What Amazon Got Right From the Start

3 Mistakes Disruptors Must Avoid

When Jeff Bezos - the founder of Amazon - started offering books to the public over the Internet, he could have decided to partner with Barnes & Noble or Borders and become their online distributor. They were after all, the Pepsi/Coca-Cola leaders of their industry for that time. Amazon would get a recognizable brand name and perhaps in-store promotions that could drive traffic to their site since few people were using the Internet in 1995.

Cagey as a fox however, Mr. Bezos had a better idea. He would get his books from the same wholesale distributor as the book giants themselves. Thus, he connected with Ingram, tied into their software database and put an HTML interface onto the listings.

Boom. He was in business.

Overnight Amazon became 'the largest bookstore on earth.' Amazon, with no prior retail business infrastructure, focused on blowing past its competitors by offering something they couldn't or wouldn't provide - big discounts and access to more books than any store could possibly offer. And a smart search function that made it easy to find new books in the genre or topic people craved.

At the time, Barnes & Noble mostly ignored the new upstart, giving Amazon a two-year head start. Borders lived to regret how long it took them to recognize this under-the-radar threat. In 1998, Barnes and Noble even tried to slow Amazon down by trying to acquire Ingram. But it was too late to stop the online innovator and the FTC opposed the merger.

Jeff Bezos with Amazon avoided making some of the biggest mistakes first-time entrepreneurs make.

1. If your product or service is core to a large incumbent's business, don't use them as a distribution channel. Even if the large company does a deal with you, they will drop you like a hot potato when they have learned what they need to. Too often they will turn into your biggest competitor- just ask Real Networks, an early innovator in the music streaming business after a deal with Microsoft went sour. An ironclad legal agreement may pay you a few dollars after you sue, but rarely does it undo the damage or turn the clock back.

How to Avoid: Create your own distribution channel, use multiple distribution channels or partner with someone that has a complementary product and no history of cannibalizing or knocking off it suppliers.

2. Beware of customers who just want to have more and more exploratory meetings.

I made this mistake as the co-founder of a breakthrough customer information and billing software company in the utility industry. Wooing, or so we thought, ENRON as a customer, they invited us down for multiple meetings, one right after the other. At one point, they even flew a team of their people up to our offices for workshops, under the auspices of due diligence. What I came to realize later is that it was a business intelligence trip (aka spying mission) to get as many people at Enron as smart as they could on our insights and architecture. Fooled once, but hopefully, never again.

Sadly, I see this mistake again and again when I teach and advise entrepreneurs. It doesn't happen all at once. Sometimes it's just a person in a large company who wants to get smart on new technology or new markets by picking a disrupter's brain, nonstop. They have zero plans to purchase the product, they're just hoping to look smart in their next internal meeting without bothering to tip their hat to how they learned it. The entrepreneur is hopeful a deal will be done and simply thinks the buying process is slow - a deal with the innovator almost never results.

How to Avoid: Get the potential customer or partner to have skin in the game. Ask in the first meeting what the buying decision process is. Only take additional meetings that move along actual purchase decisions. In addition, have them make commitments early on, even if it is only to pay for a pilot, a few licenses or products for new stores with a specific pathway to larger purchase.

3. One more improvement is needed before we expose it to customers. 
It used to be called 'inventor's syndrome' - that one last rev before marketplace release.

When my brother was working on getting Costco to sell fresh flowers, he discovered this great display cart that kept flowers fresher longer. Only the inventor was working on version number 70 (no joke) and was reluctant to distribute it. Gone are the days where software or apps or products (unless it is a medical device) need to be perfect before they interact with customers.

Amazon's first site was black and white, very boring to anyone except nerds, but they launched anyways. An early Amazon hire, Maryam Mohit - now the co-founder ofGemshare - focused on creating the compelling customer service experience we know and love today. Amazon jumped way ahead of everyone in retail e-commerce in part because they didn't wait for the perfect product.

How to Avoid: Produce a rough version of your app, software, product or service and start getting customers to use and pay for it but also pay attention. Listen carefully to customer suggestions and change it accordingly, so they'll fall in love with the product.

Disrupters are the ones that have the courage to plow new or adjacent distribution channels rather than settle for a deal with an incumbent. Don't be afraid to ask for commitment sooner rather than later. And once again: launch and listen. Quickly make the changes needed to create a breakaway success.

Good Luck!

What Other Love Are We Missing Out On?

A few weeks ago I was putting away our holiday cards, the majority of which were photo cards. Some were cute or funny, and others depicted the growing families of some of our closest friends. I wanted the kids to jump out of the card so I could hug them or teach them how to be great Scrabble players.

There was one in particular I just held in my hand and couldn't quite put away. It was a picture of a friend -- an accomplished academic and administrator at one of the top universities in the world -- and his husband and their two children. Two siblings -- one boy and one girl -- both of whom had come to live as foster kids with Jay and his husband, David. And before long, all four were gobsmacked with love, leading them to venture through the long and official process of becoming one big, happy adopted family -- for life.

As I looked at the card, I was struck by all the smiles, the fun, the silliness and the deep care seen by all four of them. There was something really special about this card, something way deeper than the rest. On the backside of the card were pictures of the kids with their grandparents and extended family members, as if they had always known each other. It was meant to be. It was one of the most joyful families I had ever seen. But there was something else that made me want to hold onto this card.

When I spoke to Jay, he said, 'Who would have thought after 50 that instead of thinking about retirement or at least wondering when I was going to take the pedal off the career accelerator, I would instead become a dad." We agreed that the kid chapter was simply the best chapter of our lives.

Yet for me, it was much more straightforward -- I mean, I was raised Catholic, for starters, married and pregnant by my mid-twenties. But the U.S. was a different place back then; even if Jay had wanted all those things, society and the law were not as favorable as they are becoming today. Two men getting married, let alone adopting kids, was simply unheard of.

And who were the big losers? I thought, as I kept staring at this card.

The kids, of course!

And the parents who had so much to give and get from hugging and, yes, even enforcing homework assignments.

But in the grand scheme of things, our communities and country in many ways had been the big losers. And how stupid was that. Almost 400,000 kids in the U.S. are without a permanent family. Globally, almost 18 million children live on the streets or in orphanages -- most of us would weep if our kids were confined to that life.

So, as we prepare our valentines and bake our cakes, as I hold the card a little longer, I think we should look around and ask ourselves: Who today are we not allowing into our hearts and our communities because of fear or uncertainty?

Because traditional families are evolving and, hopefully, only getting better.

What Obama Left Behind in India

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Mobile Money Set to Transform Poor in India

The focus of the media attention during the president's visit was the historic invitation to be the honored guest at India's Republic Day -- a first for the U.S. and a signal of the close and evolving relationship between the two countries. However, what got little notice was something the president left behind, something that will likely contribute to the biggest transformation for the poor in India.

India is a study in contrasts -- deeply spiritual yet stubbornly segregated. It rightfully celebrates one of the fastest-growing middle classes in the world. Still home to 200 million people living in unimaginable poverty and 500 million more not that much better off, there is much that can be done.

Roughly half of Indian households have access to a bank account, and 73 percent of the farmers have no formal credit, robbing them of their ability to invest and build a food-secure future for their family and the rest of the country. The new Premier Modi is laser-focused on changing this reality. He made a pledge to get every single one of the 1.2 billion people living in India bank accounts -- an important step toward prosperity.

Mobile phones are the key.

Almost all Indians own or have access to a phone, including 80 percent of those living at the bottom of the pyramid. If they could use their phones like we use our debit and credit cards, millions of poor Indians could have the tools to become less hungry and more prosperous. Obama and Modi announced an innovative partnership with USAID and the private sector to accept mobile money for purchases and to use it to distribute payments for goods or wages throughout India. Getting private companies to accept mobile money for purchases is huge and an essential part of creating a digital financial system.

There are three things that are needed for mobile money to work:

1. Regulators need to allow people to store money, access bank accounts and buy things using their phone.

Fortunately this week the Reserve Bank of India finished accepting applications, which will allow a new kind of banking license to enable just this kind of opportunity with mobiles. Among those applying included the largest mobile operator in India,Bharti Airtel. The Reserve Bank of India will soon start issuing these licenses, also ensuring that adequate consumer protection rules and anti-money-laundering rules are in place.

2. Cash needs to start moving in and out of digital wallets.

Big payment providers, like governments that issue social-welfare and pension-benefit payments, banks, microfinance institutions and business networks like SAP, need to send money directly to digital wallets like they do in the U.S. to direct-deposit bank accounts. That way a network of mobile-money outlets where people can get and send money will spring up and have the cash when and where people want it. Don't think machines but people at village stores or kiosks in the city, creating the most extensive ATM network. These big payers are the essential "anchor tenants" of the mobile-money mall.

3. People need to have places they can use their digital cash.

If people receive money on their phones but then immediately take out the cash, it will cause huge liquidity problems for the local kiosk, the mobile operator and the banking system nationally. People need places that accept mobile money for payment of goods and services. Think stores that accept credit cards, only this time we are talking about stores accepting mobile money from your phone and a PIN.

This is where Obama, USAID and the private companies that are part of this partnership come in. Companies like Procter & Gamble agreed to work with the stores and distributors that carry their products in India to accept mobile money. So when an Indian wants to buy soap or make a loan payment, they can do it with their phone. Snapdeal.com, India's largest online marketplace with over 20 million users, is part of the partnership to make mobile money a reality. Buying something online from your phone? Punch a few buttons and use the money in your bank account. That's how easy it will be.

In the last thirty years India has dropped its rate of poverty in half from 60 percent to 33 percent. Mobile money and digital payments will take it down further alongside collective action and key partnerships. This push for the incorporation of mobile money will be the biggest key factor for the poor to leap forward.

These recent commitments by major companies, banks, mobile-network operators, e-commerce sites and more across six identified categories to building a shared infrastructure could potentially drive India's middle class to exceed the estimated 40 percent by 2027, which could result in the transformation of its current poverty landscape for the better. A rising middle class in India helps alleviate global poverty and create larger opportunities for U.S. companies' products.

What Obama left behind in India will be a giant step toward not only financial inclusion but eradication of poverty.