of Amazon. [Reuters, Joshua Roberts]

Jeff Bezos, the founder of Amazon – the world’s largest online retailer – recently reclaimed his spot as the world’s richest man with a record Sh20 trillion net worth.

The 57-year-old founded the e-commerce giant in 1994 from his garage in Seattle, US and stepped down as CEO this year to be executive chairman. Amazon was first an online bookstore before expanding into a global superstore that sells almost every imaginable product.

And let’s not forget that Amazon is just one of Jeff Bezos’ successful business ventures. He has his hands in several other businesses including an aerospace company called Blue Origin (which is set to start commercial trips to space) and The Washington Post newspaper.

Bezo’s entrepreneurial journey is truly inspiring. There’s a lot that we can learn from him on founding and managing successful businesses. Here are four powerful business insights every entrepreneur can learn from the man that founded Amazon:

Take bold, calculated risks

Being a successful entrepreneur is all about taking risks. But don’t take risks just because it is something that entrepreneurs are supposed to do. You must give business decisions some thought and assessment before diving in. Remember, smart entrepreneurs, look for ways to reduce risk and maximise profit. They only take the kind of risk that has a reasonable chance of giving significant results.

In 1994, Jeff Bezos quit his job as a Wall Street hedge fund manager to invest in an online bookstore. As the internet wasn’t well-developed at the time, this venture was a big risk. He understood that there was a good chance that his business venture would fail. In fact, he warned his earliest investors – his parents – that there was a 70 per cent chance that Amazon would be a dud. However, he had done his homework and had good reason to believe that the risk would pay off.

Bezos had heard that the internet was growing at an annual rate of 2,300 per cent. He had heard wrong – the internet was growing by 230,000! Although he wasn’t particularly fond of books, Bezos knew they would be a perfect product to sell online. In 1994, the catalogue of available books in print was effectively infinite, with more than three million titles. Shipping books was also relatively easy and not too expensive. This was a sensible place to start. By getting into e-commerce on the ground floor, he was able to establish his enterprise as a leader in the industry.

Asked about taking risks in business, Bezos said: “If you have a business idea with no risk, it’s probably already being done. You’ve got to have something that might not work. It will be, in many ways, an experiment.”

Recently, Bezos took another bold, calculated risk: a trip into space. To the regular person, a space trip might seem like a huge risk. But only one per cent of US human spaceflights result in fatal accidents. This was a well-calculated risk for Bezos that boosted his personal and business profiles.

Be stubborn but flexible

Bezos believes that great entrepreneurs should be stubborn, yet flexible. These contradictory traits, he says, will propel you to success when used correctly. Referring to Amazon, he had this to say “We are stubborn on vision. We are flexible on details.” In another instance, he added “The thing about inventing is you have to be stubborn and flexible, more or less simultaneously. The hard part is figuring out when to be which!”

Sticking to the vision is where stubbornness pays off. Vision provides a sense of purpose and direction to any business. Without it, you are likely to flounder as you make decisions that are not compatible with your long-term goals.

Once you define your vision and long-term goals, you don’t be stubborn about the details. Flexibility helps you to exploit opportunities as and when they arise. Entrepreneurs who are unwilling to be flexible can struggle to respond to any developments in consumers’ needs and preferences – which is ultimately bad for their bottom lines.  “If you’re not flexible, you’ll pound your head against the wall and you won’t see a different solution to a problem you’re trying to solve,” Bezos said.

Never stop innovating

Jeff Bezos is a big believer in innovation as the key to sustainability in business. Although Amazon started as an online bookstore, it has never stopped expanding into other categories since its inception. “If you double the number of experiments you do per year, you’re going to double your inventiveness.”

Never get comfortable in the business. Look for ways to innovate and expand, ensuring that your business is always growing and future-proofed. For instance, if you have a restaurant business, you can experiment with new foods and flavours and faster online delivery systems. You can also experiment with different marketing ideas such as social media adverts, influencers, and content marketing.

However, experimenting shouldn’t be done blindly. Always measure the effectiveness of experiments to your business. Actually, before you even start an experiment, think of how to measure its success. But remember, while some experiments might hurt your sales in the short term, they can benefit your business in the long term.

Put your customer first

Many entrepreneurs and businesses preach customer-first as their philosophy. Bezos lives it. “The secret sauce of Amazon – there are several principles at Amazon – but the number one thing that has made us successful, by far, is obsessive, compulsive focus on the customer,” Bezos said in an interview.

Bezos believes in creating a company whose products or services people cannot live without. In a 1997 letter to shareholders, he said “From the beginning, our focus has been on offering our customers compelling value.”

He is particularly obsessed with giving customers the best value at the lowest possible prices. While many companies look for ways to cut costs and maximise profits with high prices, Bezos puts his customers ahead of profits. He scrapped TV advertising because it increased costs to the customer, even though it gave Amazon a bump in sales. Amazon also offers free shipping because they realised that shipping costs were prohibitive to many potential online shoppers.

Some companies, especially those dealing in luxury products or services, can achieve success by charging more. However, for most businesses, charging less is a great strategy.

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