Last week, Amazon.com, the world’s largest retailer, conducted their annual event called ‘Invent’ in Las Vegas. I’ve always been amazed by Amazon’s innovation, and how their business model has evolved since its humble beginnings 18 years ago.
Last Thursday, in a fascinating 40 minute interview, Amazon founder Jeff Bezos revealed some fundamental insights into the way he enabled Amazon to become a Fortune 500 company and the biggest retailer in the world. The entire interview is right here:
The company started out as one of the world’s first web-based bookstores and then quickly diversified by adding other items, such as DVDs, audio CDs, software , video games, electronics, clothing, furniture, toys and even groceries.
Amazon prides itself as a customer centric company. In fact, I’ve had an experience where over $800 in electronics that I ordered went missing (a camcorder and accessories). I called Amazon about it, and they shipped out the same order the next day, no questions asked. I’ve been a customer of theirs for life since then and have purchased books, gifts and groceries from them since then.
If you can, please take the time to watch this 40 minute interview, since it reveals some fascinating insights into the mind of Amazon’s founder Jeff Bezos and his ‘customer centric’ attitude. I consider it a lifetime of insight from one of the pioneers of ecommerce. To make things easier for you, I’ve highlighted some of the key takeaways from this talk, and how you can use this in your practice.
- “The balance of power is shifting from providers to consumers” Lesson - shift your marketing from (traditional) physicians direct to consumers, and possibly other local businesses that cater to your patients in an effort to reach them. After all, these local businesses serve the same consumer you do. For example, if you are a specialist in postnatal care, you may want to partner up with Babys R Us and run a joint marketing campaign with them. Think of innovative ways to reach your patients since they have the decision making power and are becoming increasingly aware of it.
- “Build a customer centric company and not product centric”. Lesson - offer additional, ancillary services that help patients get better and healthier, and don’t ‘restrict’ yourself to traditional care models.
- “Word backwards from what the customers want”. Lesson - Ask yourself “What’s best for the patient” and the rest will fall into place step by step.
- “If you are scared of failing and of being criticized, then don’t innovate”. Lesson - don’t hesitate to try out new offerings to patients and the community. Some may work and some won’t. Innovation implies that you redefine yourself, and stick to your guns in the process. It may not always work, but you’ll never know until you try. Don’t let the fear of failure hold you back. I’ve personally failed more times than I can count, but the victories are what makes everything worth it.
- “We are winning not because of our sales force but because we provide the cheapest product and the widest selection of products” Lesson - As pay for performance and declines in reimbursement become a reality, we’ll see a trend towards ‘volume’ and ‘cheaper pricing’ for services like physical therapy. Hospitals and larger corporate clinics will be able to survive in this environment, and the best way for a private practice to compete is to focus on the widest possible selection of services for the patient.
- “Developers write code without understanding resource allocation. With our AWS (amazon web services) hosting, developers know in real time what is raising cost and this infrastructure helps them lower cost”. Lesson - while this sounds somewhat technical in nature, there is an underlying logic that applies to all private practice owners. Physical therapists have the same traits as software developers, i.e they do their ‘own thing’ (in our case, we treat and they do a wonderful job at it) without understanding time management and resource allocation (marketing, billing, hiring) which are the building blocks to maximize efficiency (and revenue). Moral of the story - a practice owner must be able to understand, in real time, what is raising costs and build the infrastructure (people, software, systems) to reduce costs and maximize efficiency.
- “The further a defect travels downstream, the harder it becomes to fix” Lesson - Create the right infrastructure (people, software, systems) as quickly as you can. The more you wait, the more money you will lose. Don’t ‘make do’ with people because you are too intimidated to ‘let them go’ and apprehensive that you ‘won’t find a replacement’. Make the hard decisions sooner rather than later if you want to run a profitable practice.
- “Communication between the customer service agent and fulfillment is important. Any agent can pull any products from Amazon’s store when needed (such as, for example, when they see that a product is always being returned)” Lesson - This is a big one because it implies the staff has autonomy to make decisions and not ‘look over their shoulder’ each time they want to take an action. Trust your staff to do what’s right, and make sure every department is communicating with the other.
- “It’s impossible to be efficient with high margins because you don’t need to be. Necessity is the mother of invention because it makes us more efficient, and we are more aligned with customers, you get more usage, you are forced to operate lean and efficient. In my dreams I want a high margin business” Lesson - Now this is one area where I don’t agree with Bezos. He’s talking about a web-based commodity driven business, but physical therapy is a skill-based service driven business. We must develop and market innovative cash-paying programs to supplement our income. There will always be patients willing to pay a premium for better service, in any market. Your job as a practice owner is to identify them, reach out to them and bring them in.
- “Good entrepreneurs don’t like risk and this is a common misconception. They seek to reduce it step by step in the early days. They need a lot of luck in the early days. As they become bigger, they can take more risks” Lesson - in the early days of your practice, get the right business education (we can help you - just schedule a strategy call with us) so you minimize risk and understand where to focus your energy. As you grow, you can take some calculated risk, but you don’t want to mess around with your time and money especially when you are starting out.
- “When you empower people with new tools, you get unexpected and beautiful results” Lesson - goes back to the earlier point about empowering and motivating staff to make decisions on behalf of your company.
- “Everyone wants low cost, reliability, fast evolving APIs, doesn’t matter if they are enterprise or small business. The needs are the same” Lesson - your patients want to be seen quickly, they want to get better as fast as possible and they want to pay as little as possible. What can you do to fulfill this need and be profitable at the same time?
- “The point of AWS is to create a standard layer and the benefit for us is to retail that standard. Custom solutions never work. You have to create a new standard” Lesson - this is a big one. Try and create a new niche, a new service in your community. Apple for example ‘defined’ a new category of music players with the iPod, a new category of tablet computers with the iPad and a new category of laptops with the Macbook Pro retina display. The emergence (and explosive growth) of Amazon’s kindle books (e-books) is one such phenomenon (see chart). As a private practice owners, what can you offer that becomes new, refreshing and invigorating for referring physicians and the patient? In other words, can you remain innovative?
- “Be a missionary and not a mercenary to build a great company” Lesson - build it slowly, step by step with the aim to provide patient satisfaction. Don’t be a renegade out to ‘crush your competitors’ and ‘undercut your competition’. Do the right thing, and be strategic about it, while keeping the needs of the patient as your number one priority.
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