In an age of digital disruption, Amazon is the poster child for success. Where other companies struggle to keep up or survive, Amazon is endlessly innovative. But why? In a new chapter for the re-release of his book, “Reinvent Your Business Model: How to Seize the White Space for Transformative Growth” (Harvard Business Review Press, July 2018), business strategist Mark Johnson argues that the important fact in Amazon’s story is not that the company developed or leveraged new technology, but that it radically and repeatedly used technology to reinvent its business model.
Amazon – whose offerings evolved from online book retailer to Hollywood studio – maintained its success and growth to become a global giant, not by merely improving on what it initially did, but by dominating every digital business area imaginable. Johnson shows companies how they can emulate this dynamism, enshrining permanent revolution as their status quo.
In “Reinvent Your Business Model,” Johnson outlines the four business models that enable digital transformation:
- E-commerce: Selling products online
- Digital platforms: Digitally connecting customers with services
- Models that turn data into assets: Providing free services in exchange for data, to be sold for targeted marketing
- Automation-enabled services: Replacing human labor with software
Many companies have built their success on one of these models, but Amazon is unique in having diversified into nearly all of them. In doing so, the powerhouse minimized its own risks and vulnerability to disruption. Amazon’s different business models allow it to innovate for the future while extracting value in the present, says Johnson, who also cites Microsoft, General Electric and Netflix as prime examples of continuous business model reinvention.
Remember: the core products or services that make you successful today may not save you from disruption tomorrow. In his speaking and writing, Johnson emphasizes the need to institutionalize perpetual motion in a company’s approach to business models; the alternative is organizational demise.
For your summer reading list, grab a copy of “Reinvent Your Business Model,” now available in hardback and e-book.