Amazon is a good example of technological leapfrogging

Technological leapfrogging is rooted in the Schumpeterian concept of creative destruction, which in turn is derived from the conceptual repertoire of Karl Marx work on economic theory. More clearly, the concept defines the companies that are having a dominant position in a certain market, benefiting from the status quo and from the ownership of already established technologies so that they are left without incentives to innovate. On the other hand, leapfrogging takes place when a company introduces disruptive innovation in the market, taking advantage of the temporary inability of the incumbents to mobilize its resources in order to quickly respond to the organization`s environment threats. In the management literature there can be found plenty research papers on organizational ambidexterity, concerning the ability of companies to exploit their core competences in the same time with exploring their business landscape and innovate (Birkinshaw, Gibson 2004). This fundamental notion of ambidexterity can actually address why some companies get stuck in their path dependency behaviour. There are various reason why and how companies adhere to technological leapfrogging. The major factor is of course technological advancements, but other ones as cultural shifts and governmental support can play a role in this process in some countries(Gray, Sanzongi 2004). Also pursuing an international strategy can become a favourable context for using this kind of technological strategy (Athreye, Godley 2012). More or less, there are a few components of the strategy that must be pursued by a new entrant, in our case Amazon who launched the original Kindle in 2007, and are described thoroughly by Marissa Schiller in her article Technological Leapfrogging. Lessons from the US Video Game Console Industry: create a technological gap, build installed base and availability of complementary goods and shape perceptions and expectations through signaling. Assessing the activity of the American online retailer we can identify similarities with the three tenets listed by Schiller. First of all, Amazon developed a set of skills and know-how from its core activity, having a powerful advantage in understanding the online business industry.

The technological assets of the company created a competitive advantage in the sector that could considerably ease a lot of the financial constraints facing such businesses and the acquired portfolio of expertise and aptitudes soon could be translated into other market opportunities, for example the book publishing industry. The technological gap was created by the aforementioned array of core competences retained by Amazon.com, surpassing the publishing houses that were classically retailing hardback an paperback editions. Those companies needed to heed the new trends that reshaped the dynamics of their business environment in order to mitigate the effects on their market position. The second strategy incorporated into technological leapfrogging and described by Schiller is „build installed base and availability of complementary goods”. Amazon is one of the company that can be given as an example in pursuing such a strategy. For example, the company has direct partnership with the book authors. The acquisition of a Kindle gives you the possibility to access an enormous virtual library with thousands of books (complementary product strategy). The online retailer’s policy resembles with the one pursued by the major radio equipment manufacturers a couple of decades ago, selling the radio devices at a low margin but getting the bulk of their profit from broadcasting programs (Leblebici et al. 1991).

At the launch of the new Kindle Fire, the business analysts were commenting Amazon is selling the Kindle Fire at an estimated $10 to $20 loss per a unit to encourage tablet adoption by the less affluent segments of the population, as they believe this will increase their content consumption and encourage more online purchasing and drive demand for their Prime services and e-commerce business. The „building of an installed base” is followed by shaping „perceptions an expectation through signaling”. To be more rigorous, signaling is described by one party, also called agent, conveying some information about itself to other parties (Spence 2002). Having a brief look at the marketing campaign following the release of the Kindle, there can be observed that the dot com company wanted to send a clear message to all the potential customers;the product itself has appended a large pool of reading materials that can be accessed and downloaded using this device. To conclude we can say that the Amazon.com business model was designed to tap the consumer needs of flexible and cheap shopping opportunities. Amazon itself as a company can be regarded as one of the most successful survivors of the dot com bubble burst at the beginning of the the 21st century. The Seattle based multinational created a well- built reputation in the industry and has all the characteristics of a company that employed successfully a technological leapfrog.

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