Amazon CEO Andy Jassy at Recode Reveals Amazon Core Innovation Questions

CEO Andy Jassy sat down with Kara Swisher for an hour, and in many ways was not that surprising what he had to say. There were two elements, however, that I thought were interesting.

The first was an off-hand comment, "All these businesses are very decentralized."

In this one statement, Jassy described what a lot of people may not be aware of at Amazon, and I think is a big contributor to its success. The idea of the single-threaded leader. Each major area at Amazon has essentially its own leader who -- unless they are doing something extremely risky or worrisome -- does not have to answer to some kind of senior leadership team. Even this simple idea is one that most other companies even half Amazon's size have not been able to figure out.

The second was Amazon's core investment questions. In order to decide to go into a new line of business (Alexa, Healthcare, etc), Amazon asks itself 4 key questions:

1 - If we invest, could this be big and move the needle? (total addressable market)

2 - Is it being served well today? (problems compelling)

3 - Do we have a differentiated approach? (our strategy matters)

4 - Do we have a competence there, and if not, can we acquire it quickly? (ability to win)

I think these 4 questions are really interesting ones for any startup. Number 3 I would like to call out in particular.

So many startups ask number 1, their answer for number 2 is weak, and number 3 while the answer is, yes we are technically different, the answer to that difference does not matter to the customer.

Let me give you one example. eBay used to say, we are different than Amazon because we will never compete with you.

Is it different? Yes.

Is it meaningful to the seller? History would tell us no, unless you are primarily interested in PR (what people tell you) versus behavior (how people act).

The history of the last 20 years would tell us that sellers migrate to the platform where buyers are getting the widest selection in the most convenient way possible, which is what really tends to matter in the long-term.

It may seem like a small point but it's not, and likely in whatever sector of the ecommerce market you cover there is a lesson here as well.

Differentiation is table stakes, yes. But to have the right long-term vision, that the points of differentiation you choose as the focal points of your strategy also need to be the most important factors to your customer, and you need to work on improving those factors over a long period of time.