The keys to Amazon's success

The charmed life of Amazon's Jeff Bezos is a great article in the latest Fortune magazine about Amazon.com's success.  The key paragraph for me is the CEO's statement of their relentless focus on customer satisfaction -- even it means bad earnings for a few quarters:

For all of Amazon's ups and downs over the past 13 years, Bezos's strategy is one thing that hasn't changed. Customers want three things, he says: the best selection, the lowest prices, and the cheapest and most-convenient delivery. At Amazon, he explains, all decisions flow from those fundamentals. "What's not going to change over the next 10 years is incredibly important - you can build plans that are durable and meet important customer needs," he says, adding, "Ten years from now, customers will still want vast selection, low prices and fast, accurate delivery. In fact, it is impossible to imagine a world 10 years from now where customers will say, I love Amazon, but I just wish your prices would be higher."

A good example of this is Amazon's decision to build some excess warehouse capacity. As Amazon started to grow its business in the late 1990s, some members of the management team argued in favor of building just enough of the giant, automated warehouses - four of the $60 million facilities - to meet projected demand. Bezos decided to build five. "From a financial point of view, we should have built four rather than five," says Bezos, pointing out that in 1999, when the centers were built, "for a company that only had $1 billion in sales, spending $300 million on fulfillment centers is a very big investment."

Instead, he was positioning the company to pursue "more fundamental things": that is, keeping Amazon's customers happy. Remember all the post-holiday news stories at the turn of the millennium about little Timmy and Janie not getting their presents on Christmas because some fly-by-night toy site couldn't handle the holiday crush? Amazon came out smelling like a 1-800-FLOWERS rose. "A lot of companies stumbled and we didn't," said Bezos. "We had an insurance policy against that huge burst of demand" - the fifth fulfillment center.

Which leads up to the most important statement I think he makes:

"A lot of decisions around consumers are like that," Bezos says. "When you do the math it's not clear what will happen."

When you create a great user experience, the business will follow...