How Amazon innovates in ways that Google and Apple can't

Amazon has shown a remarkable ability to succeed in a wide variety of different product categories. That’s a contrast to most other high-profile tech companies that are really good in one area but struggle when the quest for growth pushes them outside their zone of core competency.

Amazon has figured out how to combine the entrepreneurial culture of a small company with the financial resources of a large one. And that allows it tackle problems most other companies can’t.

Google’s approach — solve the hard technical problems first, worry about the business model later — is rooted in the engineering background of Google Founders Larry Page and Sergey Brin. In contrast, Amazon CEO Jeff Bezos spent almost a decade working for several Wall Street firms before starting Amazon — a background that gives him a more pragmatic outlook that’s more focused on developing products customers will actually want to pay for.

A key factor in making this work, Ries says, is that experiments start small and grow over time. At a normal company, when the CEO endorses an idea, it becomes a focus for the whole company, which is a recipe for wasting a lot of resources on ideas that don’t pan out. In contrast, Amazon creates a small team to experiment with the idea and find out if it’s viable. Bezos famously instituted the “two-pizza team” rule, which says that teams should be small enough to be fed with two pizzas.

Bezos has worked hard to make Amazon a modular, flexible organization with a minimum of company-wide policies. That has made Amazon’s internal culture somewhat chaotic and balkanized. An engineer on one Amazon project can’t easily jump to another the way they can at Google or Apple. Friction between teams with different cultures may explain why some people find Amazon a stressful place to work.

But this chaotic culture is also hospitable to innovation. A new team can use the tools and processes that make the most sense instead of feeling pressure to conform to company-wide standards.

But acquiring fast-growing startups is a very expensive way for a big company like Google or Uber to stay on the cutting edge. And in many cases, this strategy doesn’t even work. Google’s $2 billion acquisition of Nest was supposed to accelerate the company’s growth, but instead the company has struggled under the Alphabet umbrella.

This is what makes Amazon’s evident success at nurturing entrepreneurial projects internally so significant. Amazon doesn’t need to rely so heavily on expensive and risky acquisitions because it has developed a system for nurturing entrepreneurial projects internally. And as technology invades the real world, there are going to be more and more opportunities for these kinds of entrepreneurial projects.