Is an organization that focuses intensely on customer satisfaction be the utopia of government itself?
We have all heard of it. The maniacal focus on customer satisfaction. Nay, customer delight. The focus on free cash flow. The focus on continuous improvement of a “flywheel” business model that delivers growth and value.
The one that strikes fear in the hearts of most traditional firms. The You-Know-Who. The one-that-shall-not-be-named. AmaZon!
Let’s assume Jeff Bezos and Team Amazon continue to prosper; that they don’t back away from their reinvestment of cash to grow relentlessly; that they don’t get anti-competitive or predatory; that they don’t run afoul of anti-trust hawks inside governments.
Where can Amazon go from here? Is Amazon similar to a non-profit? Will they make governments better or replace them? Should governments fear them? Where does that leave us consumer-citizens? Fear, awe, love?
First the basics.
Amazon’s P.E.T Leadership
In 1996, when I was still a new immigrant in the United States, after a lot of hesitation I signed up for Amazon for books. It took some persuasion to give away my credit card and personal information to an upstart in the early days of the Internet.
They promised these 3 things to win me over.
- Price: Money talked. I could do with discounted books. As a new immigrant, prices at the nearest brick-and-mortar store were daunting to me.
- Experience: Convenience of home delivery. Icing on the cake.
- Trust: Peace of mind and great return policy. I was sold.
Over time, these three attributes got better. Trust translated over to other products and services. Some experiences where memorable. Like the time when they let me keep an item I was about to return for free.
P.E.T culminated in a relationship called Prime.
Prime shipping is like a flat tax you pay for faster service. A subscription to the local toll booth so that you can bypass the lines.
Prime has morphed. More benefits were added if you were in the prime relationship.
Now, 2 out of 3 households in the USA have Amazon Prime.
Prime is poised to fuel the flywheel even more powerfully.
Now that we know P.E.T, the flywheel, and Prime, let’s see how big Amazon is relative to the US economy and what else Amazon can deliver, before we compare Amazon to government.
Amazon and The Economy
Excluding housing expenses, US consumer spending is $9 Trillion. Amazon’s retail revenues were about $125B in 2016. That’s many orders of magnitude apart.
Let’s see if the gap can be closed. I am going to round-up numbers to keep the math easy.
About $25B of Amazon’s retail revenues (15% of total retail) came from retail third-party seller services. That is just the portion of fees Amazon recognized as revenue. Not what we paid for the purchase. If the average fees amount to 10% of the purchase price, the total consumer spend is $250B.
I’m simplifying, it could be a much higher percentage including referral fees, fulfillment services, and newly added checkout/payment services. Add to it the $100B retail products sold by Amazon and we see the impact.
That’s a whopping $350B of consumer spending that Amazon controls.
Let’s say they double every 3 years. That is an average annual growth of 25%. Quite doable given their history.
In 5 years, Amazon can power US$1 TRILLION of consumer spending globally.
Compare that to the $9 trillion US consumer spending and we see the relative size of Amazon in the economy.
Where is the growth upside? Let’s look at the nascent and untapped potential markets for Amazon using 3 sectors as examples: Food, health, and transportation.
Amazon can impact how we Eat, Treat, and Move
Amazon has inserted itself in our food supply chain — perishable and cooked.
It is early days still for Amazon Fresh and Amazon restaurant food delivery, but their investments firmly place them to control farm-to-fork experience whether directly or through the restaurants.
Priming Our Health
They can easily orchestrate how we get healthcare, especially remotely delivered care. For example, doctors-on-demand provided under a Prime Health relationship with Amazon is not far fetched.
Plus they will treat me like a paying customer rather than as a patient. I am impatient for that experience.
That is not counting pharmacies and the drug supply chain.
With a play in two sectors — food and health — Amazon plays not just in farm-to-fork, but farm-to-body. How we eat and treat ourselves could be revolutionized by Amazon. And that could do wonders to society.
How about Prime Taxi for helping us get around.
They could buy cars and operate fleets. Or they could just buy Uber or Lyft and do a better job at it.
Could they collect road tax and maintain roads too? Could they tax us based on our usage?
Tax talk brings us to government.
Government and P.E.T
Shall we look at government’s price-experience-trust trifecta?
When it comes to experience, governments are stuck in a 20th century customer experience still. Wait, we aren’t customers. We are mere citizens. Just like we are mere patients in the healthcare system.
Citizens get the spaghetti experience on the left, specially reserved for tax-paying, law-abiding, upstanding citizens. Customers get the experience on the right.
Amazon’s NPS (Net Promoter Score) is about +70 [Range: -100 to +100. NPS is arrived at by subtracting the percentage of detractors from the percentage of supporters]. Government agencies are starting to think about measuring experience!
Amazon should give the government a master-class on experience. Better still, government should use Amazon as their front-end.
Government Added To Cart
I want to renew my driver’s license through Amazon. And my business permits. Amazon can collect my taxes and figure out how the money gets to the right place.
Government should become a third-party reseller on Amazon marketplace, addable to Amazon shopping cart.
What about the other elements of P.E.T — Price, Experience, Trust?
I don’t want to get you started on a rant about government inefficiencies (and consequent higher prices/taxes) and our confidence in how government can serve us better.
May be I do!
Improving price and trust needs more than window-dressing the front-end experience and becoming part of Amazon’s marketplace. It needs government services to be part of not just Amazon’s marketplace, but its supply-chain.
How about Fulfillment By Amazon (FBA) applied to government services?
Can’t the government use Amazon for service fulfillment? Government is already outsourcing IT services to AWS (Amazon Web Services). They could go the whole hog and outsource more than just IT services.
That could work. Especially for “retail” services offered by government.
Bezos can throw those pesky government services into the flywheel and give it a nice once-over. It will free governments up to focus on policy and defense…and world peace.
Government fulfilled by Amazon may be more fulfilling for me as a citizen-customer.
For-profit or Non-profit
I hear us murmuring about placing our trust blindly in a big bad corporation.
Should we trust a for-profit corporation to do non-profit government work? Won’t the corporate greed take over?
Well, here is the irony!
The last time I checked, Amazon was operating like a non-profit! A self-sustaining non-profit focused on free cashflows and not profit margins. If that party continues, let it roll. When it stops, we will see. [Note: All the more ironic for me since I serve on the board of a non-profit for a great cause.]
And the irony doesn’t stop there.
The last time I checked, government was not non-profit. It was actually negative profit. Borrowing to spend. Investments for the future, we say.
Exactly what Amazon is doing.
Amazon is a master orchestrator of the economy. Its flywheel model and price-experience-trust trifecta can be applied to serve the bulk of consumer spending. Prime-relationship variants reinforce the flywheel.
Can we leverage the Amazon machine to eliminate inefficiencies in the economy — both in the private and public sectors? Perhaps that is a more productive conversation than the should-we-break-up-amazon conversation.