What Amazon's Fire Reveals About Its Innovative Strategy

Last week's announcement that Amazon would be entering the tablet fray with the release of a new $200 tablet called the Kindle Fire was about more than the CPU speeds or the future shape of media distribution. The real lesson was bigger than HP or RIM or the entertainment industry overall. The insight to draw from Amazon’s announcement was hidden in the background and reveals the DNA of truly competitive companies.

I have always believed that companies win by outthinking their competition, not by out-muscling or out-spending them. The way you win is by taking a unique perspective on your business, a point of view that competitors have difficulty getting their heads around. 

Because you’ve adopted this new paradigm while your competition is still scratching their heads, the thousands of strategic decisions your people make today will align to this new paradigm, incrementally building your competitive advantage. With each decision, you move further and further ahead.

Indeed, it’s been shown that more successful leaders are better able to change their perspectives than less successful leaders. I call this ability "frame-shifting" (see my related blog here).

When I wrote my second book, Hide a Dagger Behind a Smile, I researched the 100 companies that produced enormous levels of out-performance (revenue growth, profit margin, and value generation) over the course of 10 years. If you trace these companies to their beginnings you see in more than half the cases that they were born by adopting a new paradigm. Dell went direct, Microsoft built operating systems, and Wal-Mart placed stores in rural areas at times when the competitors' mindsets all said these were bad ideas.

See the world differently and you act differently. Act differently and you have a chance to create a competitive advantage. 

So what is Amazon's paradigm? It’s revealed in the quotes of executives who say they don't see the Fire as a device but as a service. It is a natural extension of a service to deliver TV, movies, music, books, and other media to customers. While the rest of us are talking about devices and content, Amazon has moved onto a new game in which these distinctions no longer matter. Instead they see a seamless service that spreads across the physical (tablets, books, grocery items) and the intangible (content, safety of our personal data).

All of a sudden things are starting to make sense. Why is Amazon giving me two-day free shipping just because I paid $80 to join "Amazon Prime"? It always seemed odd to me—a great deal for me but some kind of miscalculation on their part. But now whenever I want something—we run out of diapers or toilet paper—I immediately log onto Amazon and the item is at my doorstep in 48 hours.

I just learned my Amazon Prime membership now allows me to stream free movies. My kids just watched a movie for free there that would have cost me $4 to rent from iTunes. Amazon's seamless service mindset is transforming my behavior.

Start looking at Amazon's business model as a service instead of disconnected parts composed of books and devices and shipping and you start to see the seemingly random dots are forming a picture, a strategic vision. The longer it takes competitors to "get" this picture, the longer Amazon will have their competitors guessing.

What is the unique frame you are taking on your business?

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  • John

    - Kindle Fire doesn't have microSD slot that, for example, Nook Color has thus
    it is stuck with 6 GB usable internal storage unlike Nook Color that can get up
    to 32 GB card in. Kindles are made to be almost like a "dumb terminal" of the past to make sure you're tied up to Amazon's storage on the web (for which you need Wi-Fi connection to get to) and you can only store content you get from Amazon there, not other files. Quoting Amazon on Kindle Fire: "Free cloud storage for all Amazon content". Get it, Amazon content?
    - The stats of how long the battery can last (Kindle Fire theory is 8 hours) are taken with Wi-Fi off. You can only imaging how much less Kindle Fire battery will last if you use it to access content from their Cloud storage over Wi-Fi.
    - Amazon can spy on your web activity through their new cloud-integrated web browser of Kindle Fire.
    - VERY IMPORTANT – lack of microSD slot means that if you decide to root your
    Kindle Fire, you’ll have to root the actual device thus there will be no coming back. On Nook Color, you can make it boot from a “rooted” microSD card and if you want to get back to the original Nook you can just take out the card and reboot.
    - Kindle Fire doesn't have a camera.
    - Kindle Fire has about 70% less usable screen area than iPad 2.
    - Kindle doesn't support eBooks in ePub format that is the most used format in the world.
    - Kindle app store contains only Amazon approved apps and it does not include (and will not include) Netflix app that iPad has and Nook Color is getting thus again you're stuck with Amazon content only.
    - Amazon confirmed that you cannot download anything to Kindle Fire when traveling outside US
    I'd recommend waiting for a couple of weeks as Nook Color 2 is rumored to be released by Barnes & Noble soon.