Innovation Strategies of Amazon: A Detailed Analysis

This report provides a comprehensive analysis of innovation strategies, focusing on the case of Amazon. It begins with an introduction to the concept of innovation and its importance, followed by an in-depth exploration of various innovation theories, including Schumpeter's Creative Destruction, the Diffusion of Innovations, Radical and Incremental Innovations, the Open Innovation Model, Disruptive Innovation, and Blue Ocean Strategy. Each theory is explained and then applied to Amazon, demonstrating how the company has utilized these strategies to achieve its success. The report also includes a critical discussion based on innovation management literature, providing a balanced perspective on the effectiveness of these strategies. The analysis covers Amazon's practices in e-commerce, digital streaming, artificial intelligence, and cloud computing, highlighting its ability to disrupt the retail industry. The report concludes with a summary of the key findings and insights, offering a valuable resource for students studying business development and innovation management. The assignment follows the guidelines provided, including word count and structure, and is designed to meet the requirements of a business development course assignment.

Running head: INNOVATION AND PLANNING IN ORGANIZATIONS
INNOVATION AND PLANNING IN ORGANIZATIONS
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1INNOVATION AND PLANNING IN ORGANIZATIONS
Table of Contents
Introduction......................................................................................................................................2
Analysis of innovation theories.......................................................................................................3
Critical discussion based on innovation management literature......................................................9
Conclusion.....................................................................................................................................12
References......................................................................................................................................13

2INNOVATION AND PLANNING IN ORGANIZATIONS
Introduction
Innovation can be defined as the new idea, new imaginations and the creative thoughts
that are implemented for the purpose of developing new methods or devices. Innovation is also
viewed the as application of the better solutions that can help in meeting the new requirements,
existing needs in the market and the unarticulated needs as well. Innovation can take place with
the help of effective processes, products, technologies, services or the business models which are
available in the markets, society and government. Innovation is considered to be a process that is
effective and original and can also break into the society or market (Adegbile, Sarpong and
Meissner 2017).
Innovation can be related to the process of invention, however the processes are not
same. Innovation can be considered as the concept that is based on the production or the
adoption, assimilation and exploitation of the value-added aspects. The report will be based on
the detailed study of different innovation based theories that can be implemented by the modern
organizations in the changing business environment. The literature review will be based on the
detailed discussion related to the various innovation theories that are used by firms operating in
different industries (Bagella 2018).
Amazon.com Inc. is a global technology based organization of American origin which is
mainly based in Seattle with around 750,000 employees. The organization mainly focusses on
the development of e-commerce, digital streaming, artificial intelligence and cloud computing.
Amazon has also been able to gain its position as a part of the Big Four technology based
organizations that include Google, Microsoft and Apple. Amazon has been able to gain its
position as one of the well-established organizations that has been able to disrupt the processes

3INNOVATION AND PLANNING IN ORGANIZATIONS
of companies in the retail industry. Amazon was established by Jeff Bezos in the year 1994
(Amazon.com, 2020).
The theories that have been taken into consideration for this analysis mainly include
Schumpeter’s Creative Destruction model, incremental and radical innovation theory, diffusion
of innovation theory, Open innovation model, disruptive innovation theory, blue ocean strategy,
red ocean strategy and business model canvas. The examples will be based on the organizations
that have been able to implement the innovation theories in an effective way in their operations.
Analysis of innovation theories
The ability that has been developed by an organization to innovate its operations is
considered to be a vital part of the firms. The organizations aim at making huge investments and
have also implemented different ways for the purpose of enhancing the levels of innovation in an
effective manner. Various facets of the ways by which firms can innovate have led to the
development of innovation management discipline. The firm’s ability to implement innovations
can be explained with the help of proper application of innovation theories (Bagno, Salerno and
da Silva 2017).
Schumpeter’s Creative Destruction – Joseph Schumpeter who is an Austrian economist
has considered innovation to be a critical aspect of the economic changes and he also believed
that economic changes can take place due to the implementation of innovation in the
organizations and the various entrepreneurial activities as well. The economist has mainly
focused on the impact that various market innovations have on the capitalist systems (Caetano
2017). Creative destruction is a term that has been developed by the economist which is mainly
based on the process related to industrial mutation that is implemented by Amazon in order to

4INNOVATION AND PLANNING IN ORGANIZATIONS
revolutionize economic structure in an effective manner. Creative destruction is also considered
to be a major economic concept which is able to explain the dynamics of the various industrial
changes that are related to the transition of the competitive structure of the market (Callaghan
2016).
Diffusion of innovations – The theory mainly focusses on various factors which are able
to determine the pace if the idea or innovation can be adopted by the members who are a part of
a particular culture. Everett Rogers an American sociologist has stated that the diffusion is
defined as the process with the help of which innovation can be communicated through the
different channels within a period of time. The four major elements that have an impact on the
development of a particular idea mainly include invention, channels of the communication, time
and the social system (Dickel and de Moura 2016). On other hand, the five aspects that have
been the focus of diffusion research mainly include characteristics of the innovation process that
can influence adoption, decision making process which occurs when the individuals adopt a new
idea, characteristics of the individuals that enhance the chances of the adoption of new ideas. The
innovation diffusion process is mainly based on the human resources or employees as the
innovation can sustain if they are adopted widely throughout the organization (Dodgson 2017).
The theory of innovation diffusion is thereby able to highlight five different categories of
the innovation adapters that include innovators, early adopters, early majority, late majority and
the laggards. Amazon has been able to establish itself in the e-commerce or online retail industry
as an innovator that has been able to bring changes in the industry as a whole (Amazon.com,
2020). The innovation in Amazon mainly relies on cultural context that is considered to be a
function of decision making process of the type of innovation. Information in this case flows

5INNOVATION AND PLANNING IN ORGANIZATIONS
through the networks and the nature of various networks can have an impact on the innovations
that are adopted (Frishammar et al. 2019).
Radical and incremental innovations – Radical innovation is considered to be the
implementation of technological knowledge that is required for the purpose of implementing the
innovative activities in an effective way. Radical innovation mainly requires the new knowledge
or the resources and it can be competence destroying in nature as well. Amazon has proved itself
as a radical innovator in the industry by implementing disruptive activities (Amazon.com, 2020).
On the other hand, incremental innovation is able to describe the products that are created with
the proper implementation of knowledge that is built on the existing knowledge and resources of
the firm.
The form of innovation is considered to be competence enhancing in nature and it does
not involve the drastic technological changes in operations (Goffin and Mitchell 2016). The
incumbents in the industry remain in a better position in case of the implementation of
incremental innovation process. Incremental innovation is mainly based on the architectural
knowledge and component knowledge. The individual components are improved effectively
without any impact of the changes on the core designs of the organizations. Modular innovation
is based on the implementation of new knowledge for some of the components and on the other
hand architectural innovation is mainly based on the linkage that is developed between the
different components that are a part of the innovation process (Haucap, Rasch and Stiebale
2019).
Open innovation model - The open innovation based paradigm had been introduced by
Henry Chesbrough and it has thereby emerged as the alternative model of innovation process.
The model thereby assumes that the organizations can use the external ideas and the internal

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ideas and the internal and external paths for the purpose of advancing the process of technology
implementation. The model of open innovation is thereby considered to be opposite to that of the
traditional and vertically integrated model in which internal research and development based
efforts of the firms are taken into consideration for development of the products (Howaldt and
Schwarz 2017).
The use of inflow and outflow of knowledge is able to accelerate the internal innovation
process in an effective manner. Different principles and aspects are able to distinguish between
the process of open innovation and closed innovation related activities that are performed by the
modern organizations. The open innovation model is based on the research and development
activities that are performed with respect to the ideas that come from the inside and outside of
the organization as well (Knoke, Missikoff and Thoben 2017). The open innovation model
mainly regards the research and development process as the part of an open system that is
implemented in Amazon and ideas can be implemented from inside and outside the organization
as well (Amazon.com, 2020). Open innovation is mainly divided into the two dimensions that
include, in-bound innovation and out-bound innovation as well (Kasemsap 2017).
Disruptive innovation – The theory of disruptive innovation had been introduced by
Clayton Christensen in the year 1997 in his book that is named the “The Innovator’s Dilemma”.
The theory also became one of the most important innovation theories that can help in the
creation of value networks and the development of new markets as well. Disruptive innovations
are considered to be the innovations that can improve the products and services that are offered
to the consumers. A major example of disruptive innovation is mainly based on the replacement
of telegraph by the usage of telephone (Kock and Georg Gemünden 2016).

7INNOVATION AND PLANNING IN ORGANIZATIONS
Technological innovations are considered to be a vital part of the process of disruptive
innovation that is implemented by the firms. The implementation of superior technologies can
also provide different values to the customers of organizations operating in different industries
(Lopes et al. 2016). Disruptive innovation can take place as a process and in the early stages of
development this type of innovation is able to serve the niche market. The disruption in the
market can take place when the inferior products in the organizations or the market can be
replaced by the new products. Market disruption is able to play a key part in the implementation
of changes in the organizations (Korableva, Gorelov and Shulha 2017).
Disruptive innovation of Amazon – Amazon is a major online retail organization that
provides different types of products to the consumers in different parts of the world. The product
portfolio of the organization is considered to be quite huge and the various needs of consumers
have been fulfilled effectively by the services and products. The operations of Amazon that had
started in the online retail industry was able to bring huge levels of changes in the retail industry
(Amazon.com, 2020). The changes that have taken place in the retail industry are also based on
the ways by which the company has provided the products to consumers within the convenience
of their houses. Many different organizations have also started providing competition to Amazon
with the help of similar products that are provided to consumers in the online retail industry
(Tidd and Thuriaux‐Alemán 2016).
Blue ocean strategy – Blue ocean strategy can be defined as a marketing based theory
and title of the book that was published in the year 2004 was mainly written by W. Chan Kim
and Renee Mauborgne. The strategic moves are able to create the leap in the value for a
company, the buyers and the employees by unlocking the new demands and reducing the
relevance of competition as well. Blue ocean strategy is mainly defined as the simultaneous

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pursuit of the low cost and differentiation levels that can open up the new market space and the
competition in the market is also made irrelevant in the process (Mir, Casadesús and Petnji
2016). The strategy is also considered to be useful for the creation of new demands in the
market.
The development and capturing of the uncontested space in the market is also supported
by reduction of relevance of the competition levels. The industry structure and market
boundaries are also able to play a key part in appropriate reconstruction of the beliefs and actions
of the industry players (Oeij, Rus and Pot 2017). Blue ocean strategy is mainly based on an idea
that is related to the ways by which an organization like Amazon is able to achieve the higher
levels of profits by development of demands for the particular products (Amazon.com, 2020).
The procedure is mainly focused on the ability that the organizations have developed for the
creation of sovereign market spaces in order to exclude the competitors (Nambisan et al. 2017).
Red ocean strategy – Red ocean strategy is considered to be a strategy that mainly aims
at fighting and beating the levels of competition in comparison the organizations that implement
blue ocean strategy for the purpose of achieving differentiation in the industry. The focus of
organizations in this case is to exploit the existing levels of demands in the market or industry.
Red ocean strategy is implemented by the organizations in order to fight and beat the
competition in the industry as well (Pikkemaat and Peters 2016).
The major characteristics that are a part of the red ocean strategy mainly include the
focus on competing in existing marketplace, focusing on beating the competition, focusing on
the value, focusing on exploiting the existing demands and the focus on execution as well. The
red ocean strategy mainly leads to the organizations so that they can choose to follow either the
strategy of low cost or differentiation. The organizations can thereby align all their activities in

9INNOVATION AND PLANNING IN ORGANIZATIONS
implementation of one of the two strategies and this is also related to the development of an
effective strategic direction (Plucker 2016). Amazon has aimed at the implementation of low cost
based strategy for the purpose of enhancing the satisfaction levels of the customers. The
customer centric nature of Amazon has led to the implementation of low cost and customer first
strategy of the organization (Amazon.com, 2020).
Business model canvas – Business model canvas can be defined as a tool that can help
the organizations in understanding the operations of the organization in a straightforward
manner. The canvas can be used for development of insights related to the methods by which an
organization can serve the customers. The value propositions of the organizations are also
developed in an effective manner with the help of appropriate implementation of business model
canvas by the organizations that operate in the modern business environment (Ratten, Ferreira
and Fernandes 2017).
Critical discussion based on innovation management literature
Innovation management mainly includes the set of different tools that can allow the
managers and the workers to cooperate with the common process of understanding the goals and
objectives in an effective manner. The process of innovation management can allow the
organizations so that they can respond to the internal and external opportunities. The
organizations in this case can use the creativity levels in order to introduce the new ideas,
products or processes (Reinhardt and Gurtner 2018).
The examples of a real life organization like Amazon has been taken into consideration
for the purpose of understanding the implementation of different innovation theories. The use of
these theories for the purpose of understanding the current operations of the organizations and

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the development of future innovation opportunities can be understood with the help of the
following examples (Smith et al. 2017).
Business model canvas of Amazon –
Key Partners
 Partners in
delivery.
 Vendors
providing
technology.
 Social
media.
 Restaurants
.
Key Activities
 Offering
delivery to
the
customers.
 Providing
bulk
corporate
orders.
Value Proposition
 Price
 Taste
 Quality
 Convenience
 Consistency
 Accessibility
Customer
Relationships
 Service
provided to
customers.
 Connectivit
y through
social
media.
Customer
Segments
 Corporate
customers.
 Students.
 Working
professional
.
Key Resources
 Delivery
staff.
 Retail shop
owners.
Channels
 Mobile
applications
 Social
media
based
activities.
Cost Structure
 Costs related to the channels of the organization.
 Expenses based on salary provided to the delivery
staff.
Revenue Streams
 Income based on the orders provided.
 Income gained from the restaurants.
The business model canvas of Amazon an online retail organization has able to provide
details related to the different aspects of the organizational operations. The various aspects that
have been taken into consideration for the purpose of analyzing the business model include key
partners, key activities, key resources, value proposition, customer relationships, channels,
customer segments, cost structure and revenue streams. The aspects are able to depict the ways

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by which an organization like Amazon is able to maintain its operations and the future
innovation based plans that have been made by the organization as well (Tidd and Bessant 2018).
The different possibilities and ideas that are related to innovation for each organization
are considered to be an important part of the innovation management process. The
implementation of innovation management is mainly based on the methods by which
organizations are able to gain maximum levels of success in their respective industries.
Innovation is also considered to be one of the most challenging activities that are performed by
the organizations in different parts of the world (Trapp, Voigt and Brem 2018). Innovation
process can also be considered as an interdisciplinary process based on the changes that are
required for proper cooperation and commitment of all the areas of a particular company. The
process of innovation management are based on five major steps that are follows,
Step 1 – Orders from the management and the targets – The clear commitment is based
on the mandate that is provided by the management of the organization is considered to be a part
of the first step of innovation management.
Step 2 – Strategic orientation of the innovation activities – The strategies objectives of
the innovation process are defined in the second step of innovation management of
organizations.
Step 3 – Specifying the search fields – The definition based search fields is related to a
task that is based on strategic innovation management of the organizations (Westland 2016).
Step 4 – Starting search for the ideas – The idea is then searched as a part of the fourth
step that is related to introduction of the innovation based management related ideas.