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Amazon and Apple: Different Paths to Innovation

Comparing these two very successful businesses shows the value of invention, regardless of the path taken

Bernard Golden recently wrote a book titled Amazon Web Services (AWS) for Dummies, which I had an opportunity to review. One intriguing segment of the book came from a section offering 10 reasons to use AWS and one that stood out was AWS enables Innovation. Results from innovation are more immediate when it leverages the capability of cloud computing to change underlying processes across a broad segment of industries. AWS not only challenges legacy vendors in the enterprise but also help them to dominate areas of new IT revenue from start-ups funded by venture capitalists. For example, while discontinuing shrink-wrapped products, Adobe powers their cloud-delivered services with AWS.

Along with Amazon, more and more 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 Force.com platforms. Google, who 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 have contrasting systems to alter the market.

Apple recently released two new iPhones that were an instant interest to consumers. Apple’s release of a lower cost iPhone 5C seems to have inadvertently caused greater attention to the higher priced iPhone 5S. The pioneering fingerprint recognition feature (previously not anyone’s priority) seems 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.

Amazon changes the status quo by listening to customers when making investments. Building on their expertise in selling books, Amazon has branched into mobile and cloud services. Amazon, consistently frugal, always asks a simple question before approving any expenditure: “How does it help our customer?” Jeff Bezos is known to read customer feedback and improve products based on business needs. Amazon made it to the far right corner of the Gartner magic quadrant due to the unmatched capabilities offered. 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 businesses shows the value of invention, regardless of the path taken. It also shows the difficulties faced by legacy IT vendors in meeting competitive pressures. Their 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 to keep 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 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.

More Stories By Larry Carvalho

Larry Carvalho runs Robust Cloud LLC, an advisory services company helping various ecosystem players develop a strategy to take advantage of cloud computing. As the 2010-12 Instructor of Cloud Expo's popular Cloud Computing Bootcamp, he has already led the bootcamp in New York, Silicon Valley, and Prague, receiving strong positive feedback from attendees about the value gained at these events. Carvalho has facilitated all-day sessions at customer locations to set a clear roadmap and gain consensus among attendees on strategy and product direction. He has participated in multiple discussion panels focused on cloud computing trends at information technology events, and he has delivered all-day cloud computing training to customers in conjunction with CloudCamps. To date, his role has taken him to clients in three continents.