#24 Importance of unique insights while founding a company
Failure rate of start-ups is high (up to 90% depending on which report you go by)
Jeff Bezos gave Amazon a 30% chance of succeeding when he started it.
Amazon is the fastest company to reach $100B in revenue.
What were some of the unique insights on which Amazon was founded?
When something is growing astronomically fast, figure out the best way to participate in that growth
Bezos found that web usage was growing 2300 times a year in 1994
Build something that was previously not possible
Bezos realized it was now possible to have an online bookstore that offered all the books ever published
As technology improves, Bezos predicted that more things that previously was not possible, would be made possible
Bezos predicted that the online store could be personalized, and discovery of products will become easier over time
Scaling quickly was more important than profits
Amazon purchased books from distributors at 50% off the list price and sold it to customers at 40% off the list price + shipping fees
Based on insight 1 Bezos picked retail. A huge market, as the industry to attack. Move offline commerce online.
He then used insight 2 to pick a product category to start an online store. He formed a list of 20 product categories to choose from. He picked books as it was the category with the largest number of items. Books had 3 million items. Amazon could offer all these titles to their customers while a physical bookstore could offer only a small fraction of books (mostly the best sellers). Music was the next best category with 200 thousand items. Amazon came up with an elegant solution to fulfill orders placed (to be detailed in another post).
The quality of the unique insights on which you found your company plays a critical role in it's success.
PS: I published a short Kindle book. that summarizes Jeff Bezos' letter to shareholder letters from 1997-2018.