Amazon’s Biggest Mistake, and the Value of Listening
Even the biggest companies can fail when they stop doing this one thing.
From a business perspective, it seems like Amazon is on the verge of conquering the world. It is expanding rapidly into new markets online, new stores off-line, and new cities for its rapidly growing office footprint. With the government seemingly disinclined to pursue any kind of anti-trust action, Amazon certainly appears unstoppable in the short term.
But even massive companies loaded with top-shelf talent can sometimes make critical errors for simple reasons, and Amazon is no different. Let’s recall the odd case of the Fire Phone, which crashed and burned (pun intended) soon after its 2014 debut.
At its earliest stages, the Fire Phone no doubt seemed like a great idea. After all, Amazon had more than enough marketing muscle; in theory, it could turn any device into a hit simply by displaying it prominently on its homepage. In addition, Amazon had a deep bench of tech talent skilled in building handheld devices, thanks to its work with the Kindle e-reader and Fire Tablet. If the necessary visionaries couldn’t be found in-house, the company also had all the money it needed to poach them from other firms.
As with virtually everything else in the tech industry, rumors quickly spread that Amazon was working on a phone. I talked to any number of analysts at the time who assumed the company would follow the same playbook that transformed the Kindle into the dominant e-reader, and the Fire Tablet into a robust competitor to the iPad: Sell it cheap, link it heavily into Amazon’s services, and try to saturate the market as quickly as possible.
Imagine a smartphone that’s free with Amazon Prime, one pundit suggested. It would make Apple totally freak out.
But when Amazon CEO Jeff Bezos took the stage in June 2014, he unveiled a premium smartphone, meant to compete toe-to-toe with the iPhone. It had solid (although unspectacular) specs, such as a display that supported 3D effects, and unique apps (including Mayday, which connected to Amazon’s 24-hour customer support). I remember trying out a review unit, and coming away somewhat impressed at the hardware build, even if it took some time to get used to Amazon’s Fire OS operating system (which is a tweaked version of Android).
Despite a huge promotional push, however, the Fire Phone didn’t sell well, and Amazon discontinued its production by 2015. Amazon ended up taking a $170 million write-down on the initiative, which was a huge black eye for a company that prides itself on knowing what customers want.
So why did the Fire Phone fail (say that ten times fast)? By 2014, there wasn’t much of a lane for another ultra-premium smartphone, especially one offered via a single carrier (AT&T); Apple’s iPhone and various Google Android devices had grown to completely dominate the market.
“Bezos’s guiding principle for Amazon has always been to start with the needs and desires of the customer and work backward,” wrote Fast Company’s Austin Carr in a lengthy autopsy of the debacle. “But when it came to the Fire Phone, that customer apparently became Jeff Bezos.” In his zeal to conquer the smartphone market, Bezos reportedly wanted something “big and distinctive,” and tried to micro-manage the team working on the phone.
Prodded by Bezos, that team worked on many next-generation features, including facial recognition. But there was no indication that customers actually wanted any of those things, especially anyone who shopped at Amazon because it was cheap and convenient. In retrospect, perhaps it’s not surprising at all that the device tanked.
As Amazon grows ever-larger, it’s worth remembering that no company is invincible, and losing sight of what customers actually want (as opposed to what the CEO desires) can doom any initiative, no matter how well-funded. Amazon should keep that in mind as it pushes further into areas such as artificial intelligence (A.I.) and machine learning. Although it’s recovered from the Fire Phone debacle, the project’s stunning deviation from its usual “best practices” is why I’ve called it the company’s biggest error (so far).