Amazon CEO Jeff Bezos: Why Is This Man Smiling?

What's This?

By Lance Ulanoff2013-09-25 00:00:18 -0400

Jeff Bezos is in a good mood. His day will likely resemble a gauntlet, with dozens of tech journalists marching into Amazon headquarters three-at-a-time to hear him repeat details of the three new Fire tablets and cutting-edge customer service program that are his company’s latest creations,. But the widely admired CEO is smiling and often punctuating points with an explosive laugh.

For the launch of Amazon’s three new tablets — the Kindle Fire HDX 7-inch, Kindle Fire HDX 8.9-inch and another Kindle Fire HD — Bezos has made the relatively rare decision to eschew a product event for this series of more intimate meetings. He seems to enjoy it and it’s a chance for journalist like me to go beyond the practiced spiel, learn a little more about the larger strategy behind Amazon’s products and maybe discover just a little bit about Bezos’ view of the world.

Though much of our chat was about the new products, which you can read about here and here, the 49-year-old Amazon founder, chairman and CEO did offer some memorable color to his commentary. Below, I’ve collected his best insights.

What is Amazon’s Vision and Strategy in the Devices Business?

As Bezos explains this, he stands up at a whiteboard, writes down a list and then draws a Venn diagram to further illustrate the point.

Bezos: The first piece of our vision that you probably already know about and we’ve been talking about — we’ve been in this business [the device business] for 24 months now — talking about it since the beginning:

Premium products at non-premium prices.

Want to make money when people use our devices [he underlines “use” here], not when they buy devices.

Our point of view on that is, it allies us better with customers. For example, when we see somebody using a four-year-old or a five-year-old Kindle, we don’t have to be discouraged by that. We don’t need people to be on the upgrade treadmill. We’re basically selling our devices at break-even. If we were making most of our money when people buy the device, we would really want people upgrading. So we think this is a good alignment with customers.

The intersection of customer delight and deep integration throughout the entire stack [Here he draws the Venn diagram]. The fact is, in our view, a lot of the hardest to do, but also the very coolest pieces of customer delight that you can create require you to operate and integrate in this entire stack.

What do I mean by that stack:

Bezos then writes this list:

Services

Cloud

Key Apps (Content Ecosystem)

OS

Hardware

On Why May Day and Customer Support is Now a Good Idea

Me: A while back when you were talking about Zappos, their customer service, you mentioned that you could call them up and say ‘I want to order a pizza’ and they’d look it up for you in the Yellow pages. You said Amazon’s goal was to not talk to customers.

Bezos: [May Day] is more like the Zappos model. With ecommerce, our focus has been on defect reductions. So, for the most part, when we get a call, in our retail business, it’s usually because we’ve made a mistake. It’s usually a defect. It’s, you know, ‘You guys told me my item would come on Tuesday. It’s Tuesday, where is it?’

And every year for 18 years we’ve been able to drive down the number of defects. So our view is, when you’re talking about defects, the best customer service is to eliminate the need for the customer service. When you’re talking about things like how to configure a VPN so that you can get inside the corporate intranet, that’s a little different. It’s not so easy to treat that as a defect. There’s some aspects of it that are irreducibly hard. In my opinion, this is an appropriate approach for the context.

Why the Kindle Fire HD Still Exists

The Amazon Kindle Fire features the high-end components of their top-of-the-line Kindle Fire HD, has a new design and sells for $139. We wanted to know the strategy, especially as Amazon simultaneously unveils two powerful new HDX tablets.

Bezos: The context for this device is premium products at non-premium prices. We want to make sure that anybody— part of our mission here is to make sure anybody who wants to have one of these kinds of devices, can afford to have one of these kinds of devices. All these devices are basically, we add up the bill of materials and get what our costs are and we basically price it for break-even. Because of our pricing approach, we can pack a lot of hardware into these very low price points.

On Purpose-Built Devices

Me: With the latest Kindle Fire HD now $139 and the latest Kindle PaperWhite $119, these two product categories are converging – at least at a price level. What do you tell people trying to decide what to buy?

Bezos: What I tell them is, if you’re a reader, get both. You’ll want a tablet for email, web, video, all kinds of things, but if you’re a reader – we do this, we’ve done this research and it’s very easy to do: Take someone who is a heavy Kindle ebook buyer and is a heavy tablet user, and then show them a Kindle PaperWhite for the first time and they won’t give it back. They’re like, ‘Oh my God, I didn’t know.’ So, like, the lightness, the weight of the device, the ease of readability on that device. I’m talking about for long-form-reading books, that is a very, and at the price points we’re getting to, people can afford to have both and they will have both, if they’re readers.

Me: Was it a surprise that people would continue to buy both?

Bezos: No, not for me. My view is that purpose-built devices often — if an activity is important to you — you end up wanting a purpose-built device for it. That’s why we have hiking boots and running shoes. That’s why we don’t eat dinner with a Swiss army knife.

On Comparisons to Steve Jobs

Bezos: "That is a very complimentary thing to say, it’s not how I think about it. I don’t think about it that way. We have our own approaches and vision and you would never … no one would ever be the next Steve Jobs. He was a unique guy. It’s often meant as a compliment and I certainly receive it that way. I’m very grateful for that kind of question, but that’s not how I think about it."

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There were things Bezos couldn’t — or wouldn’t — answer, however. When I asked him about the possibility of an Amazon phone or a Phablet, Bezos answered, “That’s a road map question,” and told us the day’s focus was “on the tablets and not the general future.”