Four factors behind the rise of Amazon Web Services

Olga Ivanova recently shared a great HBS case study on Amazon Web Services with me. The study chronicles the rise of AWS from a back-office infrastructure provider to it's current incarnation.

Here are some key lessons I took away from this case study:

  1. Successful businesses listen to internal and external customers. In this case, Amazon leadership listened to internal customers and realized that tens of internal teams were reinventing the wheel every year. Another example: after opening their platform to affiliates in the early 2000's, Amazon leaders were struck by the positive response among developers. They decided rather quickly to add more fuel to the fire. AWS' growth owes much to Amazon's ability to listen to customers.

  2. Don't lose sight of your company's mission Amazon launched AWS to create a differentiated, cash-flow positive business. Amazon's gross margin on AWS is way higher than its margin on e-retail. However, this has not kept it from consistently lowering costs every quarter. AWS price drops, in fact AWS' mission to make the cloud ever-cheaper, aligns well with Amazon's overall mission to bring ever more affordable products to users. Giving up fat margin's today (which would make Amazon look great in front of investors!) for long-term growth and market dominance takes admirable foresight.

  3. Test, measure, adjust I was struck by the number of times Andy Jassy mentioned that they put the gas on an initiative after a test.

  4. Run it like a business. Jassy mentioned time and again how he kept an eye on the bottom line, and ran AWS not as an incubation or startup but as a long term business. Features were developed not because they were cool, but because they contributed to the bottom line, if not today then at a measurable date in the future.

Overall, a good read. I highly recommend it if you can get access :)