In this particular case, Amazon’s algorithm went terribly ary:

Check out the bottom of the graphic above, and the book that is recommended: Goddesses, Whores, Wives and Slaves.  Their scoring mechanism missed by quite a big margin on this one.

I knew it was pretty much over for television news when I discovered in 2003 that the heads of NBC’s news division and entertainment division, the president of the network, and the chairman all owned Tivos, which enabled them to zip past the commercials that paid their salaries. “It’s such a great gadget. It changed my life,” one of them said at a corporate affair in the Saturday Night Live studio. It was neither the first not the last time that a television executive mistook a fundamental technology change for a new gadget.

It makes me think of the Technology Strategy course I took a technology strategy course with Professor Rebecca Henderson, one of my favorite courses. We focused a lot of the disruption curve, what it does to industries and to mature businesses in that industry. But what about the human factor, the people in those industries and in those established firms.

Do they often not even realize the disruption is upon them and “enjoy the surf” as a consumer of the “new thing” themselves? The NBC execs and Tivo is an example. Did Barnes & Noble execs go and buy books on Amazon.com during the holiday rush because it was easier than going to the store? (at least before they got it together and launched their own site) Executives at AT&T using Skype at home to call their children in college or to friends internationally? At what point did someone at Polaroid (who just closed down shop their instant film division) rave about their shiny, new digital camera not realizing it was the beginning of the end for a 60-year run.

There must be tons of examples…

At Web 2.0 Expo, Jeff Bezos made an interesting statement about a recent and early-stage offering, Amazon Mechanical Turk. This new venture will leverage “human intelligence” and their cloud via Amazon Web Services. The specific example Jeff mentioned was leveraging humans to process product pages to eliminate duplicates, as task often difficult where products that are identical but represented differently exist on an e-commerce site.  Another Amazon Web Services example was allowing customers to notify Amazon that a shipment is coming and Amazon would allocate the appropriate amount of warehouse space for the inventory. And then, almost obviously, customers can use the Amazon web services to process e-commerce transactions which would subsequently be managed through top-notch Amazon’s supply chain processes.

Aside from the impressive nature of all three web service initiatives, I am most impressed by Amazon’s approach to extend their business in non-obvious ways. Companies so often move from core competencies to drive future revenue which causes a lack of focus organizationally. I thought this initially about Amazon as well (what? Amazon sells books and goods…they sell books.) until reading further into it.

Here is some additional articles and coverage about Amazon Web Services:

• Amazon Web Services blog
• Artificial Intelligence, With Help From the Humans by the New York Times
• Opening Up to Collaboration by BusinessWeek
• Mechanical Turk explanation by WhatIs.com
• Sold on eBay, Shipped by Amazon.com by the New York Times
• Amazon S3 Reaches 5 Billion Stored Objects by TechCrunch

Amazon moved swiftly beyond selling only books to being synonymous with e-commerce. Very similarly, Amazon is leveraging its strengths such as scalable architecture, e-commerce leadership and supply chain/warehouse capabilities to expand its business once again.

Amazon needs to build architectural transaction capacity to support high transaction volume; why not lease it out to the “cloud” in EC2 to offset expense and make money. Amazon needs to build large database systems to support its business and e-commerce product catalogs; why not lease it out to the “cloud” in S3 to offset expenses and make money. Finally, and arguably the most interesting scenario, is Amazon’s bridging of its off-line and online worlds. Amazon needs to build world-class warehouse capacity and supply chain system support; why not lease it out to the “cloud” (so to speak) and (you guessed it) offset these expenses and make money.

Many may say this is a strategic gamble. However, even if this becomes a break-even proposition to support their core business, it may be enough of a win. And in the long term, Amazon will be controlling a large cloud of information and transactions many other businesses. That is not a bad place to be as the web services model continues to expand and establish itself.