198. Bezos Switched From a Dead-End ERP System. Will You?

Back in 2002…

…..Amazon hit an enterprise, IT, dead-end. Their IT system could not handle the silos of people who were handling exploding numbers of- SKUs, categories, orders, acquisitions, etc. – all sold through one homepage.

Jeff sent out a now-famous – “API mandate memo” (Application Program Interface)- explaining how the entire business would be re-built around API building blocks in the cloud. Every activity and team interaction would be done through APIs. Humans doing transactional activities don’t scale. API, lego-block functions (and micro-services like one-click buying) do.

The change was a grind, but it enabled unlimited scaling of everything at zero marginal cost. It also made Amazon Web Services a new-business possibility in 2006.

Today, most everything at Amazon runs on APIs governed by ever-smarter, AI Bots. And, thanks to – massive clickstream, cheap computing and Machine Learning – experimental learning is also scaling.

AMZ people still do: customer service; warehouse picks that robots can’t; and package delivery (via partners).

No one in legacy distribution channels will ever catch or match what AMZ is doing ever better. (So: partner them carefully; minimize what they steal; and innovate differently.)

Distributor ERP “Solutions” Aren’t Enough

For 500+ years, distributors’ people-powered activities have persisted. In spite of ERP systems’ internal automation, people still do their silo activities.

Data from an ERP must now get into a digital, cloud platform to access micro-service flexibility and instant speed to market. Confusing? Get the book: Competing in the Age of AI. Management should read Ch. 4. And, your digital Champion should report on the entire book.

Who Else Has Switched to API Architecture in the Cloud?

Amazon was the first by far. Home Depot’s omnichannel plans have been slowed trying to make this big switch. But, HD will get there along with their $1.2B in new DCs. And, by 2023, IDC predicts that “Digital Enterprise First” players will be dominating the internal, ERP, IT-silo crowd.

Have First, the Profits and Agility to Invest in “Digital Transformation”
Most distributors have not measured and managed both order size and cost-to-serve. Upon subscribing to a Net-Profit Analytics service (www.waypointanalytics.net), they discover that 50%+ of their customers are unprofitable. You can’t innovate burdened down by losing busy-ness.


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