Amazon is shaking up retailers, both big rivals and small independent stores, as it speeds its way beyond books toward its goal of becoming a Web-sized general store. Jim Wilson/The New York Times
Try to imagine the largest bookstore in the world. Aisle after aisle, floor after floor of books, maps, audio books, music, video, you name it (if you’ve ever had the unique and wonderful experience of visiting Powell’s Bookstore in Portland, Oregon, you’ve got a great visual image to begin with). But this bookstore isn’t limited by physical size, or shelf space or inventory cost; it carries nearly every title in print, and a huge back catalog of used and out-of-print books. And in the unusual case where they don’t have the book you want in stock, they can try to get it for you from other stores or the publisher. Every time you enter this store, you’re immediately recognized and greeted by name at the door, and your personal guide stands ready to recommend books and other goods you might be interested in. Of course, you don’t have to get in your car to visit this store, it is as near as your computer. Of course, the largest bookstore in the world is Amazon.com.
But as you prepare to leave your mental image of the largest bookstore in the world, you notice a door with a sign on it that says, “More inside!” And when you peek through the door, you find yourself at the entrance to an even bigger store; one that carries more goods and services than you’ve ever seen in one place. A shoppers’ paradise?
That’s the image that Amazon.com has been aiming for since its inception. And as reported yesterday in the New York Times, Amazon.com is poised to cross an important milestone later this year. Its global sales of media products will be surpassed by its online sales of non-media products. That milestone has already been reached in North America. And while Amazon.com may retain its image as a bookstore in many of our minds, it seems well on its way to becoming the Wal-Mart of the Web.
After Wal-Mart, Amazon.com may be the most carefully dissected retailer in academic and popular writing, and it would be foolish for me to try to add to that canon here. But reading the New York Times article, I was reminded of my frequently-referenced theme of value proposition evolution. Amazon’s value proposition is evolving, and so is the value proposition of many other firms.
In its simplest guise, a firm’s value proposition is simply what a customer gets in exchange for value given up. The value proposition can be both absolute (e.g. ‘the world’s largest bookstore’), and relative to a competitor (e.g. “Have it your way” at Burger King). The value proposition can be emanate deliberately from the firm’s marketing efforts, or can be simply be result of the individual perceptions of consumers and non-consumers alike. A discussion of the value proposition of, say, The New York Times would be both lively and contentious.
I contend that value proposition evolution is the necessary business of any organization (not just for-profit firms) to ensure its long-term survival. The value proposition of the FBI evolved after 9/11. Intel used to be primarily a manufacturer of memory chips, but is now known for its microprocessors (two very different kinds of businesses). And even though Intel rarely sells is products directly to its consumers, it is one of the most recognizable brands in consumer electronics. The March of Dimes fights birth defects, but was founded to combat polio. When polio was brought under control by medical advances, the March of Dimes evolved its value proposition. MTV got its start as the definitive source for music videos, but shows almost none of them today. The world changes, and each of these organizations has changed its value proposition in order to defend against threats, seize opportunity, and simply to remain relevant.
Strategy planning and execution is the deliberate process by which an organization chooses to and evolves its value proposition. Failing to plan this evolution is tantamount to planning to fail as an organization, at least in the long run. Do you have a clear understanding of your organization’s value proposition as it exists today? As it is expected to be in three years or longer?