Amazon did not kill the retail industry

This post has spread like wildfire on LinkedIn. Some people love it. Others couldn’t disagree more. A few folks copy-post it without giving me, the author, credit. I’ve decided to write an article to expand on my initial post and try to address most of the comments.

The main point is that technology by itself is not the real disruptor. Being non-customer centric is the biggest threat to any business.

I am not trying to discount the value of technology. Nothing can be further from the truth. Today, technology is at the heart of nearly every transformation, but it is still the means to an end. New technology comes and goes, but the customer-centric principle remains.

If we look at any disrupted industry or business, we will always find an underlying customer-related problem, stated or unstated. Customers are always dissatisfied, even when they report being happy and business is great. Even when they don’t yet know it, customers want something better.

Many of the “killed” businesses used to be great companies. However, they got lost along the way. Perhaps, they got too comfortable. They lost focus and started suffering from marketing myopia. They concentrated on short-term gains to satisfy investors and replaced long-term vision. They had the money and access to the technology, but they decided to pursue a different route. To quote Andy Groover from Intel, “Only the paranoid survive.”

We can argue that none of the industries or businesses that I mentioned in my post are dead. In the literal sense, they are still alive. However, they are in a survival mode right now. They are either rethinking their business model or trying to transition to a different business.

Let’s go one by one on the examples that I provided in my post.

Amazon did not kill the retail industry. They did it to themselves with bad customer service.

Let’s use Borders as an example, which is a well-documented case. For years, Borders outsourced its online book-selling to Amazon.com, so anytime you visited borders.com, you were redirected. Why on earth are you going to relinquish your customer base and experience? Besides stupidity, my guess is they did it in the name of efficiency. Borders ranked #266 out of the 926 companies in customer services. They also had too many stores, had too many debts, and overinvested in music sales. In summary, Borders lost focus.

On the other hand, Amazon is customer-obsessed to the point that everyone has to be able to work in a call center. As part of a training session each year, Jeff Bezos asks thousands of Amazon managers, including himself, to attend a two-day call center training program. In the early days, Bezos had brought an empty chair to the meetings and informed his top executives that they should consider the empty seat as being occupied by a customer, who is “the most important person in the room.” If you want to learn more about customer services lesson from Jeff Bezos, Kevin Baldacci has an excellent post on the matter from where I had drawn some of the examples.

Netflix did not kill Blockbuster. They did it to themselves, with their ridiculous late payment fees.

The idea of Netflix came from $40 in late fees on an Apollo 13' rental. Furthermore, Blockbuster passed on the opportunity to buy Netflix for just $50 million, which was quite insignificant for a company that had held a 5 billion IPO a year before. Instead, Blockbuster put a massive investment into Enron (their broadband services subsidiary).

Uber did not kill the taxi business. They did it to themselves, with their limited number and fare control.

Taxis drivers are notorious for being rude, discriminating, and taking advantage of visitors to the point that, in NYC, they are not allowed, by law, to ask for your destination before you get in the cab. They like to take the most expensive route. Plus, to keep a limited supply of cabs in the street, unions limit the number of “medallion” licenses, each of which goes for a ridiculous price.

Uber is not a saint by all means. They have broken laws, manipulated taxi drivers by using behavioral science and discriminated women in their workplace. But the point is that the likes of Uber are solving a customer problem with taxis.

Apple did not kill the music industry. They did it to themselves by forcing people to buy full-length albums.

I still remember when I used to pay $12 for a CD album even though I only liked a couple of songs. Apple changed the game after offering digital albums for $10 and any individual track off that album for 99 cents. Apple made it easier to find, shop and listen to music with iTunes. As a result, we are probably buying more music than ever, but we are only buying the songs that we like.

Now, we can claim that Apple has squeezed artists by owning the music marketplace. They set the price and terms, which sometimes might not favor the artists, especially the newcomers. That said, today we have more options than ever with Spotify, Shazam, and Amazon Music.

Airbnb did not kill the hotel industry. They did it to themselves with limited availability and pricing options.

Airbnb came to fruition because of limited availability and pricing options. Designers Brian Chesky and Joe Gebbia couldn’t afford their rent on their San Francisco apartment. To make ends meet, they set up a site to rent their place during a design conference in town given the hotel space was limited. Today, Airbnb can benefit both hosts and travelers. Hosts get to meet people from around the world while making a little extra money, and travelers can often stay for less than the cost of a hotel room.

According to a CNN report, critics of sites like Airbnb have long claimed that the services remove affordable housing from the market by turning rentable apartments into unofficial year-round hotels. A drop in supply can mean higher rents for remaining apartments. Hotel industry groups are also upset at the loss of revenue.

Like it or not, Airbnb is solving a customer need.

We go back to the main point: Technology by itself is not the real disruptor. Being non-customer-centric is the biggest threat to any business.