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Alexis Ternoy
Alexis Ternoy 24 July 2015
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Two Flops For Amazon - Is It Time For Bezos To Step Down?

Both the Kindle Fire (Amazon's tablet) and the Fire Phone (Amazon's smart phone) are a huge flops.

Both the Kindle Fire (Amazon’s tablet) and the Fire Phone (Amazon’s smart phone) are a huge flops. What to say about “Prime”? Yet, the company has not dropped the price to sell off the remaining stock. Why? Is this a ploy to make Amazon seem like a company that can’t make a bad product.



Amazon is no stranger to failure. In fact, for it’s first ten years it did not make a profit. Sure, it had sales, but the investors did not see a return. Today, Amazon is barley profitable – and just barley.

It makes most of it’s money from Cloud Servers (called Amazon Web Services or AWS for short). Running a consumer, e-commerce site required Amazon to get good at distributed computing. At some point Amazon realized that they could sell their knowledge and excess server capacity – and AWS was born.

Today, AWS makes a lot more money for Amazon than selling books and whatnot. But the public still see the company as a consumer e-commerce site. But founder, Jeff Bezos, has been wrong before.

When the company started, he wanted to sell books. The margin was high and people buy a lot of them – especially in the tech boom of 1996. But it turns out, books are heavy to ship, better distributed by truck, in bulk to a book store, then picked-up by the customer.

 

So he changed the business model – free shipping and a price drop. Sales happened, but at a loss of profitability.

Fast forward to today, AWS is making money, why bother with a tablet or phone? The success of the Kindle eBook reader, and it’s super profitable digital sales, likely, started the idea of an android tablet for people who don’t want two devices or a dedicated eBook reader. Or maybe it was to fight against the Barnes & Noble’s Nook Android tablet – which are very good tablets. Who knows. But the Kindle Fire is a flop. The only thing it set fire to was company cash.

Amazon CEO Jeff Bezos unveils the Fire Phone
Amazon CEO Jeff Bezos unveils the Fire Phone

The Fire phone made more sense as it, at least, was tied to the lucrative phone subscription model. But again, the hardware was a flop as it had no compelling features for the buyer – It was more “The Scary Tech Devices” on my blog, and that gives the creep. Lots of benefit for Amazon, but company centric products don’t make compelling offerings to consumers.

So why not admit mistakes, sell of the failures and move on … in one word EGO. When everyone is telling you, “you’r the best,” it’s hard to admit mistakes.

Maybe Amazon should listen to Microsoft – it makes mistakes all the time. Microsoft is slow to kill off failures, but at least they do it. They discontinue the product and sell off the remaining stock at a discount. Ok … except for the Kinect, checkout my blog “Microsoft’s Game Console Is Pathetic“.

Likely Amazon’s founder is too focused on consumer products. While building a consumer company was Bezos’ vision, as digital products (like Kindle Books) and services (like AWS) make more profit for the company, maybe the company needs a digital leader. Maybe it’s time for the product-focused founder to say farewell?

This is no unique story. Often a CEO or Founder needs to get fired. The founders of Cisco Systems (both engineers) were replaced as the company became a huge success. Often founders know what is missing in the market place, and create a profitable business. Once successful, a company often needs a different kind of leader.

This may be the case for Amazon – stop trying to have knock-out products and focus on enhancing the current, best selling products or services.

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