Industry Innovation Report: Amazon

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Executive Summary

Amazon is a well-established online retailer that operates globally. The current industry trends include the focus on customization of customer experiences, advanced logistics, and the use of augmented reality, and testing new ways of shopping. While Amazon has an internal culture, processes, and leadership prepared to meet the challenge of innovation, the main issue is the size of the company and how to integrate new processes and systems within the existing ones. For instance, this business employs over 800,000 people globally, and disseminating knowledge about a new innovative strategy may be challenging. A road to innovation presented in this paper addresses this by establishing the categories of stakeholders and the steps needed to create a simple and flexible knowledge management system. Considering the number of innovations Amazon is already testing, such as driverless trucks and Amazon Air, the current industry trends and their implementation into the company’s operations should not be an issue. This report will detail the innovation strategies applied by firms in the online retail sector and assess how Amazon can leverage its capabilities to overcome some of the industry challenges.

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Introduction, Purpose of the Report, and Structure

Amazon is an online retailer and provider of online services based in the United States, which operates globally. Established in 1994 as an online bookshop, it has grown to become one of the world’s largest retailers. Currently, the importance of online retail is increasing since many brick and mortar stores had to close due to COVID-19, imposing pressure to deliver goods while continuing to improve the services. The purpose of this report is to analyze the innovation trends in the industry where Amazon operates, discuss how the company’s leaders can successfully prepare for innovation and change, and evaluate the meaning of organizational knowledge, knowledge transfer, and cross-functional cooperation for innovation management.

This report will begin with an analysis of the trends whiting the online retail industry. Next, the author will present an assessment of Amazon’s leadership, competitive position, and preparedness for implementing the discussed innovations. Finally, the report will detail a roadmap with the proposed strategy of how Amazon can address the challenges arising from incorporating innovation. In the conclusions part, the author will summarize the main facts about Amazon and online retail innovation trends and briefly discuss how the company can approach innovation management.

The Future of Industry: 2020 and Beyond

The main industry for Amazon is online retail, and some core innovations here include improving the experience of the consumers, working with supply chains and logistics, and testing new ways of shopping. The main driving force behind all innovation in this sector is the strive to make online shopping faster, similarly to offline shopping where a person receives the product immediately and improves customers’ experiences, for example, by including customer’s individualized characteristics in the design of recommendations or during customer support interactions.

The digitization of logistics, in general, and the use of complex algorithms that allow optimizing delivery are among the core strategies used by online retailers. Developments, such as driverless trucks, allow simplifying the logistics process and reducing the costs, and considering Tesla’s success in this field, one can anticipate that Amazon and other retailers will soon transition to a new model of interacting with suppliers (Law, 2019). Hence, it is probable that soon online retailers will rely on driverless vehicles to supply the goods they sell, which should make delivery faster.

The management of supply chains is also changing since retailers and vendors now use artificial intelligence to predict demand and adjust the supplies accordingly (Johnson, 2020). In many cases, Amazon is already testing the innovation or has already launched a project that targets a specific change because the retailer adopted a culture that makes innovation the main focus of the retailer’s development strategy.

Another trend for this sector is the improvement of customer experience, crafting an experience tailored to the individual’s characteristics and preferences. Majorel’s (2019) report indicates that customers expect online retailers to provide them with individualized services, such as individualized communication, recommendations, and other elements of interactions. This means that companies have to develop integrated customer journey strategies, which is a complex method of tracing each step a person goes through before ordering something and subsequent interactions with this customer (Majorel, 2019). The use of chatbots and personal assistants is one example of how companies integrate individualized customer journeys, but ultimately, this approach is based on data collection and analysis.

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Next, the use of augmented reality (AR) as a way of allowing the customer to preview the products they plan on buying is another trend. For example, one can see how a furniture piece will fit into their living room before ordering it (Majorel, 2019). This is an example of how online retailers try to provide customers with an experience that merges online and brick-and-mortar shopping.

In terms of integrating supply chain innovation, Amazon is already working towards testing driverless trucks, hence, this element should not be a challenge. However, integrating the driverless vehicles into the supply chain, since although Amazon strives for vertical integration, there are many products sold by outside companies on their platform. Next, although Amazon possesses the financial resources to work on innovations and test new approaches to managing retail, the retailer employs close to 800,000 people globally, either full-time or part-time (Number of Amazon.com employees from 2017 to 2019, no date). This creates a massive challenge regarding the distribution of new organizational knowledge and requires a good structure system that can make the dissemination of this knowledge easy. The same issue is linked to addressing customer experience innovations since the massive amounts of data Amazon collects are not easy to store and analyze, and the company has to employ specialists capable of data analysis. This and the aspect of AR may be difficult to implement because Amazon’s website is a collection of large quantities of data, modifying which is both time and resource consuming.

The Organisations Innovation Requirements 2020 and Beyond

When Amazon was first established in 1994, internet retail was an unpopular shopping method, and the technology was not advanced enough to ensure a good customer experience, making Amazon one of the pioneers in this industry. However, now, especially considering the global pandemic, online retail is an integral part of many people’s lives. Hence, many companies, including large tech corporations, such as ABC or Apple, and offline retailers try to get a market share in this industry, in many cases, by using innovation as the basis of competitive advantage. The premise of these actions is the vision, according to which online retail will fully replace brick and mortar shopping, and the objective is to create a user experience that would allow mitigating the adversities of online shopping, such as the inability to see and feel the products or long delivery time.

Amazon will have to make systematically targeted adjustments, integrating new customer experience management tools, driverless trucks, and AR capabilities, and it will need to teach its suppliers, employees, and sellers how to use these tools. According to Lindegaard (2019), to develop an organization’s innovation capabilities, one must build on the leadership principles that are already in place. Since Amazon adopted the ‘open innovation strategy, which allows for the company to search for and implement innovation relatively easily by gaining inspiration from the communities surrounding the company and other sources, the implementation of innovation should not be an issue (Tou et al., 2019). Next, the company should set out clear objectives, what needs to be changed, how, and what resources will be required to achieve this. For Amazon, as was previously mentioned, there is a clear vision for the image of the future online retail, hence, the organization is well-prepared to address this factor.

Finally, the implementation of new strategies requires proper knowledge management. An organization’s knowledge management system is a resource that allows collecting information pertaining to the company’s work, standards, principles, and this process allows to use of the knowledge accumulated by the firm effectively (Koenig, 2018). Knowledge transfer is the process of disseminating the information that the company collected. For example, the suppliers and logistics managers of Amazon have to be informed of how to operate the driverless truck’s systems, how to schedule deliveries and adjust the supply management to successfully implement this innovation.

Therefore, what is required from Amazon and the main objective is to develop its innovation capabilities as a system that allows implementing changes quickly and teaching people how to use these new tools or a new knowledge management strategy. Simplification of processes and the use of robots and AI is one way for ensuring that changes can quickly transfer from ideas to strategic plans. The future capabilities that Amazon wants to acquire are the ability to become a global retailer, which provides a personalized customer experience, and delivers goods quickly.

Building the Future Innovation Capabilities for the Amazon

Arguably, Amazon possesses the resources needed to successfully implement most innovation-related changes, which include both tangible and intangible assets. In terms of leadership, Amazon’s CEO and creator, Jeff Bezos, undoubtedly promotes innovation as a way of addressing industry challenges (Tou et al., 2019). Considering the massive investments that Amazon has already made into the testing of systems such as driverless trucks and drone delivery, one can argue that leadership recognizes the importance of innovations.

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Next, in terms of reviewing processes, one must look at logistics as one of the core business processes at Amazon. Amazon uses robots and automation at its sorting stations and within many areas of its process management to simplify the operations (Tou et al., 2019). This is good because it means that fewer adjustments will have to be made to implement innovation. Moreover, Amazon has established a unique approach to managing vendors that sell products through its platform since the latter can choose to outsource the logistics to Amazon (Johnson, 2019). This approach to managing logistics and deliveries provides the company with more control and allows for vertical integration.

As for culture, at Amazon, it is accepted that innovation is a driving force of the company’s development. Amazon has a long history of setting industry standards and testing new developments, such as delivery via drones, which has now become Amazone Air (Amazon air, no date). Another example is creating physical stores where customers can walk in, take a product, and walk out, with their smartphones processing the payment. Amazon itself states that the company and its employees pride themselves in building a culture of innovation’ (Innovative culture, no date, para. 1). This claim is supported by external audits as well, for instance, Fast Company named Amazon one of the top 50 companies that are the best places for innovators to work (Mautz, 2019). Hence, undoubtedly, Amazon is well-prepared internally to address the innovation challenges that it can face. However, one challenge is the size of this company and the approach to disseminating knowledge, which is integral to innovation management, since it may be challenging to implement changes within an organization that employs thousands of people.

In terms of its competitive position, Amazon has operated since 1994 and has grown to be one of the largest retailers in the United States and globally. Hence, competition from smaller retailers is not a threat to this business. Other online giants, such as Google, for example, are not involved in online retail business directly, and eBay has been losing its competitive position. However, no competitor would have a platform similar to that of Amazon.

Roadmap

Despite Amazon’s readiness to face the challenges and implement innovation, there is one issue that arises from the advantages of this company, which is its size. Figure 1 is Amazon’s roadmap to innovation. This roadmap implies that Amazon has to take steps towards simplifying its knowledge base management, for example, by dividing the innovation strategies into three distinct categories – customer experience, AR, and logistics – and managing knowledge for each of these domains separately. However, one should note that many innovations that were discussed previously imply that fewer people will be employed by Amazon, making the process easier. The next step is collecting knowledge followed by knowledge transfer, which is the process of explaining how Amazon plans of using these innovations and how each of the stakeholder groups can apply these tools.

The process of disseminating knowledge, in particular, plays an essential role in Amazon’s innovations. Here, the company should leverage the online tools available to it and create knowledge bases or hold online seminars to explain some of the critical factors in its innovation management strategy. Hence, this map shows that Amazon has to adjust its knowledge management system and adapt it to make it more flexible and straightforward.

Innovation roadmap for Amazon 
Figure 1. Innovation roadmap for Amazon 

Conclusion

Overall, this report addresses Amazon’s readiness to implement innovations that are current industry trends. Amazon is well-prepared to address these industry challenges because its leadership is upholding a strategy of ‘open innovation.’The future innovation trends include customer experience, advanced logistics, and AR. Hence, the capabilities that Amazon’s management should develop is a better knowledge management system that would allow the company to disseminate knowledge to the 800,000 employees, partners, and vendors effectively. This can be done by using online tools, seminars, and online knowledge bases and by promoting innovation among the employees.

Reference list

Amazon air (2020). Web.

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Innovative culture (2020) Web.

Johnson, T. (2020) How the Amazon supply chain strategy works. Web.

Law, B. H. (2019) Amazon tests self-driving trucks, invests in tech startup. Web.

Lindegaard, S. (2019) A roadmap for building corporate innovation capabilities. Web.

Majorel (2019) E-commerce: trends and innovations for online shopping. Web.

Mautz, S. (2019) Amazon shares 6 ways it creates a culture of innovation and how you can too. Web.

Number of Amazon.com employees from 2007 to 2019. Web.

Koenig, M. E. (2018) What is KM? Knowledge management explained. Web.

Tou, Y. et al. (2019) ‘A new concept of R&D in neo open innovation: transformation of R&D triggered by Amazon’, International Journal of Managing Information Technology, 11(1), pp. 17-35.

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BusinessEssay. (2022, May 11). Industry Innovation Report: Amazon. Retrieved from https://business-essay.com/industry-innovation-report-amazon/

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BusinessEssay. (2022) 'Industry Innovation Report: Amazon'. 11 May.

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BusinessEssay. 2022. "Industry Innovation Report: Amazon." May 11, 2022. https://business-essay.com/industry-innovation-report-amazon/.

1. BusinessEssay. "Industry Innovation Report: Amazon." May 11, 2022. https://business-essay.com/industry-innovation-report-amazon/.


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BusinessEssay. "Industry Innovation Report: Amazon." May 11, 2022. https://business-essay.com/industry-innovation-report-amazon/.