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How to Create a Business Model that’s “Built to Last”

At a time of constant change, Amazon has kept thriving by pushing into market spaces outside of its "core competencies." Could you do the same?
COLLABORATORS Ilan Mochari
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"Seizing the White Space: Business Model Innovation for Growth and Renewal"

Amazon’s growth has been analyzed and dissected by business school students all over the world. But in his book Seizing the White Space: Business Model Innovation for Growth and Renewal, Mark Johnson argues that the least understood aspect of Amazon’s success is its willingness to pursue growth in its “white spaces”—the range of potential activities not defined or addressed by the company’s current business model. Here’s a timeline showing how Amazon has thrived by perpetually reinventing its business model. 1995: Amazon sells its first book, Douglas Hofstadter’s Fluid Concepts and Creative Analogies. The company disrupts traditional book publishing with a radical new customer value proposition. 1996: Capitalizing on adjacencies, Amazon expands into other easily shippable consumer goods, such as CDs. 1999: Amazon’s business model morphs from direct sales to sales-and-service, as company launches commission-based brokerage services to buyers and sellers of used books. It  also develops a model to serve third-party sellers and opens its storefront technology to other retailers, including competitors. 2002: Amazon launches and develops web-services platform, low-cost and reliable online services for other sites and web developers. 2007: Amazon launches Lab 126 and creates the Kindle e-book reader, becoming an original-equipment manufacturer and the creator of a digital media platform. This allows for transaction-based content delivery and for a subscription model for periodical content. 2011: Amazon enters the tablet market with the $199 Kindle Fire. It is seen as an “advanced mobile portal” to Amazon’s cloud service, and Amazon’s $79-a-year Prime Service begins offering unlimited streaming of its library of movies and TV shows and the right to “borrow” a digital book once a month. With less fanfare, it also enters the content creation business and prepares to launch its own book-publishing business, stirring genuine panic among publishing giants. How have you reinvented your business model?

THE PLUS
To learn more about Amazon’s business model innovations, check out its 2002 and 2008 annual reports in particular. Even if you’re not interested in this subject one whit, you’ll likely be interested in Jeff Bezos’s letter to shareholders in 1997—the year of the company’s IPO—in which he articulates Amazon’s values and discusses its future. Every Amazon annual report includes a copy of the 1997 letter. As for Mark Johnson’s Seizing the White Space, you can find the stat on S&P 500 longevity on page 173. Johnson cites research from Creative Destruction: Why Companies That Are Built to Last Underperform the Market—And How to Successfully Transform Them, by Richard Foster and Sarah Kaplan (Currency). Peter Drucker, too, often addressed questions of business model change while writing about what he insisted on calling theories of business. See Drucker’s “The Theory of the Business,” from the September 1994 edition of Harvard Business Review. image courtesy of flickr users, Cаt, bravenewtraveler

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