Amazon Buying Whole Foods: An Amazon Strategy Lesson 21 Years in the Making

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In recent days, cable news business shows, print newspapers, and social media outlets have been packed with extensive commentary about Amazon strategy to pay $13+ billion to acquire Whole Foods. Speculation runs the gambit about the short- and long-term impact of Amazon’s latest move.

Today’s Wall Street Journal (WSJ) says it well:

“The impact of the e-commerce giant’s Whole Foods deal on online grocery services is still unclear, but one thing is certain: Competition is heating up” – WSJ

The article goes on to explain that Amazon’s entrance in the space is adding to the frenzy among grocery stores for a growing share of home delivery service market.

 Strategy Lesson 21 Years in the Making

Two seemingly unrelated events happened in 1996. I invite you to join me as I draw from both events, take the liberty to make a few connections, and challenge your approach to strategy development.

Event #1: July 5, 1996 – The Dolly the Sheep Strategy

Dolly the Sheep was born at the Roslin Institute, part of the University of Edinburgh in Scotland. She was the first-ever cloned mammal – the product of a cytoplasmic donor, a nuclear donor, and a surrogate ewe.

At the time of her birth, the story dominated the media. It was called everything from an amazing scientific feat to a moral issue that would unwind the fabric of humanity. Dolly’s saga led to much public debate and many laws to curtail human cloning.

Dolly lived only 6 years. That’s considerably less than the typical 10-12 year lifespan, but her impact was significant. Today, she is on display at the National Museums Scotland.

As interesting as the story of Dolly the Sheep is, this article is not about cloning mammals.

However, it is about cloning.

This leads us to the second event…

Event #2: November-December 1996 – Enter the Amazon Strategy

The November-December 1996 Harvard Business Review contains Michael Porter’s seminal piece What is Strategy? Among other things, Porter, who is a faculty member at the Harvard Business School and prolific writer, explains that many leaders confuse strategic positioning with operational effectiveness.

What’s the difference?

In short, operational effectiveness focuses on performing the same activities as your competitors; strategic positioning means that you are making trade-offs, choosing not to do some things, and taking on different activities.

Combining these two 1996 events…

If you will allow me a few liberties, I’d like to provide an example to illustrate the connection. (Is it perfect? No, but it will suffice for our purposes.)

In the not so distant past, there were many more brick and mortar bookstores. It is likely that many bookstore chain leaders focused on reducing costs, growing market share, acquiring better locations, increasing year-over-year revenue, or a myriad of other goals.

True, these goals were good. The more successful chains raced to the top of the heap. However, over time, the efficiencies achieved by one company were likely replicated by its competitors.

The reality is that they weren’t thinking strategically. They were merely improving on the practices of others in the industry.

They were employing a Dolly the Sheep Strategy.

No, they weren’t trying to clone one another. Nonetheless, as time passed, the differences among them became less and less. One company would improve a process and eventually the rest of the pack would catch-up. In many ways, they were clones of one another.

As a result, the race to the top turned into a sprint to the bottom. This required organizations to compete on price, which is not an easily sustained, long-term plan for most organizations.

Then, along came Amazon and the Amazon Strategy.

Amazon was competing in the same industry, but doing very different activities. Jeff Bezos was thinking strategically. The Amazon Strategy was to be a wolf, and many companies paid the price for their Dolly the Sheep Strategy.

What about you and your organization?

Here are a few questions for you to consider about your strategy:

  • Are you employing a Dolly the Sheep Strategy or an Amazon Strategy? Or are you behaving like a wolf?
  • Is your current strategic direction mostly focused on operational effectiveness?
  • If so, how sustainable is that approach? How long will it be before your operational improvements become the industry’s status quo?
  • What might you do today to begin thinking more strategically?
  • What new activities might your organization take on if you were to employee an Amazon strategy?
  • What trade-offs are you willing to make?

2 comments

  1. This is an insightful article. There are opportunities for “wolfs” in a lot of industries to bring disruptive change to antiquated processes and practices. It is very difficult and rare for the “sheep” to make those types of change. They are heavily invested in the status quo and all the stake holders will have a million reasons why they can’t change. They maybe willing to make incremental changes, but few are willing abandon the paradigm they know for the unknown. The “wolfs” look at the “what if” of Amazon, the “sheep” look at the see what happened at Sears and J.C. Penny. The big box electronic stores are right with the bookstores.

  2. The news about Amazon bought Whole Foods has been very hot. It’s interesting to see how Amazon and Dolly Sheep is connected and represented strategy. Also, the questions are very good for leaders to think about to adjust strategy.

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