From: acquiredfm
Amazon has been described as transitioning into a “Day Two” company, moving from an era of rapid growth to a focus on profitability [00:07:26]. This shift implies significant changes in organizational structure, innovation strategy, and market entry choices [00:07:36].
Embracing a New Stage
The idea of a “Day Two” company can be likened to a person embracing an older stage of life rather than trying to remain young forever [00:07:52]. A company cannot remain a startup indefinitely, and attempting to do so can be detrimental [00:08:25].
In retrospect, a decision by Jeff Bezos a few years prior to reassert control and push for “one-day delivery,” while aiming to move away from squeezing suppliers for profits, is seen as the “seed of Amazon’s kind of disastrous last few years” [00:08:46]. This era led to:
- Dramatic over-investment in their logistics network [00:08:52].
- A cost structure that spiraled “completely out of control” [00:08:56].
- Over-hiring [00:08:59].
This period is viewed as an example of losing track of a company’s true stage in life and trying to remain “young forever” [00:09:00].
Implications for AWS
The concept of “Day Two” also applies to AWS, though with different challenges [00:09:21]. Key challenges for AWS include:
- A “dry up” in startup formation and the availability of “easy money” that previously flowed into the space [00:09:30]. AWS has historically been the “default choice” for startups [00:09:37].
- Competition from companies like Microsoft Azure, which has successfully packaged its offerings to appeal to established enterprises [00:09:41].
Despite these challenges, AWS benefits from its extensive feature set, even if the interface is “pretty terrible” [00:10:30]. Its core strength lies in customer dependency; if a specific feature is not available elsewhere, customers cannot leave [00:10:45]. AWS does not deprecate features, even if they become unprofitable, as its “long-term Enterprise Value is determined by customers believing that Amazon will continue to support them forever” [00:11:12]. This policy creates customer lock-in [00:11:30].
Cultural and Geographic Differences
The strategy employed by AWS, particularly its emphasis on platform administration, backwards compatibility, and fostering customer trust, is consistent with the business culture prevalent in Seattle [00:12:11]. Companies from Silicon Valley, in contrast, are often more consumer-focused and are less trusted by enterprises due to their tendency to remove features or APIs [00:12:40]. This geographic difference in business approach played a role in Microsoft’s ability to retain talent during difficult times, ultimately contributing to its resurgence [00:13:13].