AT LEAST FOUR DOMAINS of decision making are crucial for every venture. Although any company will face additional choices that are particular to its context, a start-up that has not wrestled with at least these four decisions is unlikely to create and capture value on a sustainable basis. Amazon’s story is illustrative.
Identifying customers and understanding their needs is usually the first step in any go-to-market strategy. But the target customer is not necessarily the first customer—and it is important that you understand the relationship between the two. You validate your product by getting the right early adopters. Amazon’s decision to initially target book readers was a strategic choice. Its leadership recognized that books were a beachhead from which the company could expand into other retail categories.
Technology and customer choices are interrelated. Amazon could have built a simple online ordering system to service existing stores. Instead its goal was to let consumers buy the long tail of books that could not be stocked physically at the local mall. Thus the company had to invest beyond transaction services to build a database and a search engine capable of guiding readers through millions rather than thousands of books.
Identity, Culture, and Capabilities
Choices in this category should both create a narrative about what the company will stand for and communicate to all stakeholders what behavior to expect and what capabilities it will develop. Readers loved Amazon’s offer, and Wall Street quickly saw how much money the company could make. But Amazon’s founder, Jeff Bezos, wasn’t building a bookstore. He wanted to create the “everything store.” That would require that ordinary consumers trust they were getting a good deal, which meant that Amazon would focus relentlessly on lowering prices, despite pressure from investors for early returns.
Amazon defined its competition as other retailers and chose to compete aggressively by offering consumers more choice, greater reliability, and lower prices. In its early days it could easily have chosen to work with existing retailers—perhaps even defining them as customers. Competitors would have been other search and logistics service providers, and the company could have established itself as a premium service provider by adding more value for booksellers.