Innovation Strategy: Application of Design Thinking in Amazon

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MGMT20132: Innovation and Sustainable Business Development
Assessment 1: Individual report: innovation strategy
“Application of Design Thinking in Business Operations of Amazon”
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Executive Summary
Innovation in business is the current requirement of the modern business environment. It is very
important to make innovations in the business to beat the market competition and lead the
market. There are various problems that are faced by a business during its operations. To solve
all the issues and problems, design thinking approach is used by the companies. Design thinking
is an approach that provides effective solutions to complex business problems. The unidentified
business issues can be identified and analysed by implementing the design thinking approach,
and the problems can have effective solutions.
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Table of Contents
Executive Summary.......................................................................................................................................2
Introduction....................................................................................................................................................3
Overview of Amazon.....................................................................................................................................4
Design thinking-Meaning..............................................................................................................................4
Relevant concepts..........................................................................................................................................5
Organisational environment.......................................................................................................................5
Innovation trend.........................................................................................................................................6
Innovation strategy.....................................................................................................................................6
Innovation capabilities...............................................................................................................................6
Innovation value creation and Value capture.............................................................................................7
Importance of Innovation strategy in Amazon..............................................................................................7
Impact of Design thinking on Amazon..........................................................................................................7
Business canvas model..................................................................................................................................9
Recommendations for Innovation Strategy...................................................................................................9
Recommendations for Strategic Alignment.................................................................................................10
Conclusion...................................................................................................................................................11
References....................................................................................................................................................12
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Introduction
In the modern business environment, there is a lot of market competition, and every business
wants to capture a larger market share. But it is not very easy to get a hold on the market as there
are several issues and problems that the business encounters during its operations. Thus it is
important to adopt one such approach which can provide solutions to the problems. The
approach chosen for completing this assignment is Design thinking. The company that has been
taken into consideration for the assessment is Amazon. There will include discussion about the
various concepts of design thinking and the importance of design thinking in the company. The
impact of design thinking approach on the business will be discussed in the report. Some
recommendations will also be provided to the company so that there is strategic alignment of the
design thinking approach with the overall goals of the organisation.
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Overview of Amazon
Amazon is a multinational online retailing firm. The company has its roots in America. The
company has its base in Seattle. The company is the world’s largest chain of online retail.
Amazon has a wide variety of products to offer to its customers. The business is expanded in
almost all the countries of the world and has huge marketing and financial resources. The
company has very high profits and revenues from all over the world (Amazon, 2019).
Design thinking-Meaning
Design thinking can be understood as the strategic and cognitive process of identifying and
solving complex business problems. Design thinking is the new trend that is followed by the
businesses to have the best solutions to the business problems whether they are identified or
unidentified. Design thinking is very effective in understanding human behaviour and identifying
the needs of various techniques like brainstorming and mind-mapping. Then the problems are
identified, and their probable solutions are found out (Oxman, 2017). There are five stages in the
design thinking process. All the stages are enumerated below:
 Empathise: The very step in solving the complex business problem is to empathise. It is the
step to gain full knowledge about the problem and collect all the relevant data that can be
useful in finding out the solution. It is important to empathise with the people associated with
the problem and get engaged in the issue to know about the perspective of others.
 Define the problem: The next step is to define the problem statement and make relations
between the evidence and data collected in the first step. All the resources that are required to
solve the issue are procured in this step.
 Ideate: This is the third stage in the process of design thinking, at this stage generation of
ideas for solving the problems, is done. Many ideas are generated to resolve the identified
business issue. At this stage, several techniques like brainstorming, brainwriting and mind-
mapping are taken into consideration.
 Prototype: The prototype of the products is then investigated, and the solutions that that are
formulated in the previous stage are implemented in the prototype. It is analysed that the
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solutions are rejected or accepted. The best-accepted solution is selected for all the other
products (Elsbach & Stigliani, 2018).
 Test: Then general testing is done to refine the solution and find out any other further issues
in the products.
(Fig. 1: Design thinking process)
(Source: By author)
Relevant concepts
Organisational environment
Every organisation has an internal and external business environment that impacts the operations
of the business. These factors are very important to be considered before thinking of any solution
to any business problem (Gould, et. al., 2019). The internal environment of the company
includes the internal policies of the fir, employees, ethical values, management and corporate
governance of the firm. Amazon has an external business environment too that indirectly impacts
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Define
Ideate
Empathise prototype
Test

the operations of the business. The political, legal, technological and social environment, in
which the company operates, influences the activities of the business. It is crucial for Amazon to
understand and research the internal as a well external business environment for finding out the
solutions to the business problems encountered by the business.
Innovation trend
Innovation is required to keep the business updated and fight the tough market competition. To
beat the market players and attract the target market, it is necessary that regular innovations are
implemented in the business. Innovation is related to the ability of a firm to stay in the dynamic
business environment (Geissdoerfer, et. al., 2016). Amazon has taken the innovation trend very
seriously and worked on it to have a larger market share. The company was first in the business
of online retailing, but by implementing the design thinking approach and innovating the
business, the company has now expanded in the online payment system called the Amazon Pay.
This has increased the profits of the business to a great extent.
Innovation strategy
Innovation strategy of a business is the plan to implement the innovations in the business.
Innovation strategy is generally related to the growth plan of the business that defined the way on
which the company has to head and achieve success. Amazon is the company that has achieved
success in a very short period of time. The company has beaten all the other online retailing
platforms and has captured a very large market share. This has been possible because of the
innovation plan formulated by the company (Carlgren, et. al., 2016). The company has always
done thorough market research to analyse the tastes and preferences of the customers so that the
products that are sold by the business are according to the choice of the business. Identifying the
market opportunities proved to be advantageous for the company to have a strong hold on the
market.
Innovation capabilities
The innovation capability of a firm is the ability to generate new ideas for making improvements
in the business. The innovation capability of a company is dependent on its resources. Amazon
has high innovation capability as it has huge financial resources. The human resource of the
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company is also efficient and competent enough to handle and manage innovation in the
business.
Innovation value creation and Value capture
Every innovation leads to the creation of value to the firm and the customers as well. By
adopting the technique of innovation in the business, the company has gained high goodwill in
the market and loyalty of customers.
Importance of Innovation strategy in Amazon
Innovation strategy has played a very important role in the success of Amazon. The company has
grown in the market because of the innovation strategy adopted by it. As it is discussed above
that the company has entered the new business stream of online payment, this has been done by
the adoption of innovation strategy in the business. There is increased value to the business and
the customers by the deployment of innovation strategy in the company. New markets are
explored by the company when it adopted the technique of innovation strategy (Shapira, et. al.,
2017). The company has launched various new products in the market which are only available
on the online retail platform of Amazon. This has increased the sales of the company.
Impact of Design thinking on Amazon
Amazon had gained popularity in the last decade when more and number of people started using
the internet for making a purchase. The company has adopted the strategy of design thinking. By
the implementation of design thinking in the business, the company has gained various
advantages that are listed beneath:
 Collaboration: The design thinking approach used by Amazon has benefited the firm in
collaborating with the external as well the internal business environment. If the sales of the
company are struggling, the usage of design approach encourages the sales team to think of
some new strategies to increase the number of sales.
 User-focused company: One more benefit that is derived by the firm after the
implementation of design thinking is that the company is now user-focused. Design strategy
induces the company to be focused on the end users of the business. The needs and
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preferences of the end users are kept higher than all the other aspects. This led to customer
retention in Amazon.
 Boost moral: Sometimes, there are major changes in the business and the market; it is the
time when the management of the company has to handle and manage the changes in the
organisation. At that time design thinking plays a very important role. Design thinking
helped Amazon to introduce and manage the changes in the business as sometimes
employees resist changes.
The SWOT analysis of Amazon is given below:
Strengths
 Cost leadership
 Product differentiation
 Focus
 Superior logistics system
Weaknesses
 Non-optimization of cost
 Zero-margin business model
Opportunities
 Backward integration
 Global expansion
 Acquisitions
Threats
 The entry of new entrants
 Local competition
 Regulations of government
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Business canvas model
Key Partners
 Media companies
 Large scale
manufacturers
Key Activities
 Providing
worldwide
distribution of
products and
services.
Value Proposition
 High-quality
products
 Fair pricing
 Timely delivery
of products
 Easy exchange
Customer Relationships
 feedbacks
 After Sale
Customer Service
Customer
Segments
Consumers
Wholesalers
Key Resources
 Staff members
 Government
 Huge financial
resources
Channels
 Intensive distribution
 Extensive distribution
Cost Structure
 Taxes
 Salaries/wages
 Operating and fixed cost
 Promotion
Revenue Streams
 Sales to intermediaries
 Sales to consumers
Recommendations for Innovation Strategy
 It is important for the company to have a dynamic business structure that can help the
business to cope up with the market changes. The company must make innovations to
incorporate the change taking place in the external business environment.
 Innovation capabilities are the abilities of the firm to manage the innovations. Amazon has
huge financial resources that help develop new ways to attract customers. The company is
capable enough to handle human resource worldwide. The marketing capabilities of the
company are also very high.
 Earlier the company had a different type of packaging which disinterested the consumers, but
by making changes and innovating the operations. The company has changed the packaging
of the products ordered by consumers. There is one more suggestion to the company that it
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should improve the after sales services, and the website must be upgraded so that it is user-
friendly (Huq & Gilbert, 2017).
 Value capturing is important to run the business in the long run. For capturing the value in
the long run, the company needs to track the activities of the business. Analysis and
innovative accounting can help to track the behaviour and profits of the business.
Recommendations for Strategic Alignment
Given below are some of the recommendations for strategic alignment with the organisation:
 It is important for the business to train the employees and staff members to handle the
innovations and adapt to the changes in the organisation.
 Proper growth plan must be developed which must contain all the objectives and strategies of
the business so that the activities can be carried out effectively.
 Effective monitoring and tracking of business can help to record all the profit streams of the
business.
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Conclusion
The report concludes the innovative trend adopted by Amazon. The company has benefitted a lot
as the company is regularly creating and developing business activities to make the process more
flexible and effective. Design thinking is the approach to implementing innovations in the
company. The business canvas model of Amazon depicted that it is important to take into
consideration all the factors of business that has an impact on its operations. A new business
strategy must be developed after analysing the internal and external business environment.
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