Business

How new CEO Andy Jassy can follow in Jeff Bezos’ footsteps

Written by Administrator


As Amazon CEO Jeff Bezos prepares to leave the planet in the coming weeks in a rocket built by his spaceship company, he’s handing the reins of his e-commerce business — the country’s second-largest employer — to Andy Jassy, 53, a loyal lieutenant who spent 24 years by his side.

Jassy, the former head of Amazon Web Services, began his first day as Amazon’s CEO on Monday. He has been with Amazon since 1997, just three years after Bezos founded what was then an online bookstore from his home in a Seattle suburb on July 5, 1994.

The business has ballooned into one of the most powerful companies in the world, alongside the oil giant Saudi Aramco and the tech monolith Apple, with a valuation of about $1.8 trillion. It has also propelled Bezos to the top of the list of the world’s richest men and made him one of just eight centibillionaires in the world, with a personal fortune of close to $200 billion.

Leading Amazon, with over 1.3 million employees worldwide and $386 billion in revenue last year, would ordinarily be a daunting challenge for anyone. Business is booming — but so is scrutiny as the company faces a slew of regulatory obstacles and unionization efforts that would test the mettle of any CEO.

“It’s very important to have a company be larger than the charismatic or well-known celebrity CEO,” said Barbara Kahn, a professor of marketing at the Wharton School of Business at the University of Pennsylvania. “Having a very good succession plan is absolutely relevant for the longevity of a company.”

Jassy can expect serious regulatory hurdles from Congress and the Federal Trade Commission, or FTC, in the coming months, and Bezos has built a formidable team to support him. Amazon spent nearly $19 million on lobbying last year, second only to Facebook among corporations, according to an analysis by Public Citizen, a watchdog group that tracks spending in politics.

Jassy will also have to navigate the unions and workers who are trying to organize Amazon’s massive delivery and logistics workforce while its retail division continues to grow at a breakneck pace. Amazon is expected to account for about 40 percent of all U.S. e-commerce sales by the end of the year.

That’s all in addition to the company’s booming online advertising business; the streaming social and gaming network Twitch, which Amazon owns; its Whole Foods grocery division; Amazon Prime’s video streaming and entertainment production arm, which now rivals Netflix; and its growing interest in opening brick-and-mortar retail businesses — like its first Amazon Salon, which opened in London this year.

“Amazon is a complex web of businesses that are very intricately linked together,” said Sunil Gupta, a professor at Harvard Business School, where Jassy received his master’s degree in business administration.

“Amazon Studios and streaming helps it keep the Prime subscriptions, which helps drive its e-commerce business. To manage the complexity of the business and break these silos, you need a CEO that can hold it all together,” Gupta said.

Regulatory battles

Last month, the House Judiciary Committee voted to advance a suite of six antitrust bills to curtail the power and size of big tech companies. One of the bills would strengthen antitrust agencies by collecting additional fees on some mergers. Another would restrict companies like Amazon from competing with other sellers on its own marketplace, meaning Amazon would be barred from selling its own brand of phone chargers on Amazon or Apple would be prevented from selling its own apps in the App Store.

The bills are a result of a 16-month bipartisan investigation by the antitrust subcommittee of the Judiciary Committee. Still, Brian Huseman, Amazon’s vice president of public policy, said in a statement that the bills were pushed forward too quickly. “More than a half million American small- and medium-sized businesses make a living via Amazon’s marketplace, and without access to Amazon’s customers, it will be much harder for these third-party sellers to create awareness for their business and earn a comparable income,” Huseman said.

The bills, which were sparked in part by Amazon’s business practices, would fundamentally rewrite U.S. antitrust laws. Jassy has some experience working with government agencies as Amazon Web Services rose to become a prominent military and government contractor, but antitrust policy is likely to be new terrain.

The FTC’s new chairwoman, Lina Khan, has also spent a significant part of her academic career studying and criticizing how Amazon’s dominance has harmed new markets. The agency is investigating Amazon, and it is likely to review its proposed acquisition of MGM, the Hollywood TV and movie studio. Amazon filed a petition last week asking Khan to recuse herself from antitrust cases that affect Amazon because of her previous work.

The bills and regulatory scrutiny could also lead to antitrust hearings for Amazon, which have been time-consuming for CEOs of technology companies, Gupta said, pointing to the hearings Bill Gates weathered when the Justice Department sued Microsoft alleging monopoly practices 20 years ago.

Unionization efforts

Jassy will also have to contend with the massive workforce that powers and undergirds its e-commerce empire and has attracted the attention of major unions, including the Teamsters, one of America’s largest labor unions. The Teamsters last month shared plans to launch a nationwide unionization effort at Amazon warehouses.

Workers have long alleged grueling and unsafe labor conditions in Amazon’s warehouses, where the turnover rate among employees is about 150 percent. Under Bezos, Amazon aggressively fought organizing for nearly a decade. The company successfully opposed a major unionization effort in Bessemer, Alabama, this year by hiring outside companies to help it quash the union drive. The outcome of the vote is being challenged; the National Labor Relations Board held a hearing last month at which workers alleged retaliation for holding pro-union views.

Amazon’s director of media relations, Kelly Nantel, said in a statement that the union isn’t accepting the workers’ decision and instead “seems determined to continue misrepresenting the facts in order to drive its own agenda.”

In a letter to shareholders in April, Bezos said the company needs to do a better job ensuring its employees are successful. “We have always wanted to be Earth’s most customer-centric company,” his letter read. Now, he said, that vision should be expanded. “We are going to be Earth’s best employer and Earth’s safest place to work.”

Marketplace problems

Experts said Jassy will also have to deal with disgruntled sellers on its marketplace, where the company has been accused of culling data from third-party sellers on its platform, which it then uses to make its own versions of the same products, said Sucharita Kodali, a vice president and principal analyst at the research firm Forrester. While some may dismiss the antitrust bills as misguided, citing grocery stores who have sold their own labels of goods for years, Kodali said it’s more complicated.

“It’s one thing if you’re a company like Procter & Gamble and Amazon knocks you off, but when you’re a small business and you have to sell on Amazon because it’s your biggest marketplace and they knock you off, it’s a different equation,” Kodali said.

Amazon says it doesn’t use data from specific sellers to inform its own brands. “Like all retailers, we are able to see what sells in our store, but we strictly prohibit employees from using nonpublic, seller-specific data to determine which private label products to launch,” said Nell Rona, an Amazon spokesperson. Amazon-owned brands “make up a very small portion — around 1 percent of sales in our store,” Rona said.

Kodali said Amazon also appears to inflate the ratings on its own products, which customers then use to decide whether to make purchases.

Dharmesh Mehta, Amazon’s vice president of customer trust, said in a statement that the company removed more than 200 million suspected fake reviews last year and that it takes its “responsibility to monitor and enforce our policies seriously.”

Nonfounder CEOs

From investors’ perspective, Jassy may find it difficult to maintain the consistent growth Amazon had under Bezos, its founder. Except for one or two quarters, Amazon has grown at about 20 percent every quarter, Gupta said.

When tech companies move from being run by their founders to being run by longtime executives, there can be transitional periods when the new chiefs will have to gain the trust of their workers and of the broader public. Gupta pointed to Tim Cook, who took over as CEO of Apple from Steve Jobs, one of its founders, who built a cultlike persona.

“Everybody predicted that Apple would not be Apple anymore. And in all fairness, it took Tim Cook a little bit to adjust, and people criticized that Apple didn’t have much innovation. But the company is firing on all cylinders now, and he’s found his groove,” Gupta said.

Considering that Jassy has been with Amazon for a quarter-century and grew Amazon Web Services into one of the most important internet infrastructure companies in the world, serving customers from Netflix to NASA, experts who watch Amazon closely say he is a smart pick to take over and well poised to maintain the momentum of Amazon’s growth. About 63 percent of the company’s operating profits last year can be attributed to AWS, up by nearly 30 percent over the previous year, according to the company’s financial statements.

“The successor is a very wise choice. Jassy is the one that started AWS, which is the profitable arm of Amazon,” said Kahn of the University of Pennsylvania. “While the retail portion of Amazon might generate a lot of revenue, it doesn’t generate the profits. I don’t think that’s lost on anyone.”


Source link

About the author

Administrator