Amazon describes its leadership principles as one of the more “peculiar” aspects of its corporate culture. Of these 14 principles, perhaps the most important is the expectation that leaders will constantly “invent and simplify” and accept that as the company innovates, it “may be misunderstood for long periods of time”.
The most common misconception about Amazon is that it makes most of its money through its retail division, by providing a platform for the sale and distribution of high volumes of low-margin consumer goods. In reality, the retail side of the Amazon empire is a side show. More than 50 per cent of its operating income comes from a less glamorous but larger cash generator: the cloud computing division that powers swathes of the internet.
The significance of Amazon Web Services (AWS) to Amazon’s overall business was underlined on 2 February when the company’s founder and chief executive Jeff Bezos announced that he would be stepping aside to make way for a new CEO: Andy Jassy, who currently leads AWS. And it was further emphasised by the company’s financial results. Although the sale of cloud hosting services that enable businesses to outsource their IT infrastructure represents just 10 per cent of Amazon’s sales, the business unit’s profit rose in its most recent quarter by 37 per cent compared with the previous year, to $3.56bn. It is estimated that AWS alone will be worth more than $1tn by 2023.
Jassy is one of the longest serving Amazon executives and is seen as a natural successor to Bezos. Nevertheless, Bezos’s decision to step aside and take on a new role as executive chair in the third quarter of 2021 still sent shockwaves through the tech industry on Tuesday night. Bezos, who is the world’s second richest man, is expected to remain involved in parts of Amazon’s business, while also spending more time on his other ventures, from the Washington Post, which he bought for $250m in 2013, to his Blue Origin space project, which aims to take passengers on trips around the solar system.
His successor faces more mundane challenges. One of Jassy’s responsibilities as AWS CEO has been to reassure customers that it operates independently from the rest of Amazon. As the company has faced increased competition from cloud computing rivals such as Microsoft and Google, this has been particularly important in retaining AWS customers. Those such as Netflix and the BBC’s iPlayer, which compete with other parts of the Amazon empire, such as Amazon Prime Video, would flee if they thought they were receiving second-class treatment. To date, Jassy and Bezos have successfully navigated this. But given Jassy’s background, AWS clients will be keen to see that the firewall that surrounds AWS’s business is maintained as he takes on the CEO position.
Another challenge facing the incoming CEO is a series of upcoming antitrust probes. The European Commission has already launched investigations into whether the company unfairly prioritises its own products and logistics services over those of the third parties who use its platform. But more cases are expected to be brought against the company on its home soil in the US too.
As the Big Tech backlash intensifies, calls for the break up of firms such as Amazon will only grow louder. But by placing Jassy in charge, Amazon’s board is signalling that it envisages a more conservative future for the company, with executives focusing on growing the division that drives the largest profits, causes the least controversy and provides a financial footing on which the company’s leaders can continue to “invent and simplify” in the years ahead.
[see also: The world’s richest man has never had it so good]