Steve Jobs, Bill Gates, Jeff Bezos… We love them, we worship them, we secretly dream of becoming one of them. Countless books, movies are made about them. We invite them to speak at various prestigious Universities where they p̶r̶e̶a̶c̶h̶ give influential speeches. We careful listen to everything they say, looking for a hidden hint to their success.
“Your margin is my opportunity” is a famous quote from Jeff Bezos which has been considered by many as insightful about his strategy.
The Reign of the Customer
Nothing today is more important than the customer. “Client’s satisfaction is what we strive for” can be heard from most company’s PR people. As competition is fierce, companies try their best to “reward” existing clients for their “trust”, to acquire new clients with new offers.
What does the client want exactly? It’s hard to say, but in most cases, more for less money.
Businesses under pressure
For companies, this often means they need to run two optimization functions at the same time to attract as many customers as possible:
- Optimizing the product’s features, quality etc
- Optimizing the price of the product
Optimizing for a fully featured and enhanced product could look like this:
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For a new Market Segment, we are on the first part of the optimization function: being able to make a product greater than what already exists is possible where some big leaps can even be achieved. With an already well-established market, it is harder to innovate (last part of the optimization function).
Let’s take two examples:
- Innovative industries: e.g smartphones. For 15 years, we have seen tremendous leaps and innovations around smartphones. Yet, everyone can also notice that the leaps forward are not as impressive as they used to be. People even call the smartphone market as being done. From one year to another, we will mostly have upgrades around hardware (e.g cameras) but nothing which would be a massive leap forward as it used to be the case. Or nothing that would fundamentally change the way people interact with their phones.
- Other type of industries: e.g power provider. Providing power to customers has seen in the vast majority of cases little innovation. Sure, it is still possible to build an app to let customers check their bills on their mobile. But it is unlikely these optimizations will make a customer move more to a competitor than the other big driver: the price.
Optimizing for price could look like this:
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Again, as any optimization functions, it is quite easy at the beginning to get better prices for the final customer (enhancing the production line or to increasing volumes). However, after a while, it is getting harder and harder to keep on improving on that front too.
Back to “Your margin is my opportunity”
This quote suggests that Amazon’s main strategy is to give full attention to optimizing costs. At first, it will outperform the competition by automating, streamlining its production. But sooner or later, by keeping the same strategy, it will have to optimize on what generates a big chunk of its costs: its employees, scrutinizing their performance, often at the detriment of their mental health. Many stories show it is the case:
https://futurism.com/deaths-amazon-list-most-dangerous-employers
Of course, this is not a problem that happens only at Amazon. Countries throughout the world (and before Covid hit) were seeing more and more mental health related issues at work.
https://www.mentalhealth.org.uk/statistics
https://www.dw.com/en/germany-sick-days-due-to-mental-health-problems-on-the-rise/a-49739519
The trend with relocation of businesses in cheaper places that has been going on for decades is another symptom of this constant quest for cost optimization. More lately, the Uberization of the workforce, where people are not even given the status of employee and fired on the spot for a bad customer rating goes in the same direction.
The employee side of things
Customer is King. They can go to the competition whenever they like where a lot of providers are ready to do anything for them. Yet they (actually we) only spend a small amount of our time purchasing things.
Why have we optimized so much our experience being a customer to the point of ruining the big chunk of the time we spend not consuming but producing? If we optimize products for customers without taking into account employees’ well being, we make most of our time miserable.
Potential solutions
Not everyone can work in an innovative industry where chances of attracting new customers by enhancing significantly an established product or service is possible. For those who can’t, as we saw, there is a major imbalance between how optimization is largely made for customers (product price) rather than employees. One obvious way to address this is to have more regulations in place to ensure employees are protected sufficiently.
As citizen, we can also put pressure on our governments so that they require organizations to provide data to the public around how they run their businesses. E.g: min vs max wage in the company, max number of hours worked… This data could be used to provide an “Employee well-being ranking” while purchasing products for example.
When automation is done, production streamlined, one of the last optimization factor is around employees. These optimizations are often good for clients, as they drive the prices down. But who is working in these companies? You, me, everyone. We need to take swift actions so that cutting margins does not become an opportunity to remove all the safety nets that ensure our well-being and health.