Posted by What did Jeff Bezos do in 2002 to turn Amazon into the business ecosystem that it is today? He discovered how to scale his operations very fast, across multiple markets, and how to follow up on business opportunities and customer needs across industries with blinding speed. Today, companies worldwide scramble to copy Amazons explosive growth and diversified business.
In the following, we will outline how to do it, and do it in such a way that it leads to broader prosperity and innovation for society: A lifetime opportunity for entrepreneurs.
Digitalization today increasingly dissolves the borders between industries and markets. The accelerating market dynamic means that businesses can no longer afford to bet their income on single streams of revenue. They need to simultaneously exploit multiple business opportunities, to explore even more opportunities, and to fluidly scale all operations depending on market demand. This cannot be done with organizational structures and business management systems that stem from the industrial age and are largely based on assumptions of predictable market needs.
The institutional inability to deal with dynamic markets offers a big opportunity: To radically rethink business setups and management systems. To be useful in hyperdynamic markets, new business systems must be exceptional in repeatedly doing precisely that which tends to be hard, even impossible, in conventional business setups:
- Connect business operations and markets: Configuring and steering business operations across a wide spectrum of markets, sensing new opportunities and business needs.
- Act on opportunities: Raising awareness for opportunities, exploring their potential for business, and dedicating certain operations to new opportunities without disturbing others.
- Flexibly scale operations: Ramping the possible transaction volume of operations up and down according to market demand without losing flexibility or disturbing other operations.
- Simplify transactions: Ensuring a simple, fast, cheap, secure, and safe transfer of goods, data, and money.
- Adapt to changing business contexts: Changing the purpose of assets and investments according to new opportunities or business needs without disturbing other operations, and fluidly integrating new capabilities into business operations.
The Amazon ecosystem demonstrates these business skills. The company decided early on to use digital technology as a super-efficient, super-scalable backbone for all of its internal operations. In 2002, in an unprecedented move, Jeff Bezos ordered all business units of Amazon to turn into independent, but closely connected services, communicating with each other exclusively through digital interfaces, and able to profitably offer their services internally as well as externally. This order forced all his business units into an entrepreneurial mindset, where every service has a clear focus on customers, value-add and efficiency of all operations.
However, despite all of its success, we are not completely satisfied with Amazon’s approach. Large and fast-growing companies have to watch the impact of their business on the development of society, progress and innovation. This places a big responsibility on them. They can either contribute to a deepening of economic and social disparities or they can pave the way to more and broader participation.
How could the next evolutionary step of companies contribute to more prosperity and inclusion in society? Companies can take advantage of digital technology to incrementally transform themselves into open entrepreneurial marketplaces offering all kinds of business services externally and internally. Every service in an open marketplace connects to its users through highly effective and efficient transactions and collaboration platforms and standards. With these new technologies, companies can collaborate and share their business capabilities across industries. The more companies share their business capabilities in such a way, and the more freedom exists to choose business partners on connected marketplaces, the better for overall competition: Choice prevents the establishment of monopolies, that today can easily force others into unfavorable contracts. Open business ecosystems systematically distribute risks of individual operations across many participants and markets, making the whole environment very resilient to disruption occurring in one of its parts. The multitude, variety, and modular interoperability of its business operations enable it to quickly act on a wide range of business opportunities across markets. The more opportunities it can tap into, the more potent and attractive it becomes as a breeding ground for innovation and problem-solving, combining capabilities that formerly were structurally disconnected or unable to work together.
Well-known examples like Amazon and Haier are showing today what we expect to become the norm for future business operations in all industries. These companies can set up and manage their heterogeneous business operations with frameworks of distributed accountability, offering strong incentives and opportunities for anyone to turn into an entrepreneur. They can unlock the hidden entrepreneurial potential in society much better than other business setups. They can democratize the process of becoming an entrepreneur; by making it much easier and by removing many risks that today still are associated with this decision. They can offer strong economic incentives to share critical assets that are needed to establish a business. Designed in the right way and established with an appropriate system of governance, open business ecosystems can provide anyone with the opportunity to become an entrepreneur on their terms.
This inclusive nature of open business ecosystems will make it possible for a much larger pool of people to become entrepreneurs at some point in their life, to do meaningful work, or to solve urgent challenges for the benefit of society. As a result, more people will be able to take advantage of their talents, making their lives richer in experience and meaning, and themselves financially more independent. Open business ecosystems offer a great opportunity to fundamentally improve working conditions for the benefits of individuals and society, contributing to broad progress and prosperity.
About the authors:
Janka Krings-Klebe, Joachim Heinz and Jörg Schreiner are the founders and managing partners of co-shift. As strategic advisors they prepare businesses for digitally connected markets. This blog post highlights some topics out of their latest book Future Legends – Business in Hyper-Dynamic Markets (Tredition 2017).
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