Friday, December 15th 2017

Leadership: Amazon CEO Sets Pace for Jobs and Innovation

July 31st, 2013 in Leadership by


Amazon recently announced that it missed earnings on the bottom line for the period ending in June, and yet the stock has hardly quivered. It dropped in early trading July 25 when earnings were released, but it has since bounced back. The stock is up nearly 30% over the past 12 months, and in March traded at more than 700 times the previous 12 months’ earnings—the highest price-to-earnings ratio of any company in the Standard & Poor’s 500-stock index. All this, despite consistently reporting flat to negative net income.

What gives?  Well, investors are showing confidence in Amazon CEO Jeff Bezos and his growth strategy. They recognize that sales remain extremely strong, growing 22% to 15.7 billion in the second quarter. Meanwhile the company is using its cash to invest: In warehouses for distribution that brings the orders of its various products to consumers more quickly, in movie development and distribution, in new hand-held devices and set-top boxes that expand the array of entertainment and information options for users.

Some wonder if Amazon is the omen to a sequel of the dotcom crash. I don’t think so. Nah, I think Bezos is just a refreshingly strong example of good forward-thinking leadership. Many of the CEOs I meet are preoccupied with the short term. They’re worried about the daily performance of their company stock, instead of focusing on what legendary economist Jeremy Siegel called the “long run”.  They’re ultra cautious, hoarding cash and limiting investment.  But that’s in a large sense what’s wrong with our economy: tepid investment, a scarcity of jobs, and consequently, weak income with which consumers can comfortably spend.

Amazon, meanwhile, is opening new warehouses in several states across the country, creating 5,000 full-time warehouse jobs and 2,000 customer-service positions in both existing and new facilities. The jobs are expected to pay between $11 and $13 an hour –not great, but for many, a good start. That’s why President Obama staged a speech about the economy at an Amazon warehouse in Chattanooga, Tenn. It’s symbolic of a recovering America.

Whether you agree with that or not, one thing I think you ought to pay attention to is a CEO demonstrating undeniable vision. Bezos is using Amazon’s growing stable of warehouses to transform the retailer into a marketplace where other merchants can use its technology and website to sell products. As analysts describe it, Amazon takes a commission—which is almost entirely profit—for each item sold and collects additional fees when the smaller retailers use its network of fulfillment centers to ship goods.

The warehouse model is just one example demonstrating that Amazon is a leader not a follower. On several innovation fronts, Amazon is staying on the leading edge. Not only does it make e-readers and tablets, it is reportedly developing a smartphone, insiders say, that will compete with the likes of the Apple iPhone and Samsung phones.

To connect all of its devices, Amazon is working on a home-based hub, an uber television set-top box. Bezos is reportedly planning to introduce a device this fall dedicated to streaming video over the Internet and into its customers’ living rooms. The box will plug into TVs and give users access to Amazon’s expanding video offerings. Bezos also has his team working diligently on expanding its à la carte Video on Demand store, which features newer films and TV shows, and its Instant Video service, which is free for subscribers to the Amazon Prime two-day shipping service.

Of course there are other competitive set-top boxes. And most give their users access to Amazon’s video catalog. But by building its own system, Amazon gains greater control of how its consumers use content and connects them to what is becoming an Amazon digital ecosystem. Consider that Bezos has been rapidly expanding the company’s portfolio in the video arena. It has introduced 14 televisions pilots, and will soon produce select shows a full series. The company has also paid to secure exclusive streaming rights to the British hit, Downton Abbey and other popular shows.

The set-top box is being developed by Amazon’s Lab126 division in Cupertino, Calif. – at the heart of Silicon Valley tech innovation. And it’s hugely instructive that this lab is where Bezos spends a great deal of his time. But where you don’t find him is participating on earnings conference calls, debating the whims of a nervous market. Bezos is too busy creating jobs and investing in the future.