Norwegian trading companies must meet the competition from Amazon by using the company's resources smarter - as Amazon does itself.
In an interview with the television program "60 Minutes" in December 2013, Jeff Bezos said: "Amazon will end one day. But it does not worry me, because it is inevitable that it will happen. Businesses come and go ». With that, Bezos continued his strategy.
With Amazon's entry into Sweden, competition for Norwegian trading companies will increase. My input is to innovate as Amazon itself has done: to use the resources you have for innovation smarter rather than increase the resources.
Many companies use the resources for change and innovation in the wrong way. Too much money is spent on activities that are easy to do, visible, or easily measurable. Examples are hiring more people, buying new technologies, or acquiring larger premises.
Such activities alone create little value for the customer or business.
There are three factors that best solve customers' needs: customer experiences, business models, and digital technology. This is where the ability to use resources smarter comes in. Increasing the resources for innovation alone will not provide any value.
Let me give examples of the three conditions:
- Customer experience: Customers who shop at Amazon experience an efficient shopping experience and receive the goods quickly. The company centers its activities on the customers. For example, it does not help a Norwegian company to open a "megastore" as long as the experience customers are left with on a normal Saturday morning is to wait half an hour to talk to a salesperson. It creates no value for either the customer or the business. In less time, a customer could place the order with Amazon and have the delivery confirmed.
- New business models: Amazon consists of many companies in different industries and therefore has a number of business models that are adjusted frequently. But the core of the business models is the same: to create value for shareholders and customers in the long run. When you order a book online from a Norwegian company, you will be notified that the book will normally be sent in two to seven days. During the process, the customer does not receive an update. It gives the bookstore sales one time. Customers would get faster delivery and better information at Amazon, which increases both customer satisfaction and Amazon's earnings in the long run.
- Apply technology: Amazon develops sophisticated e-commerce platforms. The company focuses not only on books or other products, but on logistics and the use of technology. If Norwegian companies sell via Amazon's platform or let Amazon control their web pages, they will relinquish control. That's unfortunate. But to avoid this dilemma, companies should build better digital platforms themselves.
Investing in these conditions is less attractive to some companies, since the conditions are not very visible, less measurable and more complicated than most resources. However, the return can be high.
Change and innovation
I also see negative aspects of Amazon, such as taxes, conditions for employees, and lack of contribution to the circular economy. Still, I do not touch on those aspects here, since the focus is on what Norwegian companies can learn.
In the interview on "60 Minutes", Bezos added: "The companies that shine the strongest and are the most important in any era - you wait a couple of decades and then they are gone. But it's my job to delay that date as long as possible for Amazon.”
Waiting for Amazon to collapse is in vain - instead, Norwegian companies should plan more for change and innovation. They do not have to increase the resources for innovation to achieve this, but they must utilize the resources they have smarter.
- Peder Inge Furseth and Richard Cuthbertson. The Right Way to Spend Your Innovation Budget. Harvard Business Review, digital article August 3rd 2018.
- Peder Inge Furseth and Richard Cuthbertson. Innovation in an Advanced Consumer Society. Oxford University Press 2016.
This article was first published at DN.no 04.09.20.