Amazon’s recent investment in Beacon.com must have rattled the leadership of the shipping industry. If it didn’t, read on. If it did, read on as well. In this short piece I want to unpack one component that sets this investment apart: customer centricity.
Let’s start with a line from the mission statement on the Beacon.com website.
We realized that traditional logistics providers offer an outdated, poor-quality service to their customers.
What stands out is the one-sentence summary of our industry: “outdated, poor-quality service to customers”. The gut reaction from most incumbents tends to go like this: “Yes, but our industry is complex. A lot will have to change before this is truly a threat. For now we’re fine — we can focus on optimization.” Or: “Sure, but this isn’t a taxi service. And on top of that, we’re already using machine learning and AI.”
To a large degree those responses are true and defensible. But most of the solutions stem from an internal drive to optimize, to defend margin in a competitive market. What our industry hasn’t quite seen is the value and the opportunity of being customer-centric. Because that is the vantage point from which the Beacon mission statement is written. Another knee-jerk answer: “We’re already doing this — self-service portals, automated responses, a lot more efficient. We even have a mobile app.”
Now let’s explore an alternative view of what this investment might mean.
Key differentiator #1: where the work actually starts
Startups never have enough funding, resources or time to do everything on their wish list — just like any project inside a large incumbent. It is actually worse. They have no traction, no network, not even a customer when they start out. As a result, a startup tends to start with problems — cracks in the service that can be solved for the people who suffer from them: your customers. If they are really good, they tackle your problems along the way, and create intrinsic lock-in through their service. Problems solved on behalf of the customer tend to be stickier and more powerful, because they are the problems the customer is trying to solve themselves. Customers do not see shipping or interacting with you as a goal or a benefit. Their goal: get stuff from A to B.
Key differentiator #2: the articulation of the proposition
No mission statement like “we want to be the cheapest”, “we have the smartest tech”, or “we are the most efficient”. Simon Sinek comes to mind here. Their mission is to take your customers’ problems and make them the core of the business. And we all know — from the size of our operations inboxes — that there are many. Obviously it will be done efficiently, user-friendly and at a competitive rate. Those things all belong to the red ocean.
The biggest problem for incumbents is that technology is often mistaken for the solution. It isn’t. The traction these companies get is not driven by technology. It is driven by the customer’s appeal of simplicity. The wow factor is hidden in the fact that they make other steps obsolete through their own bootstrapping. They solve problems in novel ways, driven to build less and build fast. Avoiding complexity is a core part of how they design solutions.
To round off
These two differentiators are semantically similar, but what they mean in practice is different. Companies like Amazon, Uber and Beacon start from the observation that a lot of customer issues simply go unresolved, and find many ways to tackle them — even if that means becoming a shipping company themselves. Incumbents more often focus on the internal pain they share with the customer, and try to alleviate that.
The change companies like Uber and Beacon will bring to the industry is not about optimizing everything, but only what matters — and finding solutions that avoid complexity, so they can scale. Do not mistake simplicity and avoiding complexity for easy. It is very hard to do and it requires focus. The light at the end of that tunnel is scalability. And scalability, in our industry, will ultimately be the biggest threat. We can get into that another time.