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I was in the back row when Jeff Bezos told the audience, “There are two ways to build a product. The first: a company starts with their strengths and builds to the needs of the consumer. The second: a company starts with the needs of the consumer and builds (into) the strengths of the company.”

Bezos continued. Amazon.com is an example of the first. Amazon built logistical strength and educated the customer on the benefits of ecommerce. The Kindle is an example of the second. Kindle started with the consumers need for faster delivery in a digital format and built the infrastructure of the company to satisfy that need.

Every startup needs to determine which path to pursue from the very beginning. It’s as true for Amazon’s Kindle team as it is for any 2 person company.

Each path implies different product development goals and go-to-market strategies. Each path requires different skills and different kinds of team members. Most importantly, each requires a different management style: either one of customer education or one of building a product to meet a vision.

Most of the time, market conditions determine the product development path.

If the market is nascent, like ecommerce in the mid-90s, customer education will be a large part of the go-to-market strategy, in which case, follow Amazon’s model. In such a market, a startup must iterate the product to determine the resonant customer value proposition. This is a huge task because it is a moving target! As consumers become more educated about a product, their needs and wants will change.

On the other hand if a market is established, to win market share startups must differentiate their products by better serving the customer. Clay Christensen’s Innovator’s Dilemma is the best argument that iterative product development strategies won’t win large market share in an established market. Rather, startups must find a disruptive angle, a new way of serving the customer, a unique point of differentiation that provides some barrier to competition from the incumbents.

Be aware of the market type when starting your company. Your product development and go-to-market strategies should reflect the realities of your market. Paraphrasing Shakespeare: “This above all: to thine own market be true”.

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35 thoughts on “The two ways to build a product, according to Bezos

      • Sorry for being opaque. I meant, what about the scenarios when you dont start with a customer problem or you are a 2 person team with not much in the “strengths” column. You look at existing markets and say “What if this was changed to do X instead of the current way of doing things”?

        Would those companies be exceptions, when you finally find a problem that fits the solution?

      • In that case, the startup is innovating in an established market and looking to disrupt it by better understanding user needs, the second case I mentioned. I think the founders’ strength is market knowledge.

  1. A really good post, Tom. The challenge with number 2 is repeating it, I guess. Building from your core strength will be “easier” going forward.
    Think Apple as nr 1 and Google as an example of nr 2.

  2. Interesting … I also see Bezos’ statement applying to writers/bloggers and audiences. You can either be an amazing writer with a strong voice and build your following because of this unique character in your writing, or you can identify a need and write to it, thus solving a problem for the audience.

    I recognize this veers in a totally different direction than your original premise, but I guess that’s one of the benefits of blogging — different perspectives adding to the mix and all…

    Anyhow, good food for thought as I decide a direction for my own writing career — so thank YOU for the timely post!

    🙂

  3. Tom, Great advice. In both cases, you have to build your business around a superior customer value proposition and points of differentiation. As i mentioned in one of my recent blog postings at: http://wp.me/pT79u-3S the creators of the Balanced Scorecard, Robert Norton and David Kaplan, view the customer value proposition (“CVP”) as the “heart of strategy”. They very succinctly stated that:

    “Strategy is based on a differentiated customer value proposition. Satisfying [your] customers is the source of sustainable value creation.”[1]

    A customer value proposition is an offering that helps customers do an important job more effectively, conveniently, or affordably than the alternatives. [2]

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  5. Good summary. But for every success in the market, there are countless failures. Seems to me to be hit or miss most of the time. Using Bezo’s thinking might up the percentage that makes it.

  6. Exactly. Even having been in the GPS/GIS data collection business for over 15 years, we still must keep the customers’ needs a top priority and provide superior technical support to stay ahead. Besides the economy, new startups must also beware of the fickleness of the buyers’ market.

  7. Having been in business for 25 years I couldn’t agree more. All too often the new entrepreneur has only a portion of the complete thought process required to be a success. Product development is difficult in any economy but current conditions warrant additional prudence. Good post

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  8. its always very tough to start a new business. experienced this a few years ago. had some very brilliant ideas but never knew that so much more than brilliant ideas were needed for a successful venture.

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