Competing with Amazon a la the Discipline of Market Leaders

By John Richardson, Senior Manager

Preface: Many IT organizations must now defend their existence in the face of public cloud providers, like Amazon, that are frequently being used to circumvent IT processes. IT needs to be able to respond to the business faster -- going beyond the ability to simply provide a new server -- and evolving from a technology provider to a service broker.  The threat from Amazon is real -- if IT does not adapt, they run the risk of becoming increasingly irrelevant...and outsourced.

Michael Treacy and Fred Wiersema’s book "The Discipline of Market Leaders," was an instant classic a generation or so ago. It identified three ways that companies could succeed:

Operational Excellence – having the tightest operational controls, creating a cost advantage for these companies

Product Innovation – having products that are clearly perceived as above the competition, creating customer desire that allows these competitors higher margins and robust sales

Customer Intimacy – having the deepest relationships with customers, allowing companies to deliver the best customized results for their customers, even when they don’t have cost or proprietary product advantages

So what can this aging classic tell an IT leader about competing with Amazon?
  • It gives us a way to identify Amazon’s greatest weakness
  • At the same time, it calls out your greatest [potential] strength
  • From there, you can use those data points to create a vision and strategy to take your business back
Let’s dig into the categories to see what they tell us… Internal IT vs Amazon Chart
So, if customer intimacy is the strategy that best utilizes IT’s advantage – access to and knowledge of the business - what needs to be done to exploit this advantage in the market?

Create a sales force – As IT shops recognize they are in a competitive service business, they will formalize the relationship management role to deliver specific value to them and their customers.

Build a service catalog – Having a menu of service building blocks that your customers can buy is a critical component to having a more efficient and desirable customer experience.

Leverage service delivery – Being able to customize service delivery to particular customer needs is your ace in the hole. Given that Amazon offers no services, just infrastructure, it’s a matter of time before customers recognize the need for someone to bridge the gap between their specific needs and the simple building blocks of infrastructure.

Amazon may be a scary competitor, but what Treacy and Wiersema tell us is that while we can’t beat them at their own game, if we focus our strategy on their weakness – customer intimacy – we can marginalize their role and protect IT’s position.