Going From “How” to “What”

Rethink: A Business Manifesto for Cutting Costs and Boosting Innovation By Ric Merrifield ( Financial Times Press, 2009 )

In Rethink, Microsoft Corp. strategist Ric Merrifield discusses the common trap that companies fall into when they focus on “how” to accomplish a certain business task rather than on “what” they are trying to accomplish. In this excerpt, he cites Amazon.com as one example among many companies that realize this.

Amazon began by selling all kinds of books, building trust and familiarity among its customers. In the recession [after the dot-com bust], Jeff Bezos could easily have fallen into the “how” trap by focusing on ways to sell more books. Instead, he was savvy enough to recognize that his customers’ positive experiences gave him the license to bring more products and services to their attention. By distilling what was most important to his customers, Bezos expanded their relationship with Amazon (and its brand, which is a key component of value) well beyond books.

The efficiency of Amazon’s warehouses finally paid off after yet another software upgrade put Bezos in a whole new business. His superior understanding of his rethought distribution operation allowed him to perform the fulfill-order “what” for other merchants such as Target. The efficiency of Amazon’s warehouses saved those companies money even after paying commissions, and that revenue stream offset much of the interest Amazon was paying on its huge debt.

An epiphany opened Amazon.com as an online market to all comers, including competitors. Bezos invited purveyors of both new and used goods to list their products for sale on his site, and listed all items in a category on the same page whether they were new or used, from insiders or outsiders. Same-page listings seemed suicidal to analysts. Was Bezos going to risk his relationship with vendors by making them go head-to-head with cheaper used goods?

But Bezos followed his instincts, knowing that his basic customer-satisfaction metric depended not on the status of the goods, but on providing more of what the customers wanted to buy. In the end, the idea became a key part of Amazon’s strategy, opening up a new stream of revenue. The outside vendors paid commissions on sales of goods that Amazon never touched, producing almost pure profit for Bezos’ company.

Amazon was also building brand and customer loyalty by making price comparisons easy. “Giving people the choice to buy new and used side by side is good for customers,” Bezos said.  “The data we have tell us that customers who buy used books from us go on to

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