Amazon’s Provocative New Chapter

In his latest column for Bloomberg Businessweek online, Drucker Institute Executive Director Rick Wartzman explores Amazon’s big push into book publishing.

Wartzman says that “for Amazon—and any other business contemplating turning partners and suppliers into head-to-head rivals—its strategy is full of both promise and peril.”

“In the most basic sense,” Wartzman writes, “the model Amazon is pursuing (where it inks a contract with a writer, publishes his or her book, and then delivers it to a consumer either in hard-copy format or via a company-built Kindle e-reader) is a throwback to the days when enterprises were more vertically integrated.

[EXPAND More]“Companies moved away from this approach for a simple reason,” he adds. “They found that they improved their performance when they narrowed their activities. . .  . Indeed, for Amazon, perhaps the greatest danger it faces as it pushes to become ‘an end-to-end service,’ in Chief Executive Jeff Bezos’s words, is that it will become too splintered.” As Peter Drucker noted, “Effectiveness requires focus.”

Despite such hazards, however, Wartzman says that he doesn’t “suspect Drucker would advise Amazon to pull back. After all, there is a significant chance that the company will score a great success, particularly if this new direction leads to its customers getting more of what they value. Already, signs are that as a publisher, Amazon is positioned to provide book lovers with more selection and lower prices.”

Wartzman then cites Drucker’s insight that among the most important questions a business can ask is, “What should our business be?” As Drucker framed it: “What opportunities are opening up or can be created to fulfill the purpose and mission of the business by making it into a different business? Businesses that fail to ask this question are likely to miss their major opportunity.” [/EXPAND]