Amazon CEO Bezos: AWS is lean manufacturing, Kindle Fire for IT

At the Re:Invent conference in Las Vegas, Amazon chief executive Jeff Bezos explains how its Web Services business model -- and a 10,000-year clock -- embody innovation.
Written by Larry Dignan, Contributor

LAS VEGAS -- Just minutes ago, Amazon CEO Jeff Bezos likened Amazon Web Services to everything from Toyota's lean manufacturing methods to something slightly closer to home: the Kindle Fire business model.

Bezos took to the stage with Amazon CTO Werner Vogels here at the Amazon Web Services (AWS) re:Invent conference, acknowledging that retail is a low margin business and insisting that he's sticking to that game plan with AWS. "High margins cover a lot of sins," Bezos said. "We wouldn't know how to do a high margin business. Low margins keep you aligned with customers."

As a result, Bezos said AWS is very similar to the business model around its own Kindle Fire tablet computer. "We make money when people use our devices. AWS is very similar in that it's a pay as you go business," Bezos said. "Our point of view on this is, if we can arrange things so our interests are aligned with our customers, it'll work out in the long run."

AWS is also akin to Toyota's lean manufacturing methods, Bezos said. Why? Both AWS and lean manufacturing aim to remove defects closer to the source.

This lean manufacturing approach to IT---with AWS as a building block, of course---means application developers and data center costs are increasingly aligned. "The data center has been an information free zone for developers. You write code and you have no idea how much it consumes," Bezos said. "One of the most unappreciated benefits of AWS is that developers get a real sense of what's really driving the cost."

More from his remarks:

What's going to change over the next 10 years? "The more important question is, 'What's not going to change over the next 10 years?'" Bezos said. "The big ideas in business [are] often very obvious, but it's hard to have a firm grasp of the obvious."

Innovation. "Innovation is a point of view," Bezos said. "Being an explorer company isn't for everybody." He added that some companies have competitor-focused mentality and plan around beating rivals. Bezos said Amazon's goal is to bring people on board who want to innovate and invent.

But innovation isn't always fun. "You also have to have a willingness to fail and be misunderstood for a while," Bezos said. "If you never want to be criticized, for heaven's sake, don't do anything that's new."

Bezos added that successful invention revolves around things that appeal to customers. You need more experiments at a high rate. You have to change to increase your rate of experimentation. AWS is an enabler to help customers experiment faster, Bezos said.

The biggest surprise with AWS. Bezos said its growth rate is most surprising. "To see so much traction among government, education and enterprise are a huge surprise for me," he said.

Consumers are driving companies. "If you have a business model that relies on customers being misinformed, you better start working on changing your business model," he said.

The secret sales sauce. AWS is not winning via an army of sales people, Bezos said; it's doing well because it's lean, has good pricing and is reliable.

Startups. To use a baseball metaphor, it's still early innings of what the cloud can bring to innovation and entrepreneurs, Bezos said.

Enterprises and startups are the same audience. The customer needs of both parties are not that different. "Everyone wants low costs, reliability and innovative services," Bezos said.

Netflix as rival and customer. Amazon and Netflix are video rivals, Bezos said, but it doesn't matter. "We put just as much care into Netflix on AWS as we do Amazon retail. We may compete on Prime instant video, but we bust our butts every day for Netflix on AWS," Bezos said. "The whole point of what we are doing is to standardize that layer. Amazon retail gets the benefit of standardizing that layer. Customized things don't work as well."

A 10,000-year clock. Bezos wants a 10,000-year clock developed to symbolize long-term thinking. It should be carved in the side of a mountain and have five anniversary chambers, Bezos said. The fifth one goes off at the 10,000-year mark.

Blue Origin. Bezos' side project aims to create reusable vehicles for space travel. It also happens to be an AWS customer. If we're going to be a space traveling race, we need to practice, keep costs low and do it safely, Bezos said. The aim is to democratize space travel. 

Advice to entrepreneurs. Never ride the hot thing, Bezos said. "You have to wait for the wave and make sure it's something you're passionate about," he said. "Missionaries create better products, and I'd take a missionary over a mercenary any day."

More re:Invent coverage:

Amazon Web Services launches Data Pipeline, EC2 instances for analytics | Amazon's Vogels: Next-gen IT architectures need to be 'cost aware' | Amazon Web Services: Rackspace's OpenStack low on customers' radar | Amazon Web Services launches Redshift, datawarehousing as a serviceAmazon Web Services cuts S3 prices, knocks old guard rivals | BitYota launches, eyes data warehousing as a service | NetApp, Amazon Web Services set hybrid cloud storage pact

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