Strike Three? Lessons from Launching the Amazon Marketplace

Leadership, Innovating and Patience

Sep 16, 2021

The Digital Leader Newsletter — Strategies and Techniques for Change Agents, Strategists, and Innovators.

In 2002, Amazon launched the marketplace business. Today, that business accounts for well over 50% of all orders at Amazon and has over two million sellers. It is an ecosystem that impacts global supply chains and is one of the “dreamy businesses” Bezos talks about. But the success of this business wasn’t preordained — in fact, most thought we would fail. What are the lessons innovators and change agents can learn, from master Yoda himself, Jeff Bezos, and the business I got to play a key role in launching and scaling, the Amazon Marketplace business?

I recently gave a keynote at the Prosper Conference in Las Vegas to 1600 third-party Amazon marketplace sellers with this as the keynote.

Please watch this short background video setting up the story of the Amazon Marketplace using a familiar movie theme (1 minute) — and then come on back.

Be Stubbornly Flexible

The Amazon Marketplace platform was actually Amazon’s third major effort at a third-party selling strategy. It would have been easy for Amazon to forget the concept of a platform for third-party selling. In fact, that would have been the “smart advise” given to Bezos by an advisor or board members. We faced both internal and external resistance to launching the Marketplace business.

We are stubborn on vision. We are flexible on details…. We don’t give up on things easily. Our third-party seller business is an example of that. It took us three tries to get the third-party seller business to work. We didn’t give up. — Jeff Bezos

The commitment to a vision or model but allowing for experimentation and adjusting tactics is a subtle but critical nuance in the journey of launching and scaling new capabilities. Most leaders don’t have the nuanced understanding — when the tactics fail, they easily give up on the vision.

Experimentation Versus Poor Execution

The concept of “fail fast” or “fail forward” has permeated corporate America as a key mindset of innovation or “being agile.” The issue with the term “failing” is that it is misunderstood and used as an excuse for poor execution. When we are innovating, we are experimenting. When we are experimenting, we are testing. And when we are testing, we are “failing” — data-driven results confirming our hypothesis is correct.

BUT….

The term “failing” gets used as an excuse not for testing in a rigorous manner but for hiding and obfuscating poor execution and management. This rationalization either hides or reinforces the habits of poor planning, communication, decision making, or design. It distracts from the real issue — someone executed poorly and is trying to avoid being accountable.

I believe we are the best place in the world to fail — Amazon 2015 Shareholder Letter.

When I work with enterprises on creating systematic innovation, we avoid using the term “fail fast” or “fail forward” for these reasons — “failure” is confusing and an overloaded term. Instead, we use the term “experimentation” or “test.”

Are You Willing to Be Misunderstood?

When I’m asked what I think Amazon’s “biggest” innovations are, I give some surprising answers. Amazon’s “biggest” innovations to me are

- Free Everyday Shipping (and then free next day shipping; and then free same-day shipping)

- Having multiple sellers making offers to sell the product on the same detail page

- Authenticate customer reviews

- The Amazon marketplace business

What do all of these innovations have in common? First, it’s hard to imagine a world today without these capabilities -- to the point where they hardly stand out as an “innovation” today. Second, they all benefit the customer and the customer experience. Third, and most importantly, we were criticized or derided by the press and “experts” when we launched all of these. If you are going to innovate, especially business models which change industry conventions, be ready to hear criticism.

Criticism, by itself, is not that hard to deal with (except when it comes from analysts and investors and might impact the stock price). But when the criticism is early in release and adoption of the innovation, it feeds into the self-doubt and natural “low risk” mentality of most management. This leads to the last lesson I’ll talk about today. The real superpower of innovators…

Patience — Amazon’s Real Superpower

The below is a picture of Amazon’s stock price from 1997 to 2021. What most people remember are the past twelve years when the stock has essentially gone “up and to the right”.

What many people forget is the period from 2000 to 2008 when the stock was essentially flat. The marketplace business (M@) launched in October 2002. Prime launched in 2005 and FBA (Fulfillment by Amazon) in 2007. It is the combination of these three capabilities, plus just letting customers and sellers gain traction, which led to much of Amazon’s success. But it took time. No one knew what it would take — we kept adjusting, kept innovating, kept pushing for the right results for today while staying patient for the outputs and growth we wanted.

Patience is often needed for new models to develop and for customer adoption to happen.

Last Thought from Yoda

I wrapped up the keynote with a quote from Yoda. There are so many great ones to chose from, but I thought this one stood out relative to these topics of innovating and patience.

Size matters not. Look at me. Judge me by my size, do you? Hmm? Hmm. And well you should not. For my ally is the Force, and a powerful ally it is. — Yoda

Amazon was small when we launched the Marketplace business in 2002. We were doubted by all. It was our third strike. Don’t let the size of your business be the excuse for not thinking big, experimenting and building a great business.

Your Assignment …

Your assignment this week is to send me feedback. What suggestions do you have for The Digital Leader Newsletter?

The Digital Leader Newsletter -- By John Rossman

Discussion about this post