What Would Google Do_ - Jeff Jarvis [36]
Decide what business you’re in
Atoms are a drag
Stuff is just so last-century. Nobody wants to handle stuff anymore. It’s inconvenient and expensive. If you have stuff, to paraphrase the late, great George Carlin, you have to find a place for it. You must buy the raw stuff you’ll use to make your stuff. Then you have to store your stuff, pack it inside more stuff, and ship it along with other stuff. Not to mention that you have to pay to hold an inventory of stuff and you risk your stuff going out of style, in which case you’ll be stuck with a lot of useless, old stuff. Anybody can reverse-engineer your stuff and make the same stuff. Now you may argue that their stuff isn’t as good as your stuff—as Carlin said, “Have you noticed that their stuff is shit and your shit is stuff?”—but once there’s competitive stuff, you’ll probably have to charge less for your stuff to sell more of it. Stuff is a pain. Digits aren’t.
Since the dawn of industry, controlling things and the means to make, market, and distribute them has defined businesses. Carmakers sold cars, newspapers papers, book publishers books. They identified—and limited themselves—by their products. We are what we make.
Magazine companies sell what? Magazines? Not so fast. In 2008, Colin Crawford, an executive at the tech publisher IDG Communications, bragged that his was no longer a print company. IDG had crossed the Rubicon from print to digital two years earlier when its growth in online revenue exceeded the decline in its print revenue. As a result, Crawford blogged, his team could focus on “the changing needs of their customers” and on new online and mobile products and event businesses. The staff was, he said, “unburdened by print.”
Print had become a burden to a print company. It’s expensive to produce content for print, expensive to manufacture, and expensive to deliver. Print limits your space and your ability to give readers all they want. It restricts your timing and ability to keep readers up-to-the-minute. Print is already stale when it’s fresh. It is one-size-fits-all and can’t be adapted to the needs of each customer. It comes with no ability to click for more. It can’t be searched or forwarded. It has no archive. It kills trees. It uses energy. And you really should recycle it, though that’s a pain. Print sucks. Stuff sucks.
So who wants stuff? Not Amazon. Yes, Jeff Bezos built a great company around selling things: books, gadgets, hardware, almost anything that can be delivered to our door. Just as Craig Newmark of craigslist is blamed (unfairly) for driving a stake through the heart of papers, Bezos is blamed for crippling bookstores, with independent outlets dying and even chains suffering. But who can blame shoppers for going to Amazon with its discounts, convenience, and selection?
Bezos is as clever about stuff as he can be. He holds as little inventory as possible, getting more merchandise as needed when we order it. He owns no stores, pays no retail rent, hires no sales clerks. He doesn’t own the shipping infrastructure he uses but gets the best possible deal he can with outside services because he wields such huge volume. Because of that volume, he negotiates the best prices from suppliers. He passes a portion of those savings—the internet dividend—to his customers, which only builds his volume even higher. It’s a business of efficiencies, volume, turnover, and tight margins.
I bought Amazon stock and I’m holding onto it, not because Bezos built the better bookstore but because he is creating digital equity. He sells his retail services to other merchants, sending them customers online and taking a cut, in some cases warehousing and shipping their inventory and charging for the services. He also took the computer infrastructure he had to build and offered it to any company as a low-cost, pay-as-you-go service: computing power, storage, databases, and a mechanism for paying programmers. Countless companies now use Amazon Web Services as their backend, foregoing or at least forestalling investments in computers and software.