Managing Director at Temasek owned fund Heliconia Capital. Private Equity, Venture Capital, Mergers & Acquisitions, Business Strategy. Technology and Engineering. Senior Accredited Director
https://lnkd.in/guKyDZsf "And then you’d say, why is it that so called lack of focus strategy seems to be working for Amazon? And I think the fundamental underlying principle that he’s guiding his whole discussion of strategy is, he’s changed the rules of strategy. So the old rules of strategy were, the way you gained competitive advantage is by being better or cheaper. So if I am selling you a car, my car is better of cheaper. But the inherent assumption in that strategy statement is, I’m selling one product to one customer. And what Amazon is basically arguing is, the digital economy is all about connection. We have got to connect products and connect customers." "So connecting products, here the idea is, I can sell you, this is a classic razor and blade strategy. I can sell you a razor cheap in order to make money on the blade. So I can sell you Kindle cheap in order to make money on the ebooks. Now, at some level you might say, hey, razor and blade have been around forever. What’s so unique today? I think unique today is razor could be in one industry and blades could be in completely different industrys. So for example, if you look at Amazon’s portfolio of businesses, you sort of say, not only Amazon is an e-commerce player, but also is making movies and TV shows, its own studio. Well, why does it make sense for an e-commerce player, an online retailer to compete with Hollywood. Well, Walmart doesn’t make movies. Macy’s doesn’t make movies? So why does it make sense for Amazon to make movies?" And I think once you dig into it, the answer becomes clear that the purpose of the movies is to keep and gain the Prime customers. Two day free shipping is fine, but if you ask me to pay $99 or $119 for two day free shipping, I might start doing the math in my head, and say, OK, how many packages do I expect to get next year? And is the Prime membership worth it or not? But once you throw in, in addition to the two-day free shipping, you throw in some TV shows and movies that are uniquely found only on Amazon, I can’t do this math. And why is Prime customers important to Amazon? Because Prime customers are more loyal. They buy three or four times more than the non-Prime customers, and they’re also less price sensitive. And in fact, Jeff Bezos has said publicly that every time we win a Golden Globe Award for one of our shows, we sell more shoes."