California Investment Network


Recent Blog


Pitching Help Desk


Testimonials

"Our small, early-stage company recently signed up for your service. We got numerous inquiries, several of which we are pursuing, and hopefully will find an investor partner as a result. It is almost impossible for young companies to attract investment capital in the current financial climate, but you managed to bring a number of qualified and interested parties to the table. I would recommend your service to any early-stage company seeking capital. Bruce Jones, CFO "
Bruce Jones

 BLOG >> Recent

Amazon Lessons [Growth
Posted on February 22, 2018 @ 05:15:00 AM by Paul Meagher

The Amazon is the largest river in the world. One of the reasons Jeff Bezos named his company after this river is because he intended his original online bookstore to be the biggest in the world.

Today I want to explore what it takes to be the biggest river in the world. I'm sure Jeff Bezos understands perfectly well why the Amazon is the biggest river. It is possible that he is using this knowledge to scale his own company.

One of the main reasons the Amazon river is the largest river in the world is because it has a Strahler number of 12. A Strahler number is a way of classifying streams based on the number and size of tributaries that feed into it. It is easiest to understand this numbering system by seeing an example:

The number assigned to a stream segment only increases when 1) two streams join, and 2) the number of both these rivers is 1 less then the stream they combine to form. When you get to the end of the Amazon river, adding a small tributary with Strahler number 1 does not increase the Strahler number of the river. It is only when two massive streams with Strahler numbers of 11 combine that the Strahler number of the ensuring stream becomes 12.

In the early days of Amazon the company, it grew by adding hard to find books to its inventory. Alot of small revenue streams from book sales fed into Amazon. Now that Amazon is a huge company, adding small revenue streams makes very little difference to its revenue flow. To grow significantly bigger, Amazon has to merge with some huge revenue streams such as grocery shopping and entertainment.

A stream is the visible manifestation of groundwater. The presence or absence of water stored in soil determines the flow characteristics of a river. Groundwater is like the customers that feed a business. The size of the Amazon river is a reflection of the groundwater that it has accumulated.

To compete against Amazon the company you would have to take the flow from one or more of its revenue streams. Amazon would be unlikely to notice flow lost as a result diverting small revenue streams, but it would likely notice if you tried to divert a revenue stream with a high Strahler number. The key is to not to get noticed by Amazon until you have a high enough Strahler number that you can fight back or maintain your ground. You may eventually decide to sell your flow back to Amazon.

Can a startup go from a small tributary to a huge river the size of Amazon without alot of merging? Very unlikely. The history of all the behemoths of industry is one of acquiring companies to become bigger companies. They merge like the Amazon river to become bigger companies.

In conclusion, the study of river networks may offer some insight into how companies grow over time.

Permalink 

 Archive 
 

Archive


 September 2020 [1]
 June 2020 [4]
 May 2020 [1]
 April 2020 [2]
 March 2020 [1]
 February 2020 [1]
 January 2020 [1]
 December 2019 [1]
 November 2019 [2]
 October 2019 [2]
 September 2019 [1]
 July 2019 [1]
 June 2019 [2]
 May 2019 [2]
 April 2019 [5]
 March 2019 [4]
 February 2019 [3]
 January 2019 [3]
 December 2018 [4]
 November 2018 [2]
 September 2018 [2]
 August 2018 [1]
 July 2018 [1]
 June 2018 [1]
 May 2018 [5]
 April 2018 [4]
 March 2018 [2]
 February 2018 [4]
 January 2018 [4]
 December 2017 [2]
 November 2017 [6]
 October 2017 [6]
 September 2017 [6]
 August 2017 [2]
 July 2017 [2]
 June 2017 [5]
 May 2017 [7]
 April 2017 [6]
 March 2017 [8]
 February 2017 [7]
 January 2017 [9]
 December 2016 [7]
 November 2016 [7]
 October 2016 [5]
 September 2016 [5]
 August 2016 [4]
 July 2016 [6]
 June 2016 [5]
 May 2016 [10]
 April 2016 [12]
 March 2016 [10]
 February 2016 [11]
 January 2016 [12]
 December 2015 [6]
 November 2015 [8]
 October 2015 [12]
 September 2015 [10]
 August 2015 [14]
 July 2015 [9]
 June 2015 [9]
 May 2015 [10]
 April 2015 [10]
 March 2015 [9]
 February 2015 [8]
 January 2015 [5]
 December 2014 [11]
 November 2014 [10]
 October 2014 [10]
 September 2014 [8]
 August 2014 [7]
 July 2014 [6]
 June 2014 [7]
 May 2014 [6]
 April 2014 [3]
 March 2014 [8]
 February 2014 [6]
 January 2014 [5]
 December 2013 [5]
 November 2013 [3]
 October 2013 [4]
 September 2013 [11]
 August 2013 [4]
 July 2013 [8]
 June 2013 [10]
 May 2013 [14]
 April 2013 [12]
 March 2013 [11]
 February 2013 [19]
 January 2013 [20]
 December 2012 [5]
 November 2012 [1]
 October 2012 [3]
 September 2012 [1]
 August 2012 [1]
 July 2012 [1]
 June 2012 [2]


Categories


 Agriculture [72]
 Bayesian Inference [14]
 Books [15]
 Business Models [24]
 Causal Inference [2]
 Creativity [7]
 Decision Making [15]
 Decision Trees [8]
 Design [37]
 Eco-Green [4]
 Economics [12]
 Education [10]
 Energy [0]
 Entrepreneurship [65]
 Events [2]
 Farming [20]
 Finance [25]
 Future [15]
 Growth [18]
 Investing [24]
 Lean Startup [10]
 Leisure [5]
 Lens Model [9]
 Making [1]
 Management [9]
 Motivation [3]
 Nature [22]
 Patents & Trademarks [1]
 Permaculture [36]
 Psychology [2]
 Real Estate [2]
 Robots [1]
 Selling [11]
 Site News [19]
 Startups [12]
 Statistics [3]
 Systems Thinking [3]
 Trends [7]
 Useful Links [3]
 Valuation [1]
 Venture Capital [5]
 Video [2]
 Writing [2]