Sustainability of Business: Innovation Strategy of Amazon

This paper examines the sustainability of business with a focus on the innovation strategy of Amazon. It explores different aspects of innovation and design thinking, while providing recommendations for improvement.

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Executive
The current paper examines the sustainability of business with a focus on the innovation
strategy of Amazon (online shopping shop). Amazon success results from the spectacular
implementation of design thinking that has transformed business operations, creation of new
product a, product quality and service improvement as well as reduction of operation cost. This
has resulted in improved customer experience and satisfaction. The paper, thus explores different
aspects of innovation and design thinking, while providing a recommendation on how to improve
on some of the innovation aspects to continue being relevant in the competitive market.
Table of Contents

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Introduction......................................................................................................................................3
Background of Amazon...................................................................................................................3
Design Thinking..............................................................................................................................3
Relationship between OrganiSational environment, innovation trend, innovation strategy,
innovation capabilities, innovation value creation and capture.......................................................3
How innovation strategy ensures strategic alignment within organisations and why it is
important..........................................................................................................................................4
Impact of Design Thinking on Amazon..........................................................................................5
Amazon business analysis Osterwalder and Pigneur(2010)........................................................5
Key partners.................................................................................................................................6
Suppliers...................................................................................................................................6
Customer Relationship Management.......................................................................................6
Customer segmentation............................................................................................................7
Channel.....................................................................................................................................7
Key Resources..........................................................................................................................7
Cost Structure...........................................................................................................................8
Revenue streams.......................................................................................................................8
Recommendations........................................................................................................................8
Conclusion.......................................................................................................................................8
References........................................................................................................................................9

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Introduction
Over the past decade, the business environment has faced stiff competition as a result of
globalization. The business thus is looking for different ways to enable them to withstand the
stiff competition and remain relevant in the current competitive technological world. Thus
organizations have come to understand the significance of innovation as a sustainable
management strategy(Esslinger, 2011).Sustainability through innovation enhance customer
satisfaction, creation of new products, and opportunities, reduction of production cost as well as
improved service delivery. Thus the current paper explores innovation and sustainable business
development with a focus on design thinking in the Amazon retail store.
Background of Amazon
Amazon is one of the largest online shopping retail shops in the world. The store that was
founded in 1995 by Jeff Bezos, as online book retailer on the wall streets, is currently perceived
as “everything store” supplying numerous products ranging from consumable to non-
consumable products across 100 countries in the world(Arora, 2017). The tremendous growth is
as a result of the persistent, creativity and innovativeness of the CEO and employees. Amazon
has different innovation strategies such as design thinking to facilitate its business development
and sustainability to attain a better competitive advantage over competitors.
Design Thinking
Design thinking refers to the human-based strategy to innovation that draws from the
designer’s toolkit to integrate the needs of people, the possibilities of technology and the
requirements from the business success (Liedtka, 2011). The strategy of design thinking dates

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back to the industrial revolution after the world war ii when different experts such as engineers,
industrial designers architects, and cognitive scientist came together to find collective solutions
to some societal problems. After that, design thinking got integrated with human, technological
and strategic needs to become one of the innovation strategies in the business arena (Liedtka,
2018). Currently, many business innovators realized that thinking like designers enables business
transformation towards the development of new products, services, strategy, and process as well
as the use of different tools in addressing different problems.
Relationship between Organizational environment, innovation trend, innovation strategy,
innovation capabilities, innovation value creation, and capture
Organizations have different environment: internal and external environment. These
environments have a great impact on the innovativeness of an organization. Thus it is paramount
for any organization to create a conducive environment to innovate to gain organizational
performance. Oxman, (2017) states that an organization needs to create an environment that will
influence all the stakeholders to behave the way the organization wants to be in the future
through appropriate design and strategy. Organization innovative strategy refers to the formula
that directs an organization to achieve its goals and objectives through interacting with the
different competitive environment. Motivated by the increasing global competition,
organizations now grasp the significance of innovation that is swiftly changing due to rapid
technological advancement.
Different innovations have been identified by: product innovation, process innovation,
organizational innovation, and marketing innovation. Various innovation categories have
different innovation capability that eventually results in improved performance of the entire

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organization (Capriati, 2013). The major aim is to reduce the cost of production, improve quality
of the products and services, reduces the cost of operations are improve the seamless of the
operations as well as capture large market base while fulfilling the customer's experience. The
value creations of products are achieved through lean thinking that aims at reducing the wastes
and improve the value of the product to the end user. The process of value creation thus results in
building a strong brand of a product, developing efficient operations and reducing the delivery
time of the product to the consumer.
However, the value creation of a product is not a guarantee for the constant performance
of the product in the market due to different challenges such as stiff competition failing.
Therefore, it is significant for the organization’s innovation strategy to ensure value capture of
the product. Value capture refers to the ability of a business strategy to receive profit from its
operations. Thus every strategy that has resulted in the increased value of a product must ensure
that the value is captured in the market resulting in enormous revenue collection for quite a long-
time through customer’s retention. Reinhardt, (2015) observes that customer retention is
significant to the existence of an organization in a competitive market, and this is achievable
through ensuring that customers receive the best experience and satisfaction thus resulting into
strong value capture of the product in the market. However, excessive value capturing too is not
significant to the business.
To ensure sustainability, the organization needs to capture enough value of the
investment of resources to ensure continuous customer’s engagement with the organization.
Reinhardt, (2015) states that the more value a company capture, the less attractive the business
becomes thus leading to loss of customers. Chesbrough, Lettl & Ritter, (2018) identifies two
value captures: maximization and minimization. Maximization value creation ensures that the

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business value is capture as long as the business is sufficient while minimization value capturing
ensures that business capture much value as much as possible.
How innovation strategy ensures strategic alignment within organizations and why it is
important
It is very clear that innovation strategy is significant to the organizational performance;
however, the success of the strategies on the organization must be aligned to the objectives,
vision, and mission of the organization. An organizational innovation strategy aims at identifying
issues limiting development and addressing them accordingly about the organization's aims
(Schaltegger, Freund, & Hansen, 2012). The innovation strategy aligned with the organization
entails different aspects such as customer insights, technological competence, top management
commitments, organizational culture .structure and the entire organizational readiness. The
alignment of innovation strategy with the organization ensures the effectiveness and efficiency of
the organization. Innovation strategy adoption tends to bring management and operational
changes, and in many cases, change is not always welcomed by most of the employee; thus
without proper alignments resulted in change resistance. Such resistances always affect the
performance of the production and service delivery of the entire organization.
Impact of Design Thinking on Amazon
The impact of design thinking on Amazon is well understood through the business model
known as Osterwalder Pigneur. The model refers to construction that enables easy identification
of business operations, and how value can be captured (Osterwalder & Pigneur, 2013).
Osterwalder Pigeur business model comprises different elements such as firm’s product’s value

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proposition, infrastructure, customers and finances to aid in aligning the innovation strategy with
the business environment (Alt & Zimmermann, 2014).
Amazon business analysis Osterwalder and Pigneur (2010)
Key Partners
Key suppliers :
Applied
Optoelectronics
Wellnet
Corporation
TrueBlue
GoPro
Key
Activities(entail
activities that
value positioning
requires)
Customer
relationship
management
Supply chain
management
Value
Propositions
Price
reduction
Increased
accessibility
Convenience
usage
Quality
products
Customer’s
Relationship
Customer’s
expectations
Established
customers
relation
activities
Customer
Segmentation(Targete
d market)
Used design thinking in
segmenting potential
customers.
Demographic-age group
25-50 with internet
access
Situational –online
shopping as convenient
purchasing method
Geographic-developed
areas
Psychographic-loyalty,
innovative oriented,
these that value
Key
Resources(Entails
resources used to
provide value
proposition )
Human
Channels
Entails
different
channels that
the retail
shop reaches
its potential

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Finance
intellectual
Physical
customers efficiency
Cost Structure
Both cost and Value driven
Revenue Streams
Usage fee
Customer segment dependent
Volume dependent
Subscription fee
Brokerage fees
Key partners
Suppliers
These are partners that help in realizing customer satisfaction through provisions of
resources (Villanueva, 2013). Amazon key supplies include Applied Optoelectronics based in
Sugar Land provides the retail shop with optical devices, transmitters, and optic trans-receivers.
These devices enhance communication between the retail store and various stakeholders such as
customers, and employees thus enhancing order processing and customer management.

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Wellnet Corporation based in China supplies Amazon with advice on business billing,
credit cards, and electronic billing. Through this innovation, Amazon has enhanced the order
processing as all document are electronics thus reducing any form of confusion n that might be
brought by human error. The system also allows online payments; thus transactions occur
irrespective of the customers’ geographical position.
TrueBlue based in Washington offers a specialized workforce to the retail shop thus has
reduced the stress of getting qualified employees and placing of general labor in various
Amazon’s facilities across the world.GoPro focuses on the production of the camera, and video
camera accessories provide Amazon with various content created interfaces that facilitate the
operations of the retail shop.
Customer Relationship Management
In the current technological world, Amazon’s customers expect high product and services
delivery in terms of quality, convenience, efficiency, and personalization. Amazon has designed
proper CRM software. Customers relationship management is a designed approach used to
manage a company’s interactions with potential customers to ensure loyalty and retention.
Amazon has built its CRM software in-house to capture the need of the customers (Nassar,
2015). The software allows Amazon to capture various customers’ data such as previous
locations, purchases and uses the information to design, modify and deliver products about the
customer’s onsite experience. The created CRM also tackles various customers’ questions in the
absence of human involvement thus increasing the customer’s engagement. Generally, Amazon’s
CRM facilitates data collection, customer data storage; provide recommendations and offers
customer support.

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Customer segmentation
Customer segmentation refers to the differentiation of the market into different segments
to give a clear identity of potential customer to allow the provision of quality products and
services that are by the customer’s needs. Amazon applied design thinking strategy in developing
its market segmentation (Pascal, Ozuomba & Kalu, 2015). Amazon engaged in potential product
design steering to determine what type of products can be needed by various customers and place
them in the respective store even before the potential customers think of purchasing or acquiring
such products. Through this strategy, Amazon enhanced its supply chain and distribution since
the products were always available at various warehouses. The design thinking strategy, thus
divided Amazon’s market into different segmentations: Adults who don’t like in-person
shopping, geographically challenged individuals who are unable to physically shop for products
due to unavailability in the fulfillment area; people with internet access and computer literate,
consumers that perceive online shopping as the most convenient shopping method and working
class with different lifestyles such as explore, reformers and strugglers.
Channel
This entails the ways that various potential audiences are reached to create awareness.
Amazon majored on highly personalized email marketing. Additionally, through the email
marketing enable Amazon to make various product recommendations to targeted customers thus
inducing purchasing behavior that eventually increases the revenue collection of the retail shop.
Amazon is one of the pioneers to integrate their systems to include product review and rating
platform that eventually raised the revenue collection. Amazon was able to develop well-
structured user-generated content (UGC) that entailed both suppliers and consumers. Amazons
have created efficient customer loyalty software known as Prime customer loyalty program that

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accrues points as one purchase from Amazon’s shops. These points are later transformed into
money that can be used in future purchase thus motivating consumers to do more purchasers.
Key Resources
Key resources refer to the elements that are essential in creating value propositioning
such as finances, physical, intellectual and human resources. Amazon owns numerous physical
resources such as warehouses located in various positions across the country to ease efficient
delivery of the product (Vezir, 2018)). Amazon design thinking enables the construction of
technological infrastructure that is essential to the day-to-day functioning of the business.
Cost Structure
Amazon operations are majorly based on the technological innovations aims at reducing cost.
The various warehouses are automated to enhance order processing and delivery thus increasing
customer’s satisfaction (Stenström, Norrbin, Parida & Kumar, 2015). Other applicable cost
driver’s software such as customer service centers also enhances the customer experience.
Revenue streams
Design thinking has enabled Amazon to remain the largest revenue streamer in the world
with huge physical and product stock across the world. E-book and streaming remain Amazons’
largest revenue e contributor for the lasted evade while prime subscribers, kindle range of
electronics provide considerable revenue.
Recommendations
Even though email marketing still holds a significant impact on the awareness creation of
Amazon’s products, the retail shop should modify the personalization email to connect various

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products along with the purchased product, rather than inducing the customer to buy more and
get more of the same product.
Amazon should aim at innovating on increasing the short-term profitability by switching
to the high emotional cost of products to block potential competitors from acquiring the market
in the future.
Amazon should introduce other innovations such as in-store drones and robotic Al-
powered shop assistants that deliver products to customers within the store thus enhancing
service delivery.
Conclusion
From the above exploration, it is evidential that innovation and design thinking are
significant to business sustainability in the current competitive environment. Amazon founded
majorly on Innovation business strategy, has employed different design thinking in realizing its
objectives since its inception. The retail shop operations are majorly based on software that
reduces the cost of production, improved quality of products and value repositioning of the
products. However, Amazon needs to improve on its innovation strategy according to the
mentioned recommendations o continue enjoying the market command.

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