Amazon's Squat Little Robots
Right now, at an Amazon fulfillment center near you, squat little robots are carrying your holiday presents like elves.
They are moving about on a grid, making way for other robots along small highways. When they get to their warehouse quarry, they spin beneath the target totes like barbershop chairs, lifting entire stacks of shelves.
Once these bins of products are mounted on their powerful torsos, they glide back across the warehouse and into a queue of other robots waiting for their turn with a human. The human reaches the length of their arm, grabs one of your presents, and blisterpacks it into a cardboard box.
Right now this is happening. Hundreds of thousands of items.
These robotics are a small miracle of innovation that saves warehouse pickers miles of walking, increases their job satisfaction, and allows Amazon to keep 50% more stock in its fulfillment centers.
The origin of this innovation tells a tale of two companies, one failed, the other the most famous retailer in the world. There's a lot to learn about business strategy from the innovation here.
From the Ashes of Webvan
The Amazon robots are the Phoenix to rise from the ashes of Webvan, the failed online grocery retailer of the late 1990's.
Webvan burned through a capitalized value of $1.2 billion dollars while increasingly frustrated customers in ten major American cities unpacked bruised fruit, melted ice cream, and voted with their feet, abandoning the company. Webvan's shocking demise is, probably, the most spectacular flame-out of the dot-com era.
On its own, it is a cautionary tale - but it also contains the seeds of wild innovation and technological genius.
Mick Mountz and the Problem That Nagged at Him
One of the executives of Webvan, Mick Mountz, realized during his tenure at Webvan that the cost of fulfillment in his warehouse was eating their margins alive. Every customer's grocery list took too long to gather, was too prone to error, and cost too much to pack. With Webvan's breathless expansion into major urban markets, the problem grew with scale, until the company blackholed in the gravity of negative margins.
But even after the bankruptcy, this problem of the fulfillment center nagged at Mountz. As he explains in a riveting TEDx Boston talk, he couldn't see any online grocer ever turning a profit with the pickers walking 10 miles a day to collect items. Not with the frighteningly low margins of grocery stores.
What he needed was for the groceries to come to the pickers. The only way things would ever work was the dream scenario of a stationary picker stretching their hand out and receiving each item in turn automagically.
This was an absurd idea, of course.
Until it wasn't.
Kiva Systems and Revolutionary Insight
Mountz had an insight, and he founded Kiva Systems (now Amazon Robotics) to realize it. He envisioned the jaw-dropping robots that now animate every Amazon fulfillment center in the country, intermittently sipping on their battery chargers and scurrying in "hives" around magnetic flooring grids. Mountz made this revolutionary dream real and then sold it to Amazon for nearly $800 million dollars. That's an actionable insight with an eight and a whole lot of zeros.
This holiday season, at this very minute, Mick's robots queue and scoot and lift and tug like little elves, and undoubtedly something you open this season - if not everything you open - will have a little bit of elf in it.
Thank you, Santa.
The Bartlett System's Value Wheel
At The Bartlett System we help our clients face the opportunities and challenges of their businesses in two fundamental ways. Everything we do to help clients build a powerful analytics strategy revolves around two central concepts: Value and Friction. You'll see them in the center of the graphic below. These ideas focus every other activity in the Bartlett System Value Wheel.
They are the axle around which the Bartlett System revolves.
The Bartlett System's Idea of Value
In The Bartlett System, Value is a relationship-centric idea. It is found in the value proposition for customers as well as value created for employees, partners and vendors. It's the idea that all of the interactions of a company that create real value are based on satisfying human relationships.
Without creating value in relationships your customers leave, employees move on, partners grow frustrated, and vendors go elsewhere. Value creation has a practical purpose, but is also creates meaning for the organization and its individual employees.
And we all want to matter. The only way to really matter is to create value in our relationships.
We believe - and strongly - that it's that simple.
Businesses need to create value.
The Bartlett System's Idea of Friction
Friction, on the other hand, is the inexhaustible set of challenges that present themselves in the process of value creation. There is Friction in all systems (it takes too long to pick the groceries). There is Friction in employee relationships (they love the job, but the hours are too long and the pay is too low). Etcetera.
When one point of friction is removed, another one will take its place immediately (imagine little robots lining up with packages of Friction for their human picker).
Similarly, when one point of value is satisfied, another possibility for value creation emerges. Creating Value and Mitigating Friction are open-ended, iterative quests.
Businesses exist to tackle them.
CEO KPIs and Analytics Strategy
Now which value and friction points are targeted is the function of the company's strategy and the business model. The leadership, particularly the CEO, own this problem.
Similar businesses will provide different values in their relationships and, consequently, encounter different friction points. Deciding at the highest level of the organization what to prioritize, makes meaningful optimization and even radical innovation possible.
An analytics strategy and innovative technology should always be brought to bear in service of creating Value or decreasing Friction. It is the leadership's responsibility to define these (clearly and simply) and then let the innovators and optimizers solve for them.
In the data strategy world, actionable insights flow from this iterative proactive prioritization. When focus isn't defined at the top, every part of the organization works its own departmental priorities, stretching valuable resources thin, cannibalizing other parts of the business, and undermining business models.
Mick Mountz identified the most critical value and friction points in Webvan's failure: the cost of picking was unsustainable. The effort required by workers was overwhelming and stressful. Some workers trekked up to 10 miles every day. If any online grocery retail was to succeed, like ever, these frictions needed to be addressed.
And then, ultimately, they were.
Thank you, Mick.
These are the droids we were looking for.
Webvan's Coppy Holzman on Lessons Learned
Coppy Holzman, one of the VPs at Webvan confessed that Webvan was too interested in the value created for investors. It will be a small heresy for most, but investor value is not one of The Bartlett System's strategic priorities. Investors are rewarded by value creation that scales.
The Street might focus on the financial outcome from the black box of a company, but the leaders of the company need to focus on what's inside their black box.
"We should have grown slowly and focused on our customers," Holzman confessed later. In other words, Webvan should have focused on the Value for customers and the Frictions inherent in their innovative, but struggling business model.
Your Christmas Present
Your holiday present from The Bartlett System is our free CEO Playbook. Enjoy and reach out if you have questions on our system - or simply want to think out loud about the strategic challenges you are currently facing.
And you can make our Christmas by subscribing to this blog (at upper right) or sharing it with your colleagues (at the tip top).
Happy Holidays! See you in the new year!