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Amazon and Apple: Different Paths to Innovation

Bernard Golden recently authored a book entitled Amazon Web Services (AWS) for Dummies, which I had an opportunity to review. An intriguing section of the book offered “10 reasons to use AWS” and one that stood out was: AWS enables Innovation.

According to Golden, results from innovation are more immediate when the capability of cloud computing changes underlying processes across a broad segment of industries. By doing so, AWS not only challenges legacy vendors in the enterprise but also helps them to dominate areas of new IT revenue. For example, while discontinuing shrink-wrapped products, Adobe powers their cloud-delivered services with AWS.

Along with Amazon, more and more cloud services companies are examples of change agents in the IT ecosystem. Salesforce changed delivery of sales processes through the Internet under the “No Software” moniker, and now other Software-as-a-Service (SaaS) vendors are successfully leveraging their own Force.com platforms. Google, which started the search revolution, built an entire business leveraging that leadership into mobile, mapping and video delivery.

I will focus here on Apple and Amazon who I believe have contrasting systems to alter the market.

Apple recently released two new iPhones that were an instant interest to consumers, though the lower cost iPhone 5C seems to have inadvertently attracted greater attention than the higher priced iPhone 5S. The 5S’s pioneering fingerprint recognition feature (previously not anyone’s priority) is one of the features that seem to have convinced consumers to pay a premium for the product. The novelty of the new iPhone leads to high consumer excitement resulting in a higher than average demand for the product. Though Apple has a smaller market share, their products are used more frequently than competitor products (according to web analytics company NetMarketShare), and Apple has earned an enviable profit margin.

Building on their expertise in selling books and other goods, Amazon has branched into mobile and cloud services. The company, consistently frugal, always asks a simple question before approving any expenditure: “How does it help our customer?”

CEO Jeff Bezos is known to read customers’ feedback and improve products based on their business needs. Amazon made it to the far upper right corner of the Gartner magic quadrant showing leadership in functionality due to the unmatched capabilities they offer. As a result, Amazon draws a unique breed of start-ups, all eager to deliver game-changing cloud services.

The table below is a summarized comparison of how Apple and Amazon work:

Apple Amazon
Margins High Low
Innovation Driver Future Consumer Needs Customer Feedback
Investor Expectations New Products Revenue Growth
CEO/Company Quote “Innovate or Die” “Your Margin is my Opportunity”

Comparing these two very successful companies shows the value of invention, regardless of the path taken. It also shows the difficulties faced by legacy IT vendors in meeting competitive pressures where R&D budgets are usually spent propping up existing businesses, not on customer needs. Innovation by acquisition faces challenges in assimilating new acquisitions into existing products and heritage processes.

Every industry is facing challenges in keeping up with disruptive technology-enabled cloud-delivered services. Individual companies are looking to keep up with new competitors by adapting to the new reality. Apple’s strategy of futuristic innovation may not be applicable to all industries, but it is certainly worth noting. Amazon’s habit of changing the culture by listening to customers and bringing up new ideas may be the way to move forward. Either way, enterprises need to keep innovation at the top of their goals.


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