The biggest issue large companies have is that they can't reinvent themselves, especially when they're still successful. Companies have to think about creating new growth engines that result in higher margins than its existing business, or they risk becoming irrelevant. Amazon is one example of a company that continually reinvents itself. Through its Amazon Web Services business, the online retailer was able to launch a completely new company that generates much higher margins than its core ecommerce marketplace. What's incredible is how Amazon managed to do it with resources it already had. Here's some phenomenal schooling on how companies can reinvent themselves while they are still successful.
Amazon founder Jeff Bezos constantly challenges his company to improve the existing business while also inventing new future growth opportunities like Amazon Web Services. The leading online retailer is also a web-hosting and content production & distribution company. Let’s take a look at how Amazon was able to build a new resource-driven business model with its existing key resources:
Amazon’s IT infrastructure, a key resource that is crucial to develop the company’s online marketplace, also serves as a critical component of an entirely new value proposition and business model called Amazon Web Services.
This business brings a steady flow of recurring revenues that amounted to nearly $5 billion in 2014.
AWS' margins seem higher than the razor-thin operating margins of Amazon's online retail business. We do not know if this operating margin will stay at 17%.
AWS could become central to Amazon's long-term strategy.