The Head, The Heart, and Profit Margins
There is a great adage attributed to Jeff Bezos that goes like this:
Your margin is my opportunity.
It is largely suggestive of his approach to scaling Amazon. With perpetual reinvestment, Amazon grew in one primary area (bookselling), developed new technologies to support that area (computing power), spun off those off capabilities into viable services (a’la AWS), operated at low margins to price out competitors, gained through volume, reinvested in even more areas (Prime video), and thus continued the cycle.
So in the Bezos context, “their margins are my opportunity” stands for economies of scale, price wars, efficiencies, and races to a sustainable bottom. Bezos attacks areas where he sees soft margins and wedges Amazon into the space with something cheaper, faster, and eventually (thanks to the reinvestment) better.
But this can work the other way, too. As explained in the book Blue Ocean Strategy, it starts by recognizing the value of low-margin, low-cost ventures versus high-margin, high-cost counterparts. It comes down to either the head or the heart. At the most boiled-down, core essence, every customer chooses with one of these anatomical machines before choosing with the other. As explained by the authors,
Some industries compete…
