ENT20005 | Management | A Case Study on Innovation in Amazon

1. Choose an organisation.

 

2. Research the hot topics about innovation related to this organisation.

 

3. Then develop an innovation management action plan based on the criteria below.

 

4. Assuming you have the opportunity to make an elevator pitch to the CEO of this company, what would you say? Make a short pitch directed at the CEO that references your report. 

Introduction:

Innovation can be defined as development of   a new idea or product to serve an emerging need in the market. Sisodia (2016) mentions in this respect that innovation has emerged as one of the most important drivers of sustainability in the global industry. The ecommerce industry is one of the most innovative industry in the world led by multinational ecommerce companies with immense financial and technological base to bolster their innovations. The paper would delve into an imaginary innovative product which would be owned by none other than Amazon, the largest ecommerce company in the world. An exploration of three topics regarding the company would set the background of the study.

Part 1. Three hot topic about innovation in Amazon:

Hot topic 1: Free Food isn’t enough—How Amazon beats Google in Innovation:

The article published in the Forbes magazine sets the perfect stage for the study by comparing between Amazon and Google on the parameter of innovation. The article mentions that the innovation score of Amazon is 166.3 compared to 95 achieved by Google (Forbes.com, 2018). This innovative power of Amazon can be attributed to the power of the company to base its innovation on customers’ needs and employ experts for short span of time to utilise their talents. 

Hot topic 2: Amazon's arrival set to shake up Australia's retail sector:

The second article taken into account was published by The British Broadcasting Corporation and advertises Amazon’s power to influence its competitors even in market where ecommerce giant enters newly (BBC.com. 2018). The article points out that when Amazon declared its intention of entering the Australian ecommerce market, the share price of resident Australian retail chains dipped. This dip shows that ecommerce is not only capable of influencing the revenue generation of its competitors but also their capital generation.

Hot topic 3: Amazon’s Third-Party Sellers Hit By Hackers:

The article containing the aforementioned title was published in the Walls Street Journal and points out the darker side of ecommerce business of Amazon, cyber theft. The article mentions that hackers are targeting the third party sellers of Amazon and stealing the financial resources by making fake deals. The article further mentions this data theft is detrimentally effecting the brand image and customer satisfaction of Amazon (WSJ.com, 2018).

Part 2. Idea for an innovative product:

The innovative product which Amazon would develop is a secured payment gateways. The gateway would require the customers put in their identity details in order to enter the portal of Amazon. The portal would only allow customers carry on further functions like ordering of items subject to the authentication of the details by specific government body which had issued the identity proof whose details have been used. The payment gateway would enable customers make payment secure and reduce cyber theft. It can also be pointed out that the product portfolio of Amazon is vast consisting of both consumer goods as well as industrial goods. Thus, the innovative payment gateway would provide security of payment to both domestic consumers and industrial consumers. Thus, in other words the payment gateway would be totally aligned with global product portfolio of Amazon.

Part 3. Streamlining of innovation with current capabilities of Amazon:

The new innovative payment system is perfectly aligned with the current capabilities of Amazon. Wang, Li and Wang (2015) point out that in order to take maximum advantage from innovations, business organisations have to align their innovations with their business capabilities. As far as Amazon is concerned, the ecommerce company operates in more than a hundred countries either directly or through third party retailers which distribute Amazon products (Amazon.com, 2018). The third party payment gateways are already under threat of hackers (WSJ.com, 2018). Moreover, the ecommerce is already spreading its direct presence in the global markets by entering markets like Australia (BBC.com. 2018). The ecommerce giant is also required to maintain its global position as the top innovating company in order to retain its top position even in new markets like Australia (Forbes.com, 2018). This clearly shows that the payment gateway would secure the company and its customers from cyber thefts.

Body:

Design thinking for the innovation:

The innovative product which Amazon would be introducing in the market would be highly advanced payment gateway which would enable Amazon encounter data theft reported in the third articles. The payment gateway would be linked to Amazon, government and banks. Whenever a customer would attempt making payments, the new portal would require the customers to fill up their basic details as per an identity proof. The customers would be required to input his identify proof details like any number of any document issued by national government. The website of Amazon instantly would send an authentication mail to the authority issuing the identity proof whose number have been mentioned. The customer can shop online and make payments only after the auto generated confirmation from the government body is received. The customers would not be able to access the products of Amazon if the confirmation from the concerned government authority does not come. The third party retailers and firms using the payment gateway would have to input their respective employer identification number issued by the Internal Revenue Services (Irs.gov, 2018). The payment system would enable Amazon and governments track the ecommerce usage as well as identify hackers. This innovation would enable Amazon to secure its third party sellers and boost its customer satisfaction in new markets as pointed out by the third and second articles respectively.

Figure 1. Diagram showing working of innovative payment gateway of Amazon

(Source:Author)

User involvement:

The new innovative payment gateway would require involvement of the users to attribute it with success. Amazon should promote the payment gateway and its features on its official website. This would create awareness among both the industrial consumers and the domestic consumers. The company then should educate the consumers about the advantages of using the payment gateway. The consumers should be educated about the increasing online cash thefts and the need to use a more secure payment gateway. Thus, the company instead of forcing the gateway upon consumers should create awareness among the latter. This would create a more natural acceptance among consumers about the highly secured payment gateway. The consumers would also start using Amazon payment gateways to make more purchases in order to enjoy high level of payment security. The highly secured and innovative payment gateway due to its high level of security would also enable the ecommerce giant attract customers of other ecommerce companies. Thus, user involvement would enable Amazon attract more consumers and receive more orders online. This would boost its sales of products and boost its revenue generation. This enhanced security would boost the brand image of Amazon in the market as an ethical and customer centric organisation. This strong corporate image would boost the share price of Amazon shares and enable the ecommerce giant to attract more capital. Thus, the innovative payment gateway would boost both revenue and capital generation of Amazon.

Figure 2. Cycle showing customer involvement in new payment gateway and business outcomes

(Source: Author)

Fast integration-time, cost and resources:

The time required for Amazon to develop the innovative and high security payment gateway would be around two years. This is because as shown in figure 1, the payment gateway would require approval from the Government of the United States of America on one hand and approval of the participating banks on the other. Similarly, Amazon would require to initiate a pilot project to develop the payment gateway and require consent of the shareholders. The project initiation stage of the project would require the company conduct a financial and technological feasibility of the gateway. Then it would also require formation of a high level supervisory board and project team to oversee the payment gateway project. This would be followed by project planning and acquisition of the resources like software and manpower. The company may be required to conduct open innovation with third party firms. The next process would execution of the project followed by project closure. Amazon would also have to monitor and test the actual benefit of the innovative payment gateway both profit wise and security wise. Thus it is evident that Amazon would require to invest immense amount of cost towards development of the innovative new gateway. The following are the resources and cost structure of the high security payment gateway.

Resources	Cost type(variable, semi variable or fixed)($)
Technological
Software	Variable
Hardware	Variable
Manpower
Own manpower(salary+project related payment)	Semi-variable
Contractors	variable
Engineers and experts	variable
Open innovation partners	Fixed
Financial resources
Loan from bank	Fixed
Interest on loans	fixed
Laboratories	Fixed
Employee training facilities	Fixed/variable
Stationary	variable
Conference facilities	Fixed

Prototyping and testing capabilities:

Prototype:

Amazon should release a prototype of the payment gateway in its home market, the US to test its capability in securing payments. The prototype should enable the customers to make payments securely and fast. The company at a later stage can expand the prototype of payment gateway into selected markets where it has high level of operations. The selected countries can be Canada, Europe and Asian nations like China and Japan. Amazon should avoid releasing this prototype in very poor markets with low level of technological development. The company should also limit the access to the payment and its control to itself. The company at a later stage can expand the security level of the prototype. The extension of security level can consist of receiving confirmation from banks as well especially while processing payments of high value. Similarly, the innovative payment gateway can enable sending instant message to banks and police in case of any failure of identity authentication. This would enable the police and the banks track the specific customers. This would enable efficient tracking and reducing of cybercrime.   

Testing capability:

Amazon should test the actual capability of the payment gateway in ensuring secure payment. The company can attempt proxy hacking into the gateway and record the actual number of successful hacking as well as hackings tracked.

Testing	No of successful hacking	Hacking tracked
1	0	1
2	1	1
3	0	0
4	1	1
5	1	1
6	0	0
7	1	1
8	1	1
9	0	0
10	0	1
Total	5	7

The above table shows a model test of capability of the innovative hacking gateway.  1 means successful while 0 means failure. The above table shows that out of 10 attempts, 5 are successful while 3 are not traceable. Now, if the minimum success rate is decided at 6, the test fails by 1 mark. Thus, this shows that the innovative gateways fails the quality test.

Cross functional management:

The departments of Amazon should collaborate to development the payment gateway. The apex management should first form a plan to conduct the project and ensure participation of all departments. The finance department should allocate sufficient funding towards the project. Similarly, the marketing department should take the responsibility of involving the customers in the process. The technological department should submit reports regarding software which have to be acquired from third party. The apex management of Amazon should hold meetings with the government bodies both in federal and state level. The shareholders should be involved and their consent should be acquired. Similarly, the lower level employees should also be involved.

References:

Amazon.com. (2018). Retrieved from https://www.amazon.com/s/ref=nb_sb_noss?url=search-alias%3Dfashion-boys-intl-ship&field-keywords=

BBC.com. (2018). Retrieved from https://www.bbc.com/news/business-42233752

Irs.gov. (2018). Retrieved from https://www.irs.gov/payments/view-your-tax-account

McMillan, L. (2018). WSJ.com. Retrieved from https://www.wsj.com/articles/amazon-coms-third-party-sellers-hit-by-hackers-1491816600

Mourdoukoutas, P. (2018). Forbes.com. Retrieved from https://www.forbes.com/sites/panosmourdoukoutas/2018/05/03/free-food-isnt-enough-how-amazon-beats-google-in-innovation/#4a60d96d2075

Sisodia, S. (2016). Identification of growth driving factors for ecommerce 2.0 at Tata unistore ltd. NIFT.

Wang, S., Li, P., & Wang, Y. (2015, June). How do IT Competence, Organizational Agility and Entrepreneurial Actions Coevolve: The Case of Entrepreneurial Etailers on Ecommerce Platforms. In The Fourteenth Wuhan International Conference on E-business.