Dynamist Blog

Amazon's Big Mistake: Forgetting They're a Utility

As John Scalzi has scathingly noted, Amazon really screwed up when they pulled all of Macmillan's titles from their site. Although I think they have the right idea about book prices, they betrayed their customers' expectations and, worse, did so without warning. They forgot that Amazon is what Professor Postrel called in this 2007 post on Organizations and Markets a "new-wave utility" and, a such, has adopted a strategy that implies a high level of reliability.

How do you get sustainable advantage in a service business today? One approach: Become a new-wave utility. Think about Google or Yahoo, eBay, Amazon, etc. on the Internet; think about UPS or FedEx, Grainger, Ryder, Public Storage in logistics; think about McDonald's, Starbucks, 7-Eleven, in convenience food consumption.

To see the implications, read the whole thing.

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