Amazon is a great example of a services provider that has truly innovated its offerings. It started as a book store but its business activities today involve selling an increasingly wide variety of items, even to the point of reselling its own capabilities as an online retailer, using its Web sites and servers as platforms. Amazon also resells its infrastructure to other companies to use for hosting their Internet activities. Now it is creating device platforms like its Kindle, complete with e-books and other media, and attractive pricing to stimulate purchase of it.
Amazon received the customer’s order and the customer’s money at the beginning of its process. This allowed it to finance much of its growth directly from its customers, and what seemed like slim margins to many become more attractive once the cash flows were factored in. Once these processes were up and running and beginning to achieve significant economies of scale, Amazon began looking for new sources of growth. It saw a potential future as a provider of wide range of products and services, and made a $800 million investment in computer infrastructure to get there. Amazon aspired to be a platform.
Amazon was quick to figure out ways to let its customers co-create with them. Amazon prominently featured reviews written by readers on its site. Amazon also decided to open up its powerful online reselling Web site to other merchants for them to list their own merchandise. This openness unleashed powerful economies of scope for the company, attracting hundreds of other suppliers to Amazon as a place to sell their own wares, a platform for reselling, allowing it to build economies of scope.
For more information, see Ch. 8 Open Services Innovation by Henry Chesbrough