Saturday, December 23, 2006
Jimi Hendrix's guitar, Amazon.com, and you
I like Kevin Maney's tech columns in USA Today. He's a good writer and he keeps up a nice blog about tech news.
Kevin had a piece in the paper on Nov 22, 2006 that caught my eye. He was writing about Amazon.coms new vision for entrepreneurs. Amazon is beginning to unbundle their operations so that outside organizations can now pick from many Amazon in-house capabilities and apply them to their own enterprises.
This has been done with digital products in the past, but Amazon is gearing up to let us do this with 3D stuff, using their computers and providing physical distribution as well.
The businesses I’ve started have always sold things to other organizations. It didn’t matter what kind of organizations, just that there was a structure of some kind in place. For seed stage start ups, selling to other organizations has been a far more efficient way to start enterprises than selling things to civilians. The basis for this idea is that selling directly to the public has been far more expensive, and, most importantly, much more time consuming. Most start ups do not have the time available to waste dealing with anyone who can walk through the front door.
Obviously, that ground has been shifting daily as the internet emerges. The ability to sell directly at the retail level has been growing for the big guys as well as start ups.
The ability to keep enterprises small, fast and efficient has never been easier or cheaper. Now, the ability to sell to civilians seems to be emerging with the potential to take us far beyond eBay.
What I like about this Amazon development is that (hopefully) start ups and emerging enterprises can sell to civilians in ways they never could before, by opening different kinds of front doors.
Amazon won’t be the only portal you can do this with, but they are lighting the way. This trend will enrich the entrepreneurial community worldwide.
With the Amazon model, Kevin Maney says "You can rent space on Amazons computers to run a business, or to rent out its transaction capabilities to sell things and collect money, or rent pieces of its warehouses and distribution system to store and ship items - or all of the above."
Maney continues, "So with almost no start up costs, anyone anywhere could become a retailer. It's not just contracting with Amazon to sell your stuff, the way Target does. It's leasing pieces of Amazon to create something totally unrelated to Amazon."
Now, my seed stage friends, initially this is probably not set up for you. As Mr. Maney quotes Jeff Bezos, Amazon CEO, "We can take all the things that used to be fixed cost, and let people pay by the drink." That's code for ‘this service is going to be expensive’. At first, this is probably not for seed stagers, but it’s coming.
However, it looks to me like emerging organizations with the funding could jump right in. Storage space at Amazon distribution hubs seems to be about $0.45 per cubic foot per month. I have not used the electronic interface yet, but it's reported strength is it simplicity. The new access to Amazon's computing power is priced at a rate that looks cheap to me. This will be worth exploring. If you have a tech person on your team it would seem especially alluring.
Interesting side note. As this idea catches on, it will allow Amazon and others to offer increasingly lower costs for these services. According to Jeff Bezos, interviewed at this month's Web 2.0 conference, only 17% of the capacity of Amazon's servers are used. Mr. Bezos says it's like having a Boeing 747 and leaving it parked on the runway 83% of the time.
This move by Amazon is a clear, clarion shot across the bow of the emerging entrepreneurial culture announcing that the big guns get it. They are turning their ships to serve the needs of ever smaller enterprises with an increasing array of valuable resources. Good on 'em. Thank you Mr Bezos. I hope this idea evolves well.
Business Week did a very good cover story on the Amazon rollout in its Nov. 13, 2006 issue. I liked a quote there from an early adopter of the Amazon offering, Chris MacAskill, a former fierce competitor of Amazon. Chris is now president of an on line photo sharing firm, who says this about the Amazon approach, "Everything we can get Amazon to do, we will get Amazon to do. You're going to see all kinds of startups get a much better and faster start" by using Amazon services.
Is it for everybody? Of course not. Is it good news for all entrepreneurs? You bet.
As for Kevin Maney, I can't leave his column without applauding some great writing celebrating this evolving story.
"What's new about Amazon is the leap to physical products. This might be one of those evolutionary milestones, like when the first fish crawled up on land, or Jimi Hendrix discovered feedback on his guitar."
My start up friends, big new evolutionary benefits are raining down on our community at an increasing rate. Many will help you and your enterprise become more sustainable. Follow those like Jimi followed his feedback loops.
Developments like those at Amazon are leading to a lot more opportunities for a lot more people.
That includes you.
Kevin Maneys full article at USA Today
Amazon portal to learn more
Jeff Bezos interview at Web 2.0
ComputerWorld Magazine review of the Amazon project
Business Week story on Amazon
Kevin Maney's blog
Kevin Maneys home page