REV: FEBRUARY 13, 2003
MICHAEL J. ROBERTS
WILLIAM A. SAHLMAN
Jeff Bezos looked out the open doorway of his office and stared at the "problem of the day," which h is assistant Sarah had posted on the whiteboard in the hallway. It was Friday, September 13, 2002, a nd the whiteboard read: "You have 10 bottles with 100 pills each in them. In nine of the bottles, each p ill weighs 10 mg. In one bottle, each pill weighs 9 mg. These pills are poisonous. You have a digital scale that reads out in mg. Can you determine which bottle contains the poison with only one weight m easurement?"
B ezos—founder, chairman, and CEO of Amazon.com—normally enjoyed trying to solve these b rainteasers. But today his mind was occupied with weightier concerns. Bezos had an unwavering v ision that had guided the company's efforts since its founding. In Bezos's words, "We're building a p lace where people can come to find and discover anything they might want to buy online." Indeed, t his vision of breadth and selection lay behind the choice of the name "Amazon," the name of the w orld's largest river. Yet, throughout its eight-year history, in the face of changing economics, u ncertain financial markets, and a constantly evolving set of competitors, exactly how t he company c ould best deliver on this vision remained a key question for Bezos: W e started with books, but our focus on serving the customer has led us to embrace s election, price, and convenience as the three key dimensions that define the customer e xperience. In order to fill out selection—and present our customers with a variety of price p oints, including used products—we have opened up our Web site to other sellers, including b ig companies, small businesses, and individuals.
S ince its founding in 1994, the company's business model had evolved through several stages. I nitially, Amazon had been a pure online book retailer. Amazon had modest inventories and d epended on a small number of large distributors to source its vast selection. Over time, however, t his retail model" evolved to incorporate a far wider variety of products, including music, video, e lectronics, and kitchen items, as well as deeper investments in physical distribution. By mid-1999, h owever, it was clear that if Amazon was to deliver on its vision of ultimate selection, it would have t o augment its retail commerce model with a second strategy, the "marketplace initiative." T he first manifestation of this model was Amazon auctions, launched in March of 1999. This was f ollowed by several other initiatives, all of which were characterized by the feature that Amazon did n ot own the goods being sold and, in many cases, did not take responsibility for the tasks that c omprised order fulfillment. Rather, the company had developed a wide variety of commerce
Senior Lecturers Stig Leschly and Michael J. Roberts and Professor William A. Sahlman prepared this case with the assistance of Research Associate Todd Thedinga. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2003 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.
Appendix 2: Amazon.com case materials
m odels in which it served as an e-commerce outsourcing partner for individuals as well as small and b ig companies. It...