Amazon Services, Inc.
Using Knowledge to Drive Customer Growth
By S. Vandermerwe and Marika Taishoff
By 2004, Amazon.com, through massive investments in technology and knowledge, had acquired not only 35 million active customers worldwide, but also a vast customer database, allowing it to create what amounts to ‘individual stores’ for each individual customer. This strategic competence – its ‘crown jewels’, as founder Bezos himself put it – has till now set it far ahead of both on-line and off-line competitors. And it is this know-how – the ability to use technology to better know customers, and continuously grow that knowledge base and in the process customer spend – that it has been selling to other retail merchants and now decided, at the end of 2003, to sell via a new venture: Amazon Services, Inc. This case poses some of the strategic and operational challenges and makes for interesting debate on the decision to sell out the know-how fundamental to business success: was it a vital way to grow the business and customer base, amortising its investment and reusing its knowledge for continued gain? Or would it be selling – ostensibly even to competitors – what amounted to its crown jewels? And would Amazon be able to successfully structure, man, and manage this very different kind of enterprise, requiring a completely different set of skills as well as culture?
Case abstract adapted from The European Case Clearing House. Full case available at www.ecch.com