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Innovation stories: the birth of Amazon Web Services

Enrique Dans
Dec 10, 2019 · 3 min read

I highly recommend reading a report in MarketWatch, “How Amazon created AWS and changed technology forever”, based on interviews with leading Amazon executives about the development and launch phase of Amazon Web Services, a fascinating innovation case I have frequently discussed in my classes and that always proves popular with students.

Amazon Web Services provides an opportunity to question many of the myths associated with the concept of related diversification and the extent to which the provision of cloud computing services had anything to do with the skills of an electronic commerce company. Amazon was looking for a solution for its own processes and its very strong growth, and ended up creating a highly competitive service it then resized and opened up to third parties, as it had previously done with other products such as warehouse logistics. Let’s not forget that Amazon never intended to have warehouse space, because Bezos’ original idea was not to store merchandise, but to send it directly from suppliers. It then realized that in rethinking its strategy and having to build warehouses, allowed it to do so in such a way it could consider offering a logistics aggregator platform to third parties, which would make its warehouses permanently state of the art.

Using third parties as a quality benchmark is a very interesting strategy. When you develop products and services internally, thinking of them as if they were going to be offered to third parties is a way of preparing them to be very competitive, because in internal use, on many occasions, we accept standards that would not necessarily be competitive in a hypothetical open market in which we are forced to compete with competitors. The same approach helps us when we need to keep the service competitive in a rapidly evolving market: the arrival of Amazon Web Services was a revolution that gave rise to cloud computing and what we might call chewing gum infrastructures that allowed payment based on real use. Amazon may not have invented” cloud computing as such, but it did largely make it the ubiquitous service we know. Its market leadership has a lot to do with the idea of designing a competitive product for use by the company itself, whose demands were far above those of the average customer at the time.

Now, Amazon Web Services, which continues to be the leader in its segment, is filing a lawsuit after a $10 billion US government contract, Joint Enterprise Defense Infrastructure (JEDI), was awarded to Microsoft. Amazon says the US administration chose Microsoft over Amazon not for technical or competitive reasons but because of the personal preferences of President Donald Trump, determined from the beginning of his mandate to attack Amazon and its founder, who he perceives and treats as a political opponent. The president has tried to damage the company directly on several occasions, from pressuring the US Mail to raise Amazon’s rates to accusing it of tax evasion, an episode in which, moreover, Trump’s measures ended up to the company’s advantage.

From selling all kinds of products, to becoming a leader in cloud computing and now taking on the US government. The twists and turns that come with innovation…

(En español, aquí)

On the effects of technology innovation on people…

Enrique Dans

Written by

Professor of Innovation at IE Business School, blogger at enriquedans.com and Senior Contributor at Forbes

Enrique Dans

On the effects of technology innovation on people, companies and society (writing in Spanish at enriquedans.com since 2003)

Enrique Dans

Written by

Professor of Innovation at IE Business School, blogger at enriquedans.com and Senior Contributor at Forbes

Enrique Dans

On the effects of technology innovation on people, companies and society (writing in Spanish at enriquedans.com since 2003)

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