Wise Advice: Evolve

Great insights from the world's e-commerce pioneer - II

Jeff Bezos, Amazon.com

In Part I of this 2 part article (Click Here), we discussed the Amazon way of dealing with change and saw how we can adapt these learnings to our context of the Indian financial advisory business. In Part II, we will discuss 5 more learnings from Bezos and Amazon and see how we can adapt these insights in our business. If you want to build a business that lasts in any market or regulatory context, you would do well to imbibe these lessons from Jeff Bezos.

1. Be stubborn and flexible

That sounds like a strange piece of advice from Bezos. How can you be both stubborn and flexible? When referring to Amazon, Bezos says, "We are stubborn on vision. We are flexible on details."

Sticking to the vision is the first part, and being flexible about the tactics is the second part. Bezos adds, "If you're not stubborn, you'll give up on experiments too soon. And if you're not flexible, you'll pound your head against the wall and you won't see a different solution to a problem you're trying to solve."

Let's go back to what we discussed in part I - we suggested that a core customer proposition that will last for decades is one where you make it simple for your investor to take informed investment decisions. You need to be stubborn on the core proposition. You must never make things complicated in an effort to confuse and therefore boost the perceived value of your advice. You must never take a decision for him, by offering him a standard model portfolio, just because it is convenient and scalable for you. In an effort to boost scale, you must resist attempts that make things simple for you, but not for your customer. That's where stubbornness comes in. Where you need to be flexible is how you serve your clients, how they consume your advice, how you engage with them. The "how to deliver" part needs to be flexible and evolve with time, the "what to deliver" part should remain constant.

2. Obsess about customers

Amazon has for years, set a benchmark in customer service that the world has been forced to adopt and follow. Consumers want choice, and Bezos was stubborn that he would offer them the widest choice. That led to a hugely controversial decision, but one which over time has created a new business model in the e-commerce world. He said that if consumers want choice, they must have the widest possible choice on Amazon - even if it wasn't Amazon offering some of the products. He allowed competitors to advertise on Amazon and sell their products on Amazon. Customers were delighted to get fantastic choice, his team was dismayed by his decision. Customers found no reason to shop anywhere else, and in turn his competitors found it increasingly attractive to sell at Amazon - and pay a commission to Amazon for these transactions. Bezos created what we now know as the marketplace - a model followed by Snapdeal in India and Alibaba in China - a model that will soon be implemented in India for mutual fund distribution as well.

Here is a famous Bezos quote: "We're not competitor obsessed, we're customer obsessed. We start with the customer and we work backwards." If AMCs in India truly adopt this approach, we will have a very different looking product suite, and very different sales strategies.

Here's another one of his quotes: "If we can arrange things in such a way that our interests are aligned with our customers, then in the long term that will work out really well for customers and it will work out really well for Amazon." The entire debate on distributor commission structures in the industry and all the demands for upfront commissions would never have been there, if we had truly imbibed this basic principle.

Amazon implemented a number of ideas which demonstrated that they put the customer's interests first. Amazon noticed that many customers erroneously placed duplicate orders. They implemented a system which warned customers to double check an order that seemed like a duplicate one (based on their recent transaction history), before confirming it. This brought down sales in the short term, but increased goodwill hugely, with great long term benefits.

Beyond what the industry can and should learn from this, what can you do, in your own business, which demonstrates to your customers that all that matters to you is their interest? Lets say you only distribute mutual funds and no other financial product. You know that your clients own other financial products as well. Why not give them all the information they need on all financial products - whether you distribute them or not? Why not provide a ready reference of bank deposit rates across all major banks if that is of interest to them? Why not put out information on all company FD programs currently running? Why not offer policy comparison tables for term and health insurance products, across all providers? Find ways, as Amazon did, for your clients to seek your guidance on all financial matters, whether you intermediate on the underlying products or not.

There are distributors who offer free annual portfolio housekeeping check-ups - where they run an audit on documentation of all investments, to ensure that all changes such as address, bank mandate etc - have been correctly recorded, so that redemption will be smooth and clients will get the money when they need it most. There are distributors who continue to service PPF accounts long after they stopped getting commissions on them. There are distributors who go personally to banks to renew FDs and hand deliver new FD receipts to ageing clients who are relatively less mobile.

There are many ways you can demonstrate to your clients that their interests come first - not yours. Do that, and you will create a loyal customer base that will remain with you, in any market or regulatory context.

3. Start narrow, then diversify

This is something Amazon did particularly well. They started with just one product - books. They built expertise in delivery, in their website, in sourcing - and when they perfected their model and ensured scalability, they effortlessly added more and more products onto the same platform, and now almost sell everything that a consumer needs, online.

If you are growth focused, you may wish to emulate this strategy. If you sell mutual funds today and wish to expand the product suite as well as your customer base, first make your delivery platform robust. Get your team in place, get your online strategy in place, get your service proposition in place. Once all this is done, then expand the product suite by leveraging the same platform.

4. Think long term

In a world obsessed with quarterly profits, and share price targets linked to quarterly earnings numbers, Bezos turned the entire equation upside down. He rewrote the metrics by which he wanted to measure his company - and profits came at the bottom of his list. By reinvesting every cent back into the business for years and years, he built scale that is matched by nobody else, he built a brand and a customer franchise that is everybody's envy and thus built value for his shareholders much beyond what their quarterly profit numbers could ever have delivered. When you think genuinely long term, you almost invariably create much more value for yourself than you could ever have done, if you thought only about next quarter's revenues.

5. Adapt when you go to new markets

When Amazon came to India, it was a global giant, but a newcomer to India. Amazon didn't make the mistakes that many global brands do - of importing their successful global model into India and expecting to replicate the same success here. Each market is different, customers are different. You need to understand your customer if you want to build his loyalty. Amazon understood that few Indians have credit cards and therefore readily went in with a cash-on-delivery model, which is against their global practice. Amazon offers a comparison shopping website Junglee.com, where consumers are able to compare prices across thousands of online and offline sellers. Amazon operates in India on a marketplace model - where they allow competitors to also sell their wares. Amazon has a tie up in place with the Indian Postal Service for delivery in smaller towns where courier arrangements are ineffective. In short, Amazon has launched its offering in India by putting together a judicious combination of processes that it can import and use effectively here, and by localizing processes that cannot be simply copy-pasted. No wonder that Amazon is already giving a run for their money to established Indian e-commerce players and is all set to be one of the leaders in India - despite a late entry.

For distributors who are mulling expanding from their metros into Tier 2 and 3 towns in their vicinity, whether through branch networks or representatives, there are lessons to be learnt from Amazon's experience. Each town is different; customer expectations may be different. Take the effort of understanding the market well and then decide what from your platform can be directly transplanted into this new market and what tweaks you need to make, to be competitive in this new market.

Content is prepared by Wealth Forum and should not be construed as an opinion of HDFC Mutual Fund.

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